Preparing a Business Plan? Focus on the Financials.

Preparing a business plan

Many business will be required to prepare a formal business plan as part of a funding or grant issue application. Even established business with adequate cash resources, will continue to draft annual business plans as part of their governance procedures which will then filter down to preparing detailed cash flow forecasts.

In my experience, the financials are often the most overlooked aspects of a business plan, especially if the preparer does not come from an accounting or financial background.

Here's a few important points to bear in mind when finalising your business plan.

1. Colourful pie-charts and diagrams look good on the page but the financials need to back up the picture being painted by the narrative in the business plan. I've seen many business plans with optimistic explanations of future growth only for the historical and estimated future financials to reveal an entirely different outcome.

   
   

2. Ensure you are projecting for the correct period. Some grants may only require 3 year's worth of projections, while other with more demanding application procedures, may require up to 10.

   
   

3. Preparers of business plans often exclusively project cashflows only. This is often because "cash in" and "cash out" is a relatively simple concept to employ in practice. But projected financial statements should always be prepared (profit and loss account and balance sheet)...there is a fundamental difference between cash streams and revenue streams (timing, debtors, creditors, depreciation etc). Recent government grants are requiring these type of projections too.

   
   

4. Make sure your projections "look right". There is a tendency for business plan preparers to overstate cash inflow and future revenue streams. Any grant awarding body will know the typical industry turnover figure, gross margin percentage, operating expenses etc. for any entity or business operating in that business. By ensuring your projections are as reasonable as possible, with an adequate explanation for any abnormal spikes in revenue, the grant awarding body will be reassured of the capability of the business owners to operate their own business.

   
   

5. Demonstrate what the funds being applied for will be used. This is a common omission from business plans. The application of funds should not be for additional wages or travel and expenditure costs. Make sure you are aware of any restrictions on grant income expenditure by researching the grant awarding body and the grant terms you are applying for. Apply that knowledge in the design and the layout of your business plan. This is something the awarding body will actively look for.

If you require any assistance with the drafting of your business plan, please reach out and I'd be delighted to help. We can offer you a free template of a standardised business plan too, just to help you get started. Just reach out to me directly at: darren@bnoaccounting.ie