Building Financial Projections

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@MorganB wrote:

Hello everyone! If this is your first time visiting the Business Discussion board, we’re so glad you’re here! You are now part of a growing group of business men and women creating, collaborating, and connecting across the globe via the QuickBooks Community. Today I wanted to take a minute to share an article that was posted on the QuickBooks Resource Center. This particular piece focuses on how to build financial projections for your startup.

 

There are a few boxes to check when it comes to things to learn about starting a business and how to build financial projections is one of them. This is important for many reasons however the article highlights, "For external funding, financial projections help convince lenders and investors that your business will not only be profitable but also offer them a return on investment. For internal purposes, accurate forecasting enables you to budget for your new business as well as benchmark your milestones."

 

What Forecasts Should I Make First?

• Sales Forecast

Ideally you'll want to forecast sales for your first three years. The first year will need to include monthly sales, and moving forward your can forecast quarterly sales for the following two years.

• Expense Budget

An expense budget breaks down normal operating expenses. For example: supplies, rent, marketing. These can be detailed even further as fixed or variable costs.

 

What Financial Statements are Included?

• Income statement
• Cash flow statement
• Balance sheet
  
  

Now you're ready to start building projections! One difficulty that can present itself when building financial projections is the fact that there isn't any past data to go off of. However there are a few tips to consider that can still help nonetheless:

• Use your own industry experience
• Work with an accountant who knows your industry
• Do market research to develop a sustainable business model
• Be optimistic but realistic
• LiteBlue USPS

 

I linked the article for you above so you can check it out for yourself. If you're just starting out, I hope you'll find this list helpful and if you've already established your business is there anything you'd add? Your ideas, suggestions, and comments are always appreciated!

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I think you should focus on Expense Budget first.

The term projection is used within finance in the financial projection meaning to predict financial results further out into the future 1 or more years and using high-level drivers like sales capacity, market growth rate, and historical growth trends for future projections.

Myloweslife