entrep - chap 6

Are not just about numbers

Financial Projections

They help entrepreneurs think carefully about their business plans

Financial Projections

Give a clear picture of where the business is headed

Financial Projections

Importance of Financial Projections

• Plan

• Get Investors

• Spot Problems Early

• Make Decisions

Know how much money, you need to start and operate

Plan

Give you clear targets for sales and profits

Get Investors

Identify potential cash shortages or high costs y before they happen

Spot Problems Early

Decide on pricing, staffing or expansion plans

Make Decisions

Key Components of Financial Projections

• Balance Sheet

• Income Statement

• Cash Flow Statement
  

• This statement shows the financial position of your business at a specific point in time.

• includes your assets (things your business owns), liabilities (what your business owes). and equity (the owner's stake in the Business)

Balance Sheet

• This shows, the busines's revenues. expentes, and profits (or losses) over a period (e.g, monthly, yearly).

• It tells you whether your business is profitable
  

Income Statement

This tracks the inflow and outflow of cash which is crucial for ensuring that you have enough money to pay bills, salaries and reinvest in your business.

Cash Flow Statement

• Inflow: Cash from sales or loans.

• Outflow: Payments to suppliers, rent, salaries.
  

Example: Cash Flow Cycle

Managing Cash Flow

• Keep track of payment terms

• Emergency fund

• Invoice promptly

If you have customers on credit they pay you later, make sure your outflows don't exceed your inflows

Keep track of payment terms

Set aside money for emergencies, suph as an unexpected expense or slow season.

Emergency fund

Ensure you invoice customers quickly and follow up on overdue payments.

Invoice promptly