Financial statements provide you with information to make decisions, therefore it is important that you understand them. The numbers simply represent decisions you have made in your business. Remember: every decision will eventually end up somewhere in your financial statements. The three most important financial statements to include in your business plan are the following:
- Balance Sheet: shows your assets, liabilities, equity, and how much the business is worth overall at a point in time. This includes forward projections (pro-forma) for 3 years.
- Income Statement: shows your income, expenses, and whether your company made a profit. This includes forward projections (pro-forma) for 3 years. This is also referred to as the Profit and Loss Statement (P&L Statement).
- Cash Flow Projection: shows your cash in and cash out and projects whether your business has the cash to pay its bills. This includes forward projections (pro-forma) for 3 years.
Additional financial information to include:
- Start-up costs
- Sources and uses of funds
- Break-even analysis
- Budgeting projections
- Assumptions for all projections