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Projection Planned

(Company Name)

Contents
1. Introduction 1

2. Regarding Projections 3

3. Tabs 3

3a. Directions 4

3b. Starting Point 4

3c. Payroll 9

3d. Sales Forecast 11

3e. Additional Inputs 14

3f. Monthly Operating Expenses 16

3g. Cash Flow 20

3h. Income Statement 21

3i. Balance Sheet 22

4. Other Helpful Tabs 22

5. Glossary 23

1. Introduction
This guide will walk you step by step and show you exactly how to effectively use
the Excel Financial Projections Creator.

This Financial Projections Creator is designed to provide those starting a

business or already running a business with information that will allow them to
make a "go /no-go" decision. It will help a potential entrepreneur project
operating profit, develop a projected income statement, balance sheet and cash
flow forecast.
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It is designed for a wide variety of users, from those who have little or no
accounting or Excel experience to those who may be well versed in finance,
accounting and the use of Microsoft Excel.
The Projections Creator contains a number of worksheets, each documented two
ways. Extensive directions and guidance for a particular page or on a specific
accounting topic are found in blue boxes on pages that are not self-explanatory.
The second way this Projections Creator is documented is using Excel
comments in a given cell. Comments are normally hidden from sight. If you see a
red triangle in the upper right corner of a cell, you can hover your mouse over the
triangle to see the note. As your mouse moves away from the triangle, the
comment will disappear.
Comments will have a beige background. Each comment may have a specific
direction for that cell, may be a reminder of something the author believes
important, or may have some additional information about the accounting topic.
The cells and formulas in this workbook are protected. Cells with yellow or light
blue backgrounds are designed for user input. All other cells are designed to
generate data based on user input.
The cells with formulas in this workbook are locked. If changes are needed, the
unlock code is "1234." Please use caution when unlocking the spreadsheets. If
you want to change a formula, we strongly recommend that you save a copy of
the spreadsheet under a different name before doing so
Financial forecasting can be one of the most intimidating parts of starting a
business. If you are dreading this part of the process – relax, We’ve developed
this guide with you in mind.

Here are some tips for low-stress completion of this financial projections creator:

1. Use a printed version of this guide and write the numbers into this guide first
(in pencil!), before copying them into the Excel spreadsheet.

2. Take some MS Excel training before using the spreadsheet, you can find
numerous free resources online.

3. Save a blank “master” version of the Financial Projections Creator, just in

case.

4. When you don’t know a word, refer to the glossary. If there is something that’s
not in there, search for it online.

5. Remember that it’s normal to create multiple versions. Don’t worry about
getting it “wrong.” Initially, you should strive to learn how to use the Template,
rather than worrying about the detailed accuracy of your assumptions.
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2. Regarding Projections...
Accept the fact that you cannot predict the results of future events accurately, so
just make your best estimates. Fill in the requested information after researching
each item. The numbers should be based on the plan you have developed so far.
You may be able to come up with accurate numbers for some items. Others will
be best guesses.

The forecast you will generate from the data in this workbook will be for the first
36 months of the existence of your business, which may not correspond to a
calendar year. For example, if your business were to open its doors on July 1st,
the forecast for months 1-12 would be for July through June of the following
calendar year.

With adjustment, this template can be used by an ongoing business making

plans for the future.

Once you have transferred data you collected in this guide to the Excel
spreadsheet, the spreadsheet will calculate an initial set of income statements,
balance sheets and cash flow statements for the three years of the forecast,
together with some other reports. Immediately save a copy of the template as
version 2 (e.g. WidgetsCo-V2.xls). You can then make whatever changes you
need in version 2 and still have version 1 to go back to in case something goes
wrong. Do the same thing for each additional iteration. Changes will be required
until you arrive at a forecast that you think best represents the financial
outcomes of your plan.

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3. Tabs
The following pages discuss each of the main tabs in the Financial Projections
Creator. For all tabs where you will need to input some information, we’ve
provided spaces for you to write the information down in this guide first. That
way, you can simply transfer the information over the Template. We’ve found
that, for many people, this method is easier than immediately filling out the
Template. However, if you feel comfortable doing so, feel free to jump right in to
using the Template instead.

It’s important to note that the tabs are all “locked.” This means that you won’t be
able to accidentally alter any of the formulas. You will be able to change the
width of columns, row height, and the size and location of text boxes. If you see
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“###” in a column, that means the column is too narrow for the numbers to
display.

You can “unlock” the Template by using the following code: "1234". We do not
recommend doing this unless you have another copy saved and you have some
understanding of how Excel formulas work.

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3a. Directions
Here you can read some directions for completing the template. You’ll also be
asked to input your name, business name, and the month and year that you are
starting on. This will determine how the months are displayed on the rest of the
template. If you leave it blank, the months will be displayed as Month 1, Month 2,
and so on. If you enter May 2015 as your starting month and year, the months
will display as May, June, July, etc.

Prepared by: Yoel Mego Hastomo and Gabriella Tiffani Gunarto

Company Name: Karnaen Group Indonesia

Starting Month: October

Starting Year: 2021

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3b. Starting Point

In this tab, you will be developing the financial Balance Sheet for your business
at the time it opens its doors for making the first sales. If you have an existing
business, you will record the actual Balance Sheet numbers at the point in time
from which you are projecting financial forecasts for future months.

Fixed Assets

These are items that you will purchase which will have value in the long-term
(more than 1 year). Read the descriptions below, and enter an estimate for each
amount. Remember, you can always make changes later when you’ve done
more research.

Real Estate

When you purchase real estate, the cost of any buildings can be depreciated, but
the cost of the land cannot be. Therefore, for accounting purposes, you will need
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to break down the cost of the real estate into land and buildings. A good rule of
thumb is 20% of the real estate cost is land, and 80% buildings, but you should
consult a tax professional for an exact breakdown.

Land (A) IDR -

Buildings (B) IDR -

Leasehold Improvements are updates or changes you need to make in your

rental space before you can begin. These may include painting, installing new
walls or partitions, new flooring, light fixtures, etc.

(C) IDR -

Equipment includes machinery, computers, ovens, printing presses, etc. Any

type machine or device you’ll need to produce your product or service.

(D) IDR 16.000.000

Furniture and Fixtures are items like desks, chairs, tables, lamps, clothing
racks, display cases, etc. (E) IDR 3.000.000

Vehicles include any car, truck, van etc. that will be used for the business.

(F) IDR -

Other will include anything you will need to purchase as a Fixed Asset which
doesn’t quite match up with the previous categories, if needed.

(G) IDR 7.500.000

Operating Capital

These are shorter-term assets, things you will likely use within one year. Read
the descriptions below, and enter an estimate for each amount. Remember, you
can always make changes later when you’ve done more research.

Pre-Opening Salaries and Wages include any payment to employees or

contractors who help you get things ready before you have officially opened your
business.

(H) IDR-

Prepaid Insurance Premiums will need to paid on any insurance you plan to
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get.

(I) IDR -

Inventory means the goods and materials that you will sell, or that you’ll use to
produce your product or service.

(J) IDR -

Legal and Accounting Fees may need to be paid if you hire a lawyer and/or an
accountant to help you get your business set up.

(K) IDR –

Rent Deposits are fairly typical with any rental space, and you’ll usually get the
deposit back if you leave the space in good condition.

(L) IDR -

Utility Deposits are charged by most utility companies prior to activating

service. In some areas, this can be waived with a letter of reference.

(M) IDR -

Supplies may include things like paper, pens, notepads, tissues, etc.

(N) IDR -

Advertising and Promotion include fees paid to a marketing consultant, ad

space purchased, website creation, etc.

(O) IDR -

Licenses may be required locally, on the state level, or nationally in order for you
to operate your business.

(P) IDR -

Other initial start-up costs include anything you’ll need to purchase, which
doesn’t fit into these categories.

(Q) IDR -
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Fixed Assets

Enter here your answers from other pages to calculate the total. Depreciation
expense represents writing off the value of a fixed asset over its estimated useful
life, rather than expensing the entire cost in one year. Read more about
depreciation in the glossary. The Financial Projections Creator will calculate
depreciation of assets automatically using the time periods shown. If your
research shows that you should use a different time period, cross out the
number used below and write in the new one. You will be able to make changes
in the Template as well.

Item Amount Depreciation

(Years)
A Real Estate – Land IDR n/a
B Buildings IDR 20
C Leasehold Improvements IDR 4
D Equipment IDR 16,000,000 4
E Furniture and Fixtures IDR 3,000,000 4
F Vehicles IDR 8
G Other IDR 7,500,000 4
(1)TOTAL FIXED ASSETS IDR 26,500,000

Operating Capital

Enter your answers from other pages here.

Item Amount
H Pre-Opening Salaries and Wages IDR
I Prepaid Insurance Premiums IDR
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J Inventory IDR
K Legal and Accounting Fees IDR
L Rent Deposits IDR
M Utility Deposits IDR
N Supplies IDR
O Advertising and Promotion IDR
P Licenses IDR
Q Working Capital Cash On Hand IDR 973.500.000
R Other Initial Start-Up Costs IDR
(2)TOTAL OPERATING CAPITAL

Sources of Funding

Refer to other pages totals to complete this chart. Add the (1)Total Fixed Assets
to the (2)Total Operating Capital to get the (3)Total Funding Needed.

(1)Total Fixed Assets IDR 26,500,000

(2)Total Operating Capital IDR 973.500.000

(3)Total Funding Needed IDR 1.000.000.000

Now that you’ve added up your Total Funding Needed, you have to figure out
how to pay for everything! The Financial Projections Creator will calculate what
percentage of your funding is coming from each of the following categories. It will
also calculate the monthly payments for your loans, if you have any.

Equity

First, you should think about how much funding you can raise before going into
debt. Most banks or other financial institutions would expect 25% to 30% of your
total funding needed to be covered by equity capital.
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How much money will you (and any other owners) be putting into this
business?

(A) IDR

Do you have any outside investors (friends, family, or anyone who is

providing funding in exchange for ownership of part of your business)?

If yes, how much funding will you receive in total from all investors?

(B) IDR 1.000.000.000

If no, leave blank.

EQUITY SUBTOTAL (A+B) 1.000.000.000 IDR

Remaining Balance Needed

FUNDING NEEDED – EQUITY SUBTOTAL) 1.000.000.000 IDR

Debt

Now that you know how much you will have in equity, you may need to
supplement that with debt-based funding.

Will you have a mortgage (are you planning to purchase a building and/or
land?)

If yes, what is the estimated loan amount? (F) IDR ___________________

If no, leave it blank.

Will you have a vehicle loan (will you need to purchase a vehicle for your
business?)

If yes, what is the estimated loan amount? (G) IDR____________________

If no, leave blank.

SUBTOTAL (F+G)*: IDR

*If this subtotal doesn’t equal the Remaining Balance Needed amount, you’ll
have to divide the rest between a Commercial Loan (C), Credit Card Debt (E)
and Other Bank Debt (G). The total below needs to equal (3)Total Funding
Needed or you will not be fully funded.
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Sources of Funding Totals

A Owner’s Equity IDR 1.000.000.000
B Outside Investors IDR
C Commercial Loan IDR
D Commercial Mortgage IDR
E Credit Card Debt IDR
F Vehicle Loans IDR
G Other Bank Debt IDR
TOTAL IDR 1.000.000.000

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3c. Payroll
Employee Types

Fill in your estimate of the compensation for each employee or independent

contractor that your plan calls for. Owner’s compensation, for this purpose, does
not include profit or cash distributions.

Employee Types Number of Average Estimated

Owners/ Yearly Months
Employees
Directors 3 ID 288.000.000 IDR 24.000.000
Full-Time Employees 2 R 288,000,000.00
ID 153.000.000 IDR 13.000.000
Part-Time Employees R
ID
Independent Contractors R
ID
R

Payroll Taxes and Benefits

This part is tricky, so we’ve included the percentages for you (based on the
present year). If you need to make changes, you can cross out the listed
percentage and write in the correct one. The Financial Projections Creator will
automatically calculate the monthly amounts due for Social Security, Medicare,
Federal Unemployment and State Unemployment taxes.
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Payroll Taxes and Benefits Wage Base Limit* Percentage of

Salary/Wage
Social Security IDR 6.20%
Medicare 1.45%
Federal Unemployment Tax IDR 0.80%
(FUTA)
State Unemployment Tax IDR 3.45%
(SUTA)**
Worker’s Compensation n/a 2.85%
Employee Health Insurance n/a 0.00%
Other Employee Benefit n/a 0.00%
Programs

*The wage base limit is the maximum earned gross income on which a given tax
may be imposed. So you pay taxes on everything up to that amount.

**This varies by state. you need to find your state’s information.

This tab of the Template will show you the totals for year 1, plus estimates for
years 2 and 3. You can adjust those estimates by changing the growth rates. For
example, if you think you’re going to double the number of employees you have
in year 2, you can make the growth rate 100%.

This may seem too abstract right now, but once the numbers for Year 1 have
been entered and you are viewing the Financial Projections Creator, it will make
more sense.

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3d. Sales Forecast

Product Lines and Units

Some businesses may be able to use an actual unit, while others may have to
invent a unit. For example, a shoe store could use pairs of shoes sold as its unit,
and an average price and cost per pair for the value factors. A service business
might use number of service calls made and an average price and cost. Or, you
could use dollar units, such as sales in units of IDR100 and cost of sales in units
of IDR50.
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Wages and salaries are included in the salaries and wages tables 2a and 2b. If
you own (or are starting) a manufacturing or contracting business and you may
want to include labor cost in the COGS per Unit.

Product Lines Units Sales Price Cost of goods Margin PerUnit

Per Unit sold (COGS) Per (sales price per
Unit unit – COGS per
unit)
Management Fee 3 IDR 20.000.000 - IDR 60.000.000

Projected Sales Per Month

Use the tables below to record how many units of each product/service you think
you will sell in a given month. For most businesses, sales will increase or
decrease at different times during the year. This forecast will help you plan for
when you’re not bringing in as much profit.

Product 1:

Month 1 Month 4 Month 7 Month 10

Month 2 Month 5 Month 8 Month 11

Month 3 Month 6 Month 9 Month 12

Product 2:

Month 1 Month 4 Month 7 Month 10

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Month 2 Month 5 Month 8 Month 11

Month 3 Month 6 Month 9 Month 12

Product 3:

Month 1 Month 4 Month 7 Month 10

Month 2 Month 5 Month 8 Month 11

Month 3 Month 6 Month 9 Month 12

Product 4:

Month 1 Month 4 Month 7 Month 10

Month 2 Month 5 Month 8 Month 11

Month 3 Month 6 Month 9 Month 12

Product 5:

Month 1 Month 4 Month 7 Month 10

Month 2 Month 5 Month 8 Month 11

Month 3 Month 6 Month 9 Month 12

Product 6:

Month 1 Month 4 Month 7 Month 10

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Month 2 Month 5 Month 8 Month 11

Month 3 Month 6 Month 9 Month 12

Sales Growth Rate

Enter a percentage for the rate of sales growth you anticipate year over year.
You can adjust individual months and make other edits on the Financial
Projections Creator.

Again, though this may seem abstract, once the numbers for Year 1 have been
entered and you are viewing the calculations within the Financial Projections
Creator, it will make more sense.

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3e. Additional Inputs

This section is where you will enter some parameters that are necessary for
calculations in later tabs.

Accounts Receivable

If your business will be retail (where people pay at the time they purchase the
goods/services), put 100% next to “Paid within 30 days”. If you will be
contracting work and payments will be made on different intervals, you will need
to find out what the industry standard is. If you’re not sure, put 100% next to
“Paid between 30 and 60 days.” If you have a mix of retail and contract work,
divide up the percentage. You can always update this when you have more
information.

Accounts Receivable (A/R) Days Sales Outstanding

Percent of Collections Year 1 Year 2 Year 3

Paid within 30 days % % %

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Paid between 30 and 60 days % % %

Paid in more than 60 days % % %

Allowance for bad debt % % %

This should equal 100% ----> 100% 100% 100%

Accounts Payable

This will vary depending on the vendor, your business’s credit history, and how
you set up the contract. If you’re not yet sure, put 100% next to “Paid within 30
days,” and update this when you have more information.

You will notice here that some people may pay you between 30 and 60 days, but
you may have to pay people within 30 days. This impacts cash flow, which you
will learn more about in the next section.

Accounts Payable (A/P)

Percent of Disbursements Year 1 Year 2 Year 3

Paid within 30 days % % %

Paid between 30 and 60 days % % %

Paid in more than 60 days % % %

This should equal 100% ----> 100% 100% 100%

Line of Credit

As you saw above, sometimes you may have to pay for things before you
receive payment yourself. In order to ensure that you have enough cash each
month, you may need to set up a line of credit. This is usually done with a bank.
Below, you will need to enter the minimum amount you would feel comfortable
seeing in your bank account. If you go below this amount, you can draw from
your line of credit. You will have to pay this money back with interest, so also
enter an interest rate. The interest rate will likely be some percentage points
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higher than the prime rate, but this will vary by lender.

Line of Credit Assumptions

Desired Minimum Cash Balance IDR

Line of Credit Interest Rate %

Additional Fixed Assets Purchases

Below include the additional fixed assets that you will purchase in the first,
second, and third years. Include an estimate of which month you will purchase
them. For example, you might buy one delivery van for your flower shop initially,
and then plan on buying a second one after nine months, based on sales
projections.

Remember, the categories for Fixed Assets are: Real Estate, Leasehold
Improvements, Equipment, Furniture and Fixtures, Vehicles, and Other Fixed
Assets.

Fixed Assets Month/Year Amount

Ex. Real Estate July Year 2016 IDR150,000

Other

Below we’ve included the default amounts for the Income Tax Rate and
Amortization Period for your startup-costs. If these numbers are not correct,
cross them out and enter the correct amount.

Effective Income Tax Rate – Year 1 - 20%

Effective Income Tax Rate – Year 2 - 20%

Effective Income Tax Rate – Year 3 - 20%

Amortization Period in Years = 3

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3f. Monthly Operating Expenses

Operating Expenses are the costs associated with running the business. Based
on any research you have done, put in monthly estimates below. If you haven’t
yet researched all of these expenses, enter your best guess and update that
amount later. Usually, you can get a basic idea of cost by doing an online search
for each product or service that you will need. Enter “0” for anything you won’t
use.

The expenses listed here are common ones found on the Schedule C IRS form,
which business owners need to complete. For more information, visit:

Advertising includes print or media ads, business cards, mailers/brochures,

signs, give-away items, samples, sponsorships (ex. sponsoring a pet adoption
day for your local shelter).

(A) IDR ___________________________

Car and Truck Expenses can EITHER include mileage costs (the amount per
mile varies year to year) OR direct costs for your gas, oil, repairs, insurance,
depreciation and registration.

(B) IDR___________________

Commissions and Fees may include, for example, a finder’s fee for someone
who helped you find a business to buy, or an employment agency who helps
staff your business. It doesn’t include commission paid as part of a salary to an
employee.

(C) IDR ______________________

Contract Labor (not included in payroll) might include hiring a cleaning

company, landscaper or any other outside business which performs a task for
you.

(D) IDR ________________________

Insurance (other than health) will include things like liability insurance.

(E) IDR ________________________

Legal and Professional Services would include tax preparation,

payroll/accounting, legal advice, and the like.
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(F) IDR _______________________

Licenses would include any ongoing licenses that were not already accounted
for in the Start-Up Expenses section.

(G) IDR ______________________

Office Expenses are costs that relate directly to the operation of your business.
These might include: computer software, postage, cell phone, internet, office
equipment costs. You must have receipts for all items.

(H) IDR ______________________

Rent or Lease – Vehicles, Machinery, Equipment includes anything that you

rent/lease for your business.

(I) IDR __________________

Rent or Lease – Other Business Property is rented/leased office or storage

space, or anything else which doesn’t fit into the above category.

(J) IDR _______________________

Repairs and Maintenance are expenses associated with fixing something that
broke, or performing routine maintenance. If you fix/maintain the item yourself,
you cannot deduct labor costs.

(K) IDR __________________

Supplies are items you need to purchase to produce your product or service.
For example, if you sell custom stationary the cost of the paper would be a
supply. If you just re-sell paper that would be inventory, not supplies.

(L) IDR

Travel, Meals and Entertainment is a bit more complex, and you will want to
consult a tax professional to see what exactly can be deducted and how it should
be documented. For the purposes of this workbook, put together an estimate of
how often you’ll travel out of town, overnight each month and then the average
cost per trip.

(M) IDR _______________________

Utilities are services like electricity, gas, telephone, etc. that are directly related
to your business. If you work from home, figure out the percentage of square
footage in the home that is dedicated work space. Then apply that percentage to
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the utilities – for example, if your office takes up 15%, you can deduct 15% of
your electricity.

(N) IDR ___________________

Miscellaneous is the category for anything that doesn’t fall into one of the
categories already mentioned.

(O) IDR _______________________

Expenses Monthly Cost

A Advertising IDR
B Car and Truck Expenses IDR
C Commissions and Fees IDR
D Contract Labor (Not included in payroll) IDR
E Insurance (other than health) IDR
F Legal and Professional Services IDR
G Licenses IDR
H Office Expense IDR
I Rent or Lease – Vehicles, Machinery, Equipment IDR
J Rent or Lease – Other Business Property IDR
K Repairs and Maintenance IDR
L Supplies IDR
M Travel, Meals and Entertainment IDR
N Utilities IDR
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O Miscellaneous IDR

This tab of the Template will show you the totals for year one, plus estimates for
years two and three. You can adjust those estimates by changing the growth
rates. For example, if you think you’re going to expand office space in year three,
you can demonstrate that by increasing the percentage.

One method companies use to make expense and sales projections is to use
their best judgment of what actual expenses are going to be in year one and
then multiply them by a growth factor in subsequent years.

This would not work for expenses that are likely to remain fixed or close to
constant like rent, utilities, and other expenses that may not grow as fast as
revenues.

However, for expenses like advertising, trade show and others that are more
directly related to sales, this methodology works.

Expenses Growth Rate Growth Rate

Advertising % %
Car and Truck Expenses % %
Commissions and Fees % %
Contract Labor (Not included in payroll) % %
Insurance (other than health) % %
Legal and Professional Services % %
Licenses % %
Office Expense % %
Rent or Lease – Vehicles, Machinery, % %

Rent or Lease – Other Business Property % %

Repairs and Maintenance % %
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Supplies % %
Travel, Meals and Entertainment % %
Utilities % %
Miscellaneous % %

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3g. Cash Flow

Most items here will automatically pull from other areas of the Financial
Projections Creator. However, there are four items in the Cash Outflows section
that you will need to input for year 1, as well as years 2 and 3. Those items are
listed below. It may be easier to complete this section once you’ve started to fill
out the Template. That way, you will know what your monthly Line of Credit
balance is, and you’ll have an idea of what your profits will be to determine
Owner’s Distribution and Dividends Paid. In many cases, these will both be zero
for the first year.

Item Estimated Amount Per Month

Additional Inventory
Owner’s Distribution
Line of Credit Repayments
Dividends Paid

This tab is the same as tab 6a, but it allows you to make cash flow projections by
month for years 2 and 3.

Item Estimated Amount Per Month

Year 2 Year 3
Additional Inventory
Owner’s Distribution
Line of Credit Repayments
Dividends Paid

Notes
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____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

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3h. Income Statement

You will not need to enter any information here, as the Template will
automatically calculate all of the information.

You will not need to enter any information here, as the Template will
automatically calculate all of the information for years 2 and 3.

Notes

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

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3i. Balance Sheet

Like the Income Statement, the Template will automatically calculate all of the
information on this tab.

Notes

____________________________________________________________
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____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

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4. Other Helpful Tabs

Breakeven Analysis

This tab will auto-populate based on information you’ve entered in previous tabs.
Here, you can determine the number of units you will need to sell each month to
breakeven. This means that revenues are equal to expenses. Any units you sell
above the breakeven point are profit.

Financial Ratios

This tab generates some standard ratios that you might find useful. There is
space for you to enter the norms for your industry so that you can see a side-by-
side comparison with your ratios.

Diagnostic Tools

Many start-up entrepreneurs are unsure whether their financial information is

within reasonable ranges. This tab will give you very general guidelines as to
whether your numbers are too high, too low, or just right.

Cost of Goods Sold (COGS) Calculator

This tab isn’t meant to “store” data. It’s a calculator and, like a calculator that
you’d use at your desk, you can enter data into it to get an idea of your Cost of
Goods Sold (COGS) for different items. You will largely use this when you are
working on your Sales Forecast.
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Amortization & Depreciation

This tab is helpful in a variety of ways. It not only shows what you will owe
month-by-month for the first three years of any loans of credit card debt you take
out, but it also shows depreciation for our fixed assets for 3 years and how your
start-up costs can be amortized over the first 3 years.

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5. Glossary
Accounts payable - Money owed to others for goods and services received.

Accounts receivable - Money owed from customers for goods and services
sold.

Additional inventory - Raw materials or finished goods that are ready or will be
ready for sale, which are purchased to replenish existing inventory.

Amortization - The paying off of debt in regular installments over a period of

time.

Assets - All resources owned by the business.

Balance sheet - A financial statement that shows the company’s Financial

position at a moment in time—all assets, all liabilities, and all equity.

Benchmarking - Comparing company’s results to the experiences of others of

similar size and within the same industry.

Benefits - Costs paid by company for employee-related items, such as Social

Security, worker comp, health insurance, vacations, sick days, etc.

Book value - Sum of all assets, minus all liabilities = equity. The intrinsic value of
the business owned by the stockholders.

Breakeven point - Point at which total sales for a period of time = total expenses
for that period of time (in other words, there is neither a profit nor a loss).

Business concept - An idea which can be used for commercial purposes.

Capital - Long term money held in the business that is used to create profit.

Cash flow statement - An analytical tool that demonstrates the short-term

viability of a company, particularly its ability to pay bills.
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C-corp. - A limited liability legal structure in which the company is taxed

separately from its shareholders.

Collateral - Property and goods used to secure repayment of a loan.

Cost of goods sold (COGS) - Also called cost of sales or variable costs. The
costs associated with a specific product, not including Overhead costs, such as
payroll or office supplies.

Current - Will occur within 12 months of the financial statement date.

Debt capital - Debt raised by the business by taking out a loan.

Depreciation - Cost of expensing a fixed asset over its estimated useful life;
Many people use “Straight Line” depreciation, equal amounts over the life of the
asset, for management planning and reporting purposes. “Accelerated”
depreciation might be used for tax reporting purposed. Consult your accountant
for advice.

Direct cost - Cost that can be directly traced to producing specific Goods or
services.

Disbursements - Money paid out.

Dividends paid - Money paid to shareholders.

Equity - (see book value).

Expense - Operating costs the business incurs through its efforts to earn
revenue.

Financial projection - Estimate of future financial outcomes (see forecast).

Fixed expense - Business expenses which must be paid every month, even if
you have no customers (for example: rent, utilities, telephone, loan payments).

Forecast - Making statements about events which have not yet been observed.

Fringe benefits - (see benefits).

Funds management - Management of cash flow.

Gross profit - Revenue minus the cost of making a product or providing a

service, but before deducting overhead, payroll, taxes and interest payments.

Gross profit margin % - Gross profit divided by total sales.

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Income - Revenue produced through sales of goods and services.

Income statement - Analysis of financial performance over a period of time (also

called the Profit and Loss statement, or ‘P&L’).

Indirect cost - Costs that are not directly accountable to a unit of production,
also called overhead (such as taxes, administration, personnel, and security)

Industry comparison - (see benchmarking).

Liabilities - What the business owes to others.

Line of credit - The maximum credit a customer is allowed; This is usually

arranged with a bank, and the borrower is allowed to borrow up to a pre-defined
amount. This is generally used to maintain a certain minimum cash balance for
the business.

Long term - Occurs later than 12 months from the financial statement date.

Model - Computer program that uses facts and assumptions to simulate financial
operations of a business.

Net profit - Sum of total revenue and gains, less all expenses (including taxes)
for a reporting period.

Net profit before taxes - Sum of total revenue and gains, less all expenses
except for income taxes for the reporting period.

Net profit margin % - Net profit divided by total sales.

Operating expense - Expenditures incurred in the normal course of business.

Overhead - (see indirect cost).

Owners distribution - A payment of earnings to owners of a business.

Payment terms - Conditions under which a seller completes a sale, including the
time the customer has to pay off the amount due.

Profit and loss statement - (see income statement).

Profitable - Excess of purchase price over the costs of bringing product or

service to market.

Projected - Estimated or forecast.

Ratios - Calculations used to make numerical comparisons.

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Receipts - (see income).

Revenue - (see income).

Sales - (see income).

Sales forecast - Estimated sales for a time period.

Sales unit - a product or service, or a group of products or services, regarded as

a single line-item entry in the sales forecast.

S-corp. - A limited liability legal structure in which the corporation's income or

losses are divided among and passed through to its shareholders who then
report the income or loss on their own individual income tax returns.

Short term - Occurs within 12 months of the financial statement date.

Sole proprietorship - A business entity that is owned and run by one individual
in which there is no legal distinction between the owner and the business.

Sources of funds - Typical sources include profit from operations, debt from
money borrowed, and sale of equity interest to shareholders.

Spreadsheets - An interactive computer application use for analysis of

information in a tabular form. These are frequently used for financial information
because of their ability to re- calculate the entire sheet automatically after a
change to a single cell is made.

Subcontract - Individual or business who signs a contract to perform part or all

of the obligations of another's contract.

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