Financial Statements Information

Fully prepared financial statements can provide funders a lot of information about the company’s current state of affairs. When you start a new business venture, the financial statements can be included with a business plan. Whether your a startup business preparing financial records or a company looking to grow and requires expansion capital, all company financial reports work on the same principles. Companies can use bank instruments to help manage cash flow problems within your organisation as well as using them as a method of trade finance. We have outlined the financial statement format as an example you can use:

Income Statements ( profit / loss / revenue / forecast)
Statements of Cash Flow (historic and current)
Balance Sheets (assets / liabilities)
Financial Ratios and/or break even analysis

Working Costs

Businesses keep financial reports to monitor performance for at least 5 years (some countries want 7-10 years for tax recording purposes). Financial reports are for record keeping purposes that are designed to measure and analyze the company’s cash flow, profit and loss on account and includes the balance sheet. Through a well designed financial statement, it’s easy to see a company’s expenditures and outlay and spot room for improvement and growth.
Preparing your Financial Statements

If you are a start up company it may not be possible to prove any income, one way to do this is by assumption in net income. Key Financial Indicators can be used as benchmarks that compare your business process and performance metrics to other competitor practices.

Profit and Loss Account

This is known as an income statement which shows the business’s financial performance typically over a 12 month period but are usually broken up into quarterly periods. An income statement should indicate:

The profits – gross profits after all expenses paid out
The expenses (cost of goods sold, salaries, rent, advertising, etc.) that match the revenues being reported or have expired during the accounting period
The revenues (sales, service fees) that were earned as income during the accounting period of operations
Forecast (projected profit and loss margins)

This particular statement is shown as “net income”, the amount after deductions are made such as tax.

Cash Flow

This is the flow of money coming in and going out of the business. Cash flows record the difference between the opening and closing account balance. There are positive and negative ways in which a company can measure it’s cash flow operations (Examples are outlined in cash flow management)

Cash Flow Management

The management of capital flowing in and out of a business is important to it’s survival. If the cash inflow into a business exceeds the outgoing (expenditures) it’s a sign that the business is healthy and strong. 3 ways of monitoring cash flow is through:

Operational Cash Flow –
Sell more goods or services, the company can also increase the selling price
Reducing costs in areas such as employment, utility bills and loans
Investment Cash Flow – Cash received through investments or liquid assets

Financial Cash Flow –
Through company shares (stock market)
Taking out a business loan (debt repayment)

Balance Sheet

A balance sheet is part of the overall financial statement and provides a snapshot of a company at any given date. There are many reasons why you would be asked for the balance sheet. If you are looking for funding, investors will ask to see this document as it reflects the result of all recorded accounting transactions since the business began. Creditors want to see this as it shows whether or not loans can be paid back as it indicates the company’s net worth.

Balance sheets are divided into two main areas; what the business owns (assets) and owes (liabilities). Follow the link to read a balance sheet example. You can break down the balance sheet even further into organized classifications:

How to Prepare a Balance Sheet

Current Assets:

Cash on Deposit
Marketable Securities
Account Receivables
Intangible Assets

Current Liabilities: – these are all the company’s debt obligations

Long Term Liabilities
Deferred Revenues
Owners Equity
Costs – Debentures and Tax

If any, you can outline the stock holders equity interest

Capital Stock
Deferred Stock
Common Stock
Additional Paid in Capital
Retained Earnings
Foreign Currency
Treasury Stock

Financial Accounting Ratios

A financial ratio or “accounting ratio” is a relative magnitude of two selected numerical values taken from a company’s financial statements. Financial ratios are used to compare a company against an industry average or other companies in order to benchmark or measure a company’s performance.

Working Capital

Working capital is measured based on the current assets against the current liability. There are three main reasons why a business needs adequate working capital.

Pay staff wages and salaries.
Settle debts and therefore avoid legal action by creditors.
Benefit from cash discounts offered in return for prompt payment.

Financial Statement Tips

  1. Many corporations include a ten-year summary in their financial highlights each year. This provides the investing public with information about a decade of performance.
  2. Annual report contains financial statements, get a stamp of approval from independent auditors
  3. Be realistic with the projected figures
  4. Keep an eye on your business loan, can you get a better rate?
  5. As savings rates are pretty low, there are many alternative investments that can yield high interest returns

Managing Risk – Assess Your Project

In our “writing a business plan  article, we highlighted “managing risk” in a bullet points because it’s an essential element in your business plan. This article explains further why we feel that this (managing risk) is another factor to consider when writing a business plan. Strictly speaking, these aren’t the only risk assessments your company should undertake but it is a small guideline to show you how one factor can possibly effect the other.

Identify threats in your risk assesments
(c) Prestige Capital Partners

Read more

Writing A Business Plan | Important Points To Get A Business Loan

Writing A Business Plan | Important Points To Get A Business Loan

You might agree that writing a business plan can be challenging. Business plans are “projected” 3-5 year road map that outlines where you intend to take your company. From humble beginnings your idea might be to grow, make money, manage risk and sell the business when hitting retirement age. Below we outline major parts of a business plan that makes an impact with our funders.

Knowing how to structure and write an effective business plan is key to get your project seen by any funder. The business plan template written below can be used for any business be it for a large project or for a small business. It is worth time, money and effort paying out for a professional who provides a business plan service. They ‘go with a fine tooth comb’ and iron out mistakes and see areas where plans can be improved.

How To Write A Business Plan

We previously wrote about the importance of writing an eye catching executive summary. Writing a business plan that is packed with credible sources, factual information and relevant presentations will get seen in an instant. Our business plan template has been written from a startup prospective. If you are in the position of growing or expanding your business, you can refer back to this in time and see the developments and reassess your goals.

There are some common core elements to put into a business plan (eg; Company information and team, marketing plan and SWOT) It’s a good idea to structure the business plan with different titles per page and provide the lender as much detail about your project. Don’t be shy or hold back, this may count against you as they need to know everything. Every funder who reads a business plan wants to know how your business project can benefit people, how you plan to make money to pay them back (and what you can offer them) They can determine a projects value by using accounting skills, financial ratios and risk equations. It might be worth considering that if your project does involve patent technologies that aren’t currently registered, to do this before applying for funding.

Read more

Executive Summary Layout

An executive summary is an abbreviated version of a business plan. It allows the reader to obtain a quick overview of the business. Executive summaries are the first documents a lender will read, if written correctly and can be understood, it would increase the chance of getting the lender to read your business plan. Most entrepreneurs don’t realize the importance of this document because it is often looked as “unnecessary” whereas it increases your chance of being funded.

Read more