Starting a small business can seem overwhelming, but actually doing it and succeeding is empowering. Many small businesses are popping-up all over the world. Entrepreneurs start their small business with a dream for success but not every entrepreneur is successful. The success of your business cannot be determined by how great of an idea you have. The key to success is the ability to make solid financial projections. A business owner must have a clear path between where they are, where they are going and how they will get there. A Mid-Year Financial projection will help small business owners with just that.
What is a Financial Projection?
A financial projection is a prediction of the future revenue and expenses of a company. There are essentially two financial projections a small business owner should develop. One being a short-term projection, the other being a mid-year, also referred to as a mid-term projection. A mid-term projection is an outlined account of the upcoming three years.
Mid-term projection should include:
- Income statements- An Income Statement shows your revenues, expenses, and profits
- Balance sheets- A summary of your business’ financial data in three categories: assets, liability, and equity.
- Cash flow statements- This will include cash revenues, cash disbursements, reconciliation of cash revenues to cash disbursements
We recommend printing these reports and compare year-to-year, to track your businesses financial trends.
5 Reasons you Should Complete a Mid-Term Financial Projection
- Avoid Tax Surprises – Projecting and paying taxes may be extra challenging for a new small business owner. If preparing for tax expenditures is not your strong suit, hiring a qualified bookkeeper is essential.
- Plan Your Profits
- Compare Budget Expenses to Actual Expenses in an effort to reduce expenses
- Plan for Financial and Tax Efficiencies: it brings your taxable profits as low as possible legitimately and provide maximum fringe benefits and owners.
- Maximizing Benefits, Shareholder Wealth & Business Valuation
The reason you started your small business was to secure financial stability and to be your own boss. We bet your dream did not include crunching numbers. Fortunately, our CPA Professionals are here to create a clear and set path to ensure your financial success. Our comprehensive Mid-Year projection will create a strategic competitive advantage for your business. A financial forecast is one of the most crucial tools a small business owner can have.