Chapter 17: Finish the Financials

If you've followed through with the cash plan, your financials are almost done. The balance sheet should be completed by the time you have a cash flow working. Business ratios should be almost automatic too, because they draw their information from tables you've already finished.

The Balance Sheet

I showed you some basic balance sheets in Financial Analysis: About Business Numbers and Financial Analysis: Cash is King. You've seen then that the Balance Sheet table shows the financial position of the business, its assets and liabilities, at a specified time. A standard business plan includes a projected Balance Sheet table for each of the first 12 months in the plan, and for each of the three years.

The ironclad rule of Western double-entry bookkeeping and accounting is that assets are equal to capital and liabilities. This is what balance means. If you think about it, you'll notice we also used that rule in the Start-up costs section of Tell Your Story: Describe Your Company. It comes up again with the Balance Sheet table as we use this rule to calculate retained earnings, which makes the balance correct.

The following illustration shows the Balance Sheet table, or pro forma Balance Sheet table. The Balance Sheet table should naturally start with either your start-up costs or your ending balance from the previous year, depending on whether you are a start-up company or an ongoing company. Then, for the first 12 months of your plan, it should give detailed projections of your assets, liabilities, and capital as your business progresses. The calculations for this come mainly from your income statement and cash flow. Between those two statements, plus the beginning balances, your Balance Sheet should be virtually done before you start.

Balance Sheet Table

This illustration shows the Balance Sheet table for AMT, Inc., the sample company first introduced in Financial Analysis: About Business Numbers (numbers displayed in thousands).

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