Business owners know the importance of accurate financial projections.
Accurate information about your company’s financial position helps you make better decisions about strategy, investments, hiring, and operations.
Small business financial projection calculators are an effective way to quickly gain real-time insights on your finances and opportunities. Here is a closer look at how and when to use financial projection calculators.
Financial projection calculators can be used in many business situations, including:
- Writing a business plan for a new business
- Applying for a loan or other business financing
- Creating strategic plans
- Analyzing cash flow
- Making investment decisions
- Comparing business performance to industry standards
- Forecasting future sales and expenses
- Reducing guesswork in your analysis
Making Financial Projections for Your Small Business
When you want to make and use financial projections, there are several steps to take, including the following:
- Project Spending and Sales. This is the core consideration for business planning. As seen in the recent post, Business Calculators: The Quick Guide, starting cost calculations are the foundation. They include one-time expenses such as franchise fees, building or land purchases, capital purchases, initial marketing, and website design costs. Next come ongoing costs, including lease, or rent costs, payroll, supplies, utilities, insurance, and materials. That analysis should be paired with sales forecasting tools that help you project monthly revenue.
- Plot Projections. A cash flow projection calculator can help you plot your anticipated expenses and revenues. In your first year, a monthly analysis is prudent; in subsequent years, quarterly or annual projections are likely okay. Cash flow does not equal revenue, however. Cash projections should be based on when you expect invoices to be paid. You want your financial projections to be based on a rationale drawn from reliable actual figures or common practices. These projections can be gleaned from:
- Industry standards found in association datasets, magazines, or websites
- Your company’s own history
- Check Financial Needs. If you have already established your future financial needs, now is the time to determine whether those business plans are realistic or will require adjustment. If there are gaps between your cash flow projections and what you need, you will have to gain additional financing or change your plans accordingly.
- Try different scenarios. Many of the online financial projection calculators allow you to change different inputs to see the impact on your financial projects. These changes should be the manifestations of different strategies you might deploy and how they will affect your finances. In this calculator, you can change the values using sliders for the following:
- Starting cash total
- Operating cash flow
- Cash received from customers
- Other cash receipts
- Operating costs, including inventory, insurance, rent/lease, advertising, payroll, interest, and taxes
- Investments cash flow
- Property sales
- Investment sales
- Capital expenditures
- Financing cash flow
- New borrowing
- New stock issues
- Loan repayments
- Dividends paid
- Plan for Contingencies. Use the financial projection calculatorsto plan for different unexpected events that could throw off your planning.
- Monitoring. You can use these financial planning calculators to monitor progress at any point and make adjustments based on your new fiscal realities.
At Benetrends, we help businesses with their financing needs at every stage of development. Our Rollover as Business Start-Ups (ROBS) strategy uses existing 401(k) or IRA funds to fuel your business launch or expansion. To learn more, download Innovative Funding Strategies For Entrepreneurs.