Preparing a Business Plan

1. Executive Summary

Generally, this one or two-page summary sets out your

* proposed business, its product or service, and market

* management team
* projected costs and financial requirements
* highlights of financial forecasts

2. Company and Industry

You must inform lenders of the nature of your business and the industry
in which it operates.

Business name: __________________________________________________

Business address: ________________________________________________

City:_______________________________________ Province: ____________

Postal Code: _______________ Company Phone: ______________________

Date business registered/incorporated: _______________________________

State of incorporation: __________________________________________

Form of business ownership:

 Sole proprietorship: Name: ______________________________________

 Partnership: Name: ________________________________________

 Limited company: Names of signing officers/titles:

____________________________________________

____________________________________________

____________________________________________

 Co-operative: Name: ______________________________________

Major shareholders:

Name: __________________________________ Percentage: _______

Name: __________________________________ Percentage: _______

Name: ____________ _____________________ Percentage: _______

Name: _________________________________ Percentage: _______

Related companies:

________________________________________________________________

________________________________________________________________

________________________________________________________________

Classification of business:

o retail o food o construction o manufacturing

o service o tourism o wholesale/distribution

o other, explain _____________________________________________________

Will your involvement in this business be

o full-time or o part-time?

 If part-time, indicate how you will make time available for this business.
_______________________________________________________________
________________________________________________________________

 Describe your business and the progress you have made to date.
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
________________________________________________________________

What are the prospects for the industry in which your business operates?
________________________________________________________________
________________________________________________________________

3. Product/Service
These questions will help you describe your product or service
completely.

 Describe in detail your product or service. Include material such as engineering studies,
photographs, and brochures, if available.

_______________________________________________________________
________________________________________________________________
_______________________________________________________________
________________________________________________________________

 What research and development was undertaken or must be completed before your product is
placed on the market? If more development is needed, indicate the time and cost you expect to incur
before your product can be marketed.
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
 What features of your product or service (i.e. patents, trademarks) have allowed or could allow ou
to obtain a competitive position in your industry?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What are your future development plans for your product or service?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
4. Market
You should clearly define your market.

 Who are your customers and where are they located? Why will they prefer your product or
service to that of your competitors?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What is the estimated size of your market in terms of territory, type of customers, and price
range? How did you determine your market size?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 Are there market trends, such as technical developments or new or changing customer needs,
that will affect your product or service?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 Who are your competitors, where are they located, and how long have they been in business?
How does your product compare with your competitors on the basis of price, performance, service,
warranties, and other important features? If you do not have competitors, is competition possible,
and if so, from whom?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
5. Marketing
These questions will help you document your sales estimates and market
share, and outline your strategy to achieve these targets.

 What is your estimated sales and market share (units and dollars)? Your estimate should be
based on an assessment of your customers and their acceptance of your product or service, your
market size and trends, and your competition. Provide copies of any market studies obtained.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 How will you inform customers about your product or service? Identify any major customers who
have made, or are willing to make, purchase commitments.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What form(s) of advertising (business cards, radio, newspaper, pamphlets, etc.) are you
planning to use?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 How much do you intend to spend on advertising, and have you budgeted for this expense?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What price will you charge for your product or service? Is your price within range of your
competitors?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What level of sales do you need to break even?

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
 Have you provided for warranty/servicing costs in your pricing?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 How do you plan to sell and distribute your product? If distributors will be used, describe how
they will be attracted, compensated, and what geographic areas will be covered. If a direct sales
force will be used, describe how it will be organized and controlled.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
6. Operations
You must describe how and where your product will be manufactured, including
details of your plant, equipment, and labour requirements.

 Does your business need licenses, permits or insurance, and have they been obtained?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 Are franchises, patents, trademarks and licensing agreements required in your business?
Explain, including the costs associated with each.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 Where will your business be located? What are the advantages and disadvantages of that
location?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What plant and equipment will be required? Will they be leased or purchased? Provide copies of
equipment or real estate appraisals, if available.

Montly Lease Payemtns

Type of Plant/Equipment or Capital Cost Lease or Purchase
_________________________________ ______________________ _________________
_________________________________ ______________________ _________________
_________________________________ ______________________ _________________
_________________________________ ______________________ _________________

 Describe your manufacturing, quality, and production processes and your inventory control
procedures.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What is the impact of your business operation on the environment? If deemed

necessary, have the appropriate environmental approvals been obtained?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What material is used to make your product or to provide your service, and how much will it
cost?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 Who are your major suppliers and where are they located? What are their credit terms? Can you
change your suppliers easily if required?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What labor is required to make your product or to provide your service, and
how much will it cost?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What overhead cost will be allocated to your product or service in order to

look after your general business expenses?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

 What is the total cost of your product or service?

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

 Provide a breakdown of your fixed manufacturing costs and your variable unit costs by product.

______________________________________________________________________
______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

 What skills are required to operate your business and who will provide them? How many
employees will you hire?

No. of Employees: at Start-up _________________ by Year 3: _________________

Part-time: _______________ Full-time: _______________

Skills Needed: ____________________________________________________________

7. Management
You must describe your management team, their experience, talent, and
integrity.

 Who are the key individuals, and what are their duties and responsibilities?

Attach a resume for each key individual.

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

List the members of your board of directors.

Name: ______________________________________ Position: ______________________

Name: ______________________________________ Position: ______________________

Name: ______________________________________ Position: ______________________

Name: ______________________________________ Position: ______________________

Who are the lawyers, bankers, and accountants for your business?

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

Provide an organizational chart for your business.

8. Timetable

 List the estimated dates for the acquisition of equipment, inventory, staffing, financing, and other
items needed before you can commence your business.

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________
9. Financial information
Your bank will want to know the type and amount of funding you need for your business and the
amount you are requesting from them.

 What is the total expected cost to commence and operate your business?

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

 Provide a breakdown of these costs, including working capital requirements.

________________See Attached Work Sheet_________________________________

 Indicate where you expect to obtain the funds for your business. Note: The total funding should
equal the total costs shown above.

Amount of Source of Estimated or to

Item Financed Funds Funds be Arranged

_______________________________ __________ ___________ ______________________

_______________________________ __________ ___________ ______________________

_______________________________ __________ ___________ ______________________

_______________________________ __________ ___________ ______________________

_______________________________ __________ ___________ ______________________

_______________________________ __________ ___________ ______________________

 What amount of cash investment are you bringing to your business, and where do these funds
come from?

______________________________________________________________________

______________________________________________________________________
______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

 What future funding will your business require, and where will these funds come from?

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

Attach a copy of your current financial statements, if applicable.

10.Financial Forecasts
Your bank will also need information concerning the expected operating
results of your business.You should provide financial forecasts for a
three-year period for your business, including earnings and retained
earnings, cash flow and balance sheet statements.

Your financial forecasts and your request for funding must be keyed to your
market expectations. You should begin your financial forecasts with a sales
forecast. This will help you define how much and when cash from operations
will be generated. Your forecasts should be reasonable and realistic.

Appendix A summarizes the main features of the most common forms of business
organization. Appendices B and C contain general information and guidelines
on how to prepare the financial forecasts required for your business plan.
Appendix D contains blank schedules to assist you in completing your
financial forecasts.

11. Summary
Conclude your business plan with a one to two-page summary of your business,
its product, marketing strategy, manufacturing process, project costs, and
financial requirements.
Appendix A
Forms of Business Organization

There are several possible forms of business organization or ownership.

The most common in Nova Scotia are the proprietorship, partnership,
limited company and co-operative. The major features of each are:

Proprietorship

* a business operated and controlled by a single individual

* income of the business is treated as personal income for tax
purposes
* legal or other liabilities arising from the operation of the
business are the direct responsibility of the individual
* least expensive form of organization.

Partnership

* formed when two or more individuals carry on business together and

agree to share profits and losses of the business jointly
* income for tax purposes is allocated to the individuals on the basis
of their agreement
* partners are jointly responsible for debts and other liabilities
* highly advisable to have a written partnership agreement which
establishes the details of the relationship, especially
responsibilities, control, division of income (or losses), and
procedures for amending or terminating the agreement.

Limited Company

* separate legal entity responsible for its own debts, assets and
obligations
* a legal procedure which requires filing a constitutional document
The Articles of Incorporation, the selection of a board of directors
and, often, the drafting of a Shareholders' Agreement
* can be set up under either federal or provincial law with a typical
cost in the range of $800 to $2,000
* an incorporated company may provide some financial advantages
through share ownership and special rules for taxation which apply
to corporations and small businesses
* may be a requirement for accessing certain federal government
assistance programs

Co-operative
 * an organization incorporated provincially under the Co-operatives
Act, costing about $100 for the legal procedure
* can involve any type of business
* financed by the purchase of shares by members who receive a vote on
the operation of the co-operative and a limited return on their shares
* profits are returned to members in proportion to the use the member
makes of the co-operative (products or services sold or purchased).

There are also other forms of organization, including limited

partnerships, associations or societies. The suitability of each depends
on your situation. Discuss your own particular needs with your
professional advisors before making a decision.
Appendix B
Financial Statements Defined
--------------------------------------------------------------------------

Balance Sheet

Basically, a snapshot of everything your business owns and owes at a

specific date.

Classifications in the Balance Sheet

To help lenders analyze, interpret and evaluate the financial information

reported on the balance sheet, items are grouped according to common
characteristics

Assets are generally grouped in order of decreasing liquidity (i.e.

nearness to cash), the liabilities by time to due date, and owners'
equity in order of decreasing permanency.

Assets: A thing of value owned, expressed in terms of money. Assets

include cash, amounts owed to the business by its customers for goods and
services sold to them on credit (accounts receivable), inventory,
supplies, equipment, land, buildings, etc. Assets may also include
intangible items, or rights, such as goodwill and patents.

* Current assets (including prepaid expenses) cash and other assets

which are reasonably expected to be realized in cash, or to be sold
or consumed within one year from the balance sheet date.
* Investments (such as stocks, bonds, long-term notes): assets
acquired for their financial or investment advantages.
* Fixed assets; long-term assets such as land, buildings and
equipment, held for use rather than sale.
* Intangible assets: assets without physical substance, having benefit
because of the special rights their ownership confers, such as
goodwill, patents, trademarks, etc.
* Deferred charges: long-term expense prepayments.

Liabilities: Debts owed. Liabilities include amounts owed to creditors

for goods and services bought on credit (accounts payable), salaries and
wages owed employees, taxes payable, etc.

* Current liabilities: amounts payable within one year from the date
of the balance sheet. Current liabilities include:
 accounts payable
 short-term notes payable
  accrued expenses for wages, salaries, commissions, rentals,
 royalties, etc
 income taxes payable
 current portion of long-term debt.

* Long-term liabilities: liabilities that will not require the use of

current assets during the upcoming year. Long-term liabilities
include:
 bonds payable
 long-term notes payable
 mortgages payable.

Shareholders' equity (applicable only if your business is incorporated):

The interest of shareholders in the assets of a company.

* Share capital investment in the shares of the company by its

shareholders. Investment can be by way of common or preferred
shares.
 Common shares: the class of share capital representing the residual equity in the assets
and earnings of a business.
 Preferred shares: a class of share capital having special rights and/or restrictions as
compared with other classes of stock of the same company.

* Retained earnings: accumulated earnings of a corporation, less

losses incurred and dividends paid to date. It represents the amount
of undistributed earnings that the business has retained for use in
operations, expansion and growth.

Owners' Equity: (applicable only if your business is unincorporated): The

investment in the business by the owners, including the accumulated
earnings of the business, less the amount of drawings taken out by the
owners.

Statement of Earnings and Retained Earnings

Basically, a record of sales (revenues) and expenses doe your business

for a specific period of time.

Revenue: The gross proceeds from the sale of goods and services prior to
the deduction of the costs of goods and expenses. Rents, dividends, and
interest earned are also revenues.

Cost of goods/services sold: The direct costs incurred in the making of

your product and/or service. This would generall include inventory
consumed in the production of your product and direct labour costs.
Gross Profit: The excess of sales price over the direct cost of sales.

Selling Expenses: All expenditures that you incur, such as advertising,

automobile, salaries and comissions, that are directly related to selling
your product and/or services. These expenses will generally vary with
your sales volumes.

Administrative Expenses: All other expenses that are required to operate

your business. These expenses do not generally vary with your sales
volume. These expenses generally include rent, utilities, insurance,
interest on borowwed funds, management salaries, teleohone, repairs and
maintenance expenses, etc.

Depreciation: A proportion of the cost of fixed assets charged as an

expense.

Net Earnings (loss): The true profit (or loss) from sales after making
provision for all expenses. Income Statement: A record of sales
(revenues) and expenses for your business for a specific period.

Revenue: The gross proceeds from the sale of goods and services prior to
the deduction of costs of goods, services and expenses. Rents, dividends
and interest earned are also revenues.

Gross profit: The excess of sales price over the direct cost of sales.

Depreciation: A process of allocating the cost of a fixed asset over its

estimated useful life; a proportion of the cost charged as an expense to
an accounting period.

Statement of Cash Flow

Basically, a statement which shows the flow of cash through your

business. It systematically breaks down revenue and expense items by
recording cash that will be taken in and paid out. It records only
payments and receipts.

Cash Receipts: Money you get from various sources. This will include
money received from selling your product and/or service. If you provide
credit, then money to be collected depends on your collection policy.

Loan Proceeds: Money provided by a bank or other lender.

Personal Investment: Money that you invest in your business.

Cash Disbursements: Money that you pay out to sell your product and/or
service and to operate your business. Cash disbursements will include many
expenditures such as:

Inventory Purchases: Money you pay for items that will be used in
making your product and/or service.
Direct Labour: Money you pay to your employees in the form of wages
and benefits.
Advertising: Money you pay for advertising your product and/or
service.
Selling: Money you pay for selling your product and/or service.
Interest and bank charges: Money you pay for borrowed money and bank
service charges.
Insurance and Licenses: Money you pay for required licenses and
insurance premiums.
Management salaries (drawings): Money you pay yourself or others to
run the business.
Office expense: Money you pay for office supplies.
Office salaries: Money you pay for office help.
Rent: Money you pay for equipment and/or premises rental.
Other expenses: Money you pay for expenses not specifically
identifies (ie charitable donations)
Purchase of fixed assets: Money you spend for land, building,
furniture and equipment purchases.
Appendix C
Financial Forecast

A financial forecast is your estimate of the most probable operating results for your business for one
or more future periods.

Benefits of Preparing a Financial Forecast

Assists you in:

* decision making
* developing a financial plan which reflects the company's business plans
* securing loans from banks and investors
* valuing your business
* managing your business, and
* monitoring the performance of your business.

How to Prepare Your Financial Forecast

Your financial forecast will consist of three statements:

* Earnings and Retained Earnings

* Cash Flow, and
* Balance Sheet.

Earnings and Retained Earnings

The first statements you need to prepare are your forecasted statement of earnings and retained
earnings for the first three years of
your business. These statements should be prepared on a monthly basis for the first year, quarterly
for the second year, and annually
thereafter.

Your forecast will show the revenues and expenses you expect your business to generate. This
exercise is more complex for a new business
than for an existing business because historical data is not available on which to base the forecast.

To obtain guidelines for revenues and expenses, you can consult with other businesses engaged in
similar operations or use magazines,
periodicals, or other publications. Guidelines are just a benchmark. Your particular circumstances will
determine their relevance.

The following is an example of an annual forecasted statement of earnings and retained earnings.

Backgammon Industries Limited

Earnings and Retained Earnings Forecast
For the Year Ending December 31, 19XX

Revenue $ 80,000
Cost of Goods Sold
Material 30,000
Wages and benefits 30,000
Overhead 2,000
---------
62,000

Gross Profit 18,000

Administrative Expenses
Depreciation 1,000
Equipment repairs 500
Delivery and freight 1,000
Advertising 500
Insurance 300
Rent 2,400
Interest 200
Telephone 800
Taxes 900
Accounting and legal 500
Travel and entertainment 2,000
Miscellaneous 1,200
---------
11,300
---------
Difference: 6,700

Provision for Income Taxes -1,675

Net Earnings for the Year 5,025
Retained Earnings - Beginning of Year
-
Retained Earnings - End of Year 5,025

Cash Flow

Next, you must prepare cash flow statements for the first three years of your business.
Although based on your forecasted statement of earnings and retained earnings, your cash flow
statement is not concerned with
profitability, but rather with the flow of cash through your business. It systematically breaks down
revenue and expense items by
recording cash that will be taken in and paid out. It records only payments and receipts.
Your cash flow statement will account for the increase or decrease in the cash of your business.

Benefits of Preparing a Cash Flow Forecast:

* plans for the most effective use of your cash

* schedules priorities for the payment of accounts
* measures the significance of unexpected changes in your business
* lists all your bill-paying details
* estimates the amount of money you need to borrow in order to finance your day-to-day perations
* shows a potential lender that you have sufficient cash to make loan payments.

Annual Revision: Your cash flow statement should be revised at least once a year in order to ensure
that your operating line of credit
at the bank is adequate, and to obtain a picture of any additional cash requirements. Your forecast
should also be revised if your sales
or expenses, time frame for collections or your business plans change significantly.

Information Required to Complete Your Cash Flow:

* your most recent financial statements, if applicable

* forecasted statements of earnings and retained earnings
* accounts receivable and accounts payable ledgers
* various other journals and bank reconciliations
* plans for the upcoming year.

You should consider three forms of cash outlays when preparing your cash flow forecast: those that
are regular and monthly, variable with sales volume, and regular but intermittent.

Overhead expenses are generally fixed and are paid on a regular or monthly basis (for example, rent,
telephone, salaries, etc.). There are occasions when these may change - utility costs are higher
during the winter, payroll fluctuates due to holidays, lay-offs, termination, rent charges may include a
percent-of-sales component.

Cash outlays for goods and other variable costs are determined by sales volume, inventory levels and
payment terms.

Intermittent costs are important expenses often overlooked as cash outlays. They include loan
payments, insurance premiums, purchase of equipment or machinery, travel expenses, major trips,
training costs, and special projects.

Your cash flow statement should be prepared on a monthly basis for the first year, quarterly for the
second year, and annually thereafter.

The following is an example of an annual forecasted cash flow statement.

Backgammon Industries Limited

Forecasted Cash Flow Statement
For the Year Ending December 31, 19XX

Cash Receipts

Collection of sales $ 75,000

Proceeds from issuance of common shares 100
--------
75,100

Cash Disbursements
Purchase of equipment 5,000
Materials 28,000
Wages and benefits 30,000
Overhead 2,000
Equipment repairs 500
Delivery and freight 1,000
Advertising 500
Insurance 700
Rent 2,400
Interest 200
Telephone 700
Taxes 900
Accounting and legal 500
Travel and entertainment 1,300
Miscellaneous 1,200
--------
74,900
--------
Cash Generated During the Year 200
Cash-Beginning of Year -
Cash - End of Year 200

Balance Sheet

The final statements you must prepare are the balance sheets for the first three years of your
business. These balance sheets will show
the assets, liabilities and retained earnings you expect your business to have at the end of each year
of operation.

Your balance sheets are prepared in conjunction with your forecasted statements of earnings and
retained earnings and cash flow.
Information such as the ending cash and retained earnings balances are carried forward from these
statements to your balance sheets.
The following is an example of a forecasted balance sheet statement at the end of year 1 for
Backgammon Industries Limited.

Backgammon Industries Limited

Forecasted Balance Sheet

As at December 31, 19XX

Assets
Current Assets:
Cash $200
Accounts receivable 5,000
Inventory 10,000
Prepaid insurance 400
--------
15,600
Fixed Assets:
Equipment, net of depreciation of $1,000 4,000
--------
19,600

Liabilities
Current Liabilities:
Accounts payable and accrued liabilities 12,800
Income taxes payable 1,675
--------
14,475

Shareholders' Equity
Share Capital 100
Retained Earnings 5,025
--------
5,125

--------
19,600

Summary of Significant Forecast Assumptions

In order to help your bank and potential investors assess your financial forecasts, you must provide
certain information to the reader.\

Disclosure
 The quality of your financial forecast will depend on the appropriateness and completeness of your
assumptions. You should search out
all relevant information reasonably available when your forecast is prepared. The extent of detailed
information supporting each
assumption will vary according to circumstances and will be influenced by factors such as the
significance of the assumption and the
availability of information at a reasonable cost.

Certain assumptions may be interdependent and may affect other parts of the business. Therefore,
your assumptions should be internally
consistent. For example, an assumption that your sales revenue will increase would, in most cases,
result in an increase in your wage
and raw material costs.

The first assumption in your forecast should set out the purpose of your business plan and include a
description of your planned
business operations and/or a summary of significant changes to your existing business.

Earnings and Retained Earnings and Cash Flow Statements: The assumptions used for your
statements of earnings and retained earnings and
cash flow should be listed in the order that the related items appear on these statements.

Specific items for which assumptions would normally be documented (but not necessarily limited to
the foregoing) include

* sales/revenue
* cost of sales (including volume discounts)
* wages/management
* interest expense
* salaries
* depreciation and amortization
* commissions
* repairs and maintenance
* income tax rate
* general and administrative
* dividends
* partner contributions/drawings, if applicable.

Balance Sheet: The assumptions used for your balance sheet should be listed in the order that the
related item appears on the balance
sheet.

Specific balance sheet items for which assumptions would normally be documented (but not
necessarily limited to the foregoing) include

* accounts receivable
 * inventory
* fixed assets
* intangible assets
* start-up costs
* accounts payable and accrued liabilities
* income taxes
* long-term debt (principal and interest repayment terms, etc.)
* share capital/partner investment.

APPENDIX D: Schedules
General Instructions - Completion of a Cash Flow:

Step #1

 Record all sales by month. If you have more than one product or service, separate sales figures
provide greater clarity (e.g. a service station might show separate sales for gasoline, tires and
accessories, and service labor).

Step #2

 Now allocate, by month, when all money will be received by your business. Remember, if you
grant credit, your total sales for each month must be broken down into that portion received in cash
during the month of the sale, with the balance shown as receivables collected during subsequent
months, depending on the terms of the sale.

Step #3

 Now detail, by month, when and for what type of expenditure money will be paid out by your
business. If your program involves additional borrowing, remember to include the interest and
principal related to this new debt.

Step #4

 By following the instructions printed in the Summary section of the cash flow chart (Lines 45
through 49), calculate the monthly cash position for your business as a result of your forecast
Income and Expenditures.

Getting Ready for Years 2 and 3

 When preparing your cash flow statements for years two and three, don't forget to carry forward
information from your balance sheet, which will affect your cash flow.

 These will include accounts receivable, accounts payable, closing bank balance, as well as any
tax liabilities recorded. These figures are then allocated to the specific months when the cash
transaction will occur.