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The Importance of a Financial Forecasting in Business Plans – Main Components of Financial Forecasts

Business planning is vital for the survival of any business and it is a strategic tool for entrepreneurs.  A well-documented business plan helps to focus on most important activities to make an enterprise to succeed.  A good business plan will have both short-term and long-term objectives which the management needs to focus on to achieve the same per the time scale.

Financial planning and forecasting give life to Business Plan.  The financial planning includes various financial statements that show where the enterprise currently stands and where it expects to be in the near future.  This information determines how much financing your business needs to run the same per objectives.  Further, it helps outsiders determine whether lending you money or investing in your business is a wise use of their funds.

Overall financial planning assesses how a business will afford to achieve its strategic goals and objectives.  The Business Research describes each of the activities, resources, equipment and materials that are needed to achieve these objectives, as well as the time frames involved.

In financial plan need to compile revenue, balance sheet, cash flow, financial ratio and need to explain all important components of a balance sheet.  The financial plan will be done based on the clients’ requirement and need to be projected for 3 or 5 years with associated assumptions.

Contents mentioned under the financial plan of business

  • Start-up services
  • Market assumptions
  • Revenue of the business
  • Financial ratio
  • Balance sheet
  • Profit and loss statement
  • Deprecation and tax
  • Exit strategies