BUSINESS SENSE
“Pro Forma Financials” – Week 12
Nancy Larsen, Enterprise Facilitator of SEFP

Being able to present a clear, concise, logical and supportable financial projection is probably the most important key to having a chance of obtaining the capital you desire. The three reports that tell the story are the Income Statement (Profit & Loss), the Balance Sheet and the Cash Flow Statement. If you do not have financial forecast ability, hire someone who does to project monthly the first year and then annually for the next four years.

The Income Statement enables the owner/manager to develop a preview of the amount of income generated each month and for the business year, based on reasonable predictions of monthly levels of sales, costs and expenses.

The Balance Sheet deals with what is owned (assets), what is owed (liabilities) and the difference (owner equity or net worth). The sum of the liabilities and net worth always match the total asset value.

The Cash Flow Statement tells how much cash it is going to take and when that cash must be available. It is like having a road map. With it, you can go far, without it you run out of gas.

Being able to summarize your important financial points allows the Lender/Investor insight into whether or not you understand how the money world operates. Provide support for your sales revenue, price points, fixed costs, gross margins and net income. The financial industry judges your potential success by RMA standards and ratios. There are many good computer financial programs available to assist you in formatting your projections. It is always a good idea to have your accountant look over your numbers or maybe assist you with them.

Remember a Great Bumper Sticker – “I cannot be out of money, I still have checks”.

Next weeks topic is: “Preparing Your Presentation”

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