April 2003  Volume 29, Issue 3
April 2003 Issue
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SIDEBAR:
Elements of a Good Financial Plan
 
 
What Should You Put In Your Firm's Financial Plan?

The first elements are pro forma (forecasted) balance sheets, income and expense statements and statements describing the sources and uses of cash.

The financial plan must also address the twin issues of financing and investing (the capital required for the upcoming period and how it's to be raised). This ensures that partners understand how they must either forego draws or increase debt to meet the required capital infusions.

The plan should also deal with how the partners will be rewarded for their capital investments.

In addition, it should describe why you are undertaking capital expenditures (after having explored the what-if scenarios open to the firm) and the business strategy for those expenditures (to achieve greater throughput, for example).

Finally, you must incorporate financial measures and analysis to establish your costs, break-even points and revenue determinations, to find out if your business strategy is working.