Starting up? Tame your financial facades!
They say- the best way to predict the future is to CREATE it! This is something that is deeply ingrained into the psyche of every entrepreneur and propels him/her to go ahead. However, at the end of the day, its all about things like RONA, ROI, D/E ratio, Cost Benefit Analysis, Net profit, Operating profit etc etc. Too many jargons being bombarded at the . Though the budding entrepreneur has all the IDEAS that could make a supernova, often they do not have a clear picture regarding the financial projections much necessary for deciding the nature and fate of the business.
The Financial projections required as made on the basis of compilation of the internal and external data in the day-to-day management of your business. With IT-IS systems in place, most of the analysis can now be performed using the accounting software programs. This includes- cash flow, sales history, expense spreadsheets etc. The outputs of such programs when analyzed together, can help build out meaningful data for chalking out the company’s future business goals. However, few of the most important projections are:-
Budgetary Expenses- To predict and ensure the trade offs and that one is not over-spending on one business area at the sacrifice of another. It would help one to predict how much it will cost to meet the 12 month targets.
Sales Forecast- To predict sales on periodical basis for the upcoming year. It provides a breakdown of each item that is sold and an estimation of how much of that product is expected to move.
Cash Flow Forecast- It gives a clear indication about the company’s financial health and can serve as a defense mechanism for unpredicted financial crisis through the course of business. It helps to discover potential issues that may jeopardize the company’s solvency and take appropriate action before it is too late.
A 12-Month Balance Sheet- Provides the big picture taking into account factors such as- sales targets, cash balance, cost centres and other key monthly metrics to build out a holistic view of the business. This becomes more important when one looks for cash infusion from investors and creditors.
Success for an entrepreneur is not just about having IDEAS. It is about making them HAPPEN! This could only be achieved through meticulous planning and execution.
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