Financial Section

The financial section contains the business's sources and uses of proceeds, start-up costs worksheet, equipment list, and proforma financial statements with financial footnotes, a breakeven point and deviation analysis and historical records (for an existing business). Each statement is discussed below with blank work pages indicated to use for your business.

Uses of Proceeds

• This is a summary of the financial section and will be filled in after the other financial documents are completed.

Start Up Costs

• A list of start-up costs. Those costs incurred before the business opens for operation such as equipment, supplies or inventory.
• Working Capital: Part of the proceeds may be used to fund a projected increase in accounts receivable caused by a projected increase in sales. Or the loan could be used to take advantage of discounts or fund the first six months to a year of business operations.
• The proceeds could be used to purchase long term assets such as real estate or a building. An estimate from the sellers/broker should be included.

Projected Profit and Loss (3 years)

• This section shows projections based on the facts and figures generated in the previous sections of this plan. Here is where the proverbial bottom line is calculated. The profit and loss statement should be calculated monthly. As stated earlier, estimates of sales are the backbone of your proforma statements. Costs and expenses of operation are quite easily acquired from trade community and government organization. But the accuracy of your estimates of sales will depend on the quality of your market analysis. At this point you should go back and review the market analysis section of your business plan. Satisfied your analysis is correct, you should proceed with adjusting your estimates of sales. Negative net profit or cash flow figures are common in the first one to two years in business. However, you will have to show how you are going to support those losses. If by the third year of operation you are still in a loss position, first review all your costs and expenses figures. Where are the items which are draining off the profits? Secondly, review your market analysis. Ask yourself, how can I increase sales? Remember to increase sales will increase costs such as advertising, longer store hours, increased labor, etc. It is very important that a market analysis is used to project sales and that the sales figure is not simply the volume which will cover costs, expenses and give you the profit you want.
• The higher the level of fixed costs to total costs, the higher will be the break-even point, that is the higher sales volume must be to cover total fixed costs. Purchase of fixed assets will increase fixed costs.

Proforma Cash Flow (3 years)

• While the balance sheet and profit and loss statement is useful in analyzing your business from an accounting and sometimes a tax view the balance sheet and profit and loss do not tell you how much CASH you have on hand at any one time. This is because there are items such as sales and depreciation which are treated as cash revenues and expenses though they may not be so. Sales, for example may be on credit yet the profit and loss statement will report them as income. However, you have received no cash. Depreciation is similar - it is an expense but no one is paid any cash.
• The cash flow statement tells you how much CASH you will have on hand at any point in time. If this figure goes negative, your business is insolvent, unable to pay your bills as they fall due.

Projected Balance Sheet (First Day & Year End)

• The proforma balance sheets will show changes in the financial structure of your business over time. Bankers and other analysts will use these figures to conduct a ratio analysis of your business.

Deviation Analysis (Complete on Monthly basis)

• The statement compares actual performance to projected or budgeted performances on a monthly basis. You should compare both the income statement and cash flow projections against actual performance.