While starting a business it is important to prepare financial reports and projections. If done in right way it can help you avoid unforeseen cash crunch issues (80% businesses fail due to bad cash flow management) and ensure that your financial health is good. So its important to make your financial projections as accurate as possible.
You can get estimates about the income and expenses by doing a trial run or simulation on your business. But it might not always be possible to do it due to regulatory restrictions in certain industries. Another possibility is to use the industry metrics to project the figures. These industry metrics are the average figures like operating metrics, ratios, multiples etc for your industry. For example, how much inventory is the industry avg, how much is the avg revenue productivity per employee, what is the avg plant load factor, etc.
Once you have your base ready for the actual costs/income/customer data etc. you can work further to compute the figures/projections based on sound accounting principles. You can take help from a professional for making these.
Cash flow calculation:
This is the consolidated or running account of your income and expenses. Every transaction that brings in or takes out money would be part of it. Any of these are entered only when there is actual monetary transaction taking place. Cash flow projections are prepared for every month/week so that you have very clear visibility on the liquidity and these are to be revised regularly, in light of actual situation, once you reach at the end of a cash flow projection period.
Profit and Loss projection:
It is the collation of all the projected trading income and expenses, collated for a trading period such as a year. You would make estimates for things like expenses for rent, electricity, licenses etc. and income from sales.
Balance Sheet preparation:
This can be regard as a monetary snapshot of your business, at a defined moment in time. This would give details about your assets, liability and equity. How much the business owns and how much it owes.
For more details on how to do cash flow planning, and to use a proven xl template, please ask for the Alpha Business Plan Guide.