Bootstrap Business Financial Plan - Starting a Small Business With Bootstrap Financing

Preparing a sound, bootstrap business financial plan is the absolute key ingredient for any budding entrepreneur starting a small business with bootstrap financing. Unlike a traditional business plan, a financial plan for a bootstrapped business contains six essential components. 

Components of a Successful Bootstrap Finance Plan

1. Expense Summary
The expense summary contains the start-up costs and ongoing operating expenses needed to get your business up and running. 
2. Projected Profit & Loss Summary
Your profit and loss summary is a key tool for determining how long it will take your business to become profitable. It reflects a very simple formula of: revenues minus expenses, equals profit or loss.
3. Sales Forecast Summary
Your sales forecast summary is an estimation of what you believe your sales are likely to be each month. Sales forecasting requires research and a solid knowledge of your industry, niche market and product or service.
Starting a small business with bootstrap financing requires laser targeted forecasting. This is not as difficult as it sounds, it just means you must really invest the time in thoroughly researching your business.
4. Reserve Funding Plan
Establishing a reserve funding plan is essential for weathering the "start-up storms". This is a back up funding plan for keeping your cash flows above dangerous levels.  Your bootstrap business financial plan must include a reserve funding plan, in order for your new venture to be successful.
5. Cash Flow Management Plan
This is simply the anticipated inflow (sales) and outflow (expenses) of cash through your business by month. Why it's so tricky is due to the fact that you may have slow sales or no sales when you're just getting started. Or, perhaps your customers are not paying within terms. Even if you have great sales on paper, your cash flow management plan will determine your success to a large degree.
6. Balance Sheet
A balance sheet provides a good overall picture of what your business is actually worth. It takes your assets (physical goods like equipment or property) minus your liabilities (debts owed to creditors) and gives you the equity value of your business.
What makes these components different from what you would prepare for a business plan written for bank financing? Well, the main difference is that this plan is just for you. It is an actual plan that you must follow to achieve success in your business. I have seen far too many instances where a traditional business plan is almost completely ignored, once the bank loan check is cashed. 
With over one third of brand new businesses failing in their first year of operation, you owe it to yourself to minimize your start up risk, by being well prepared with a sound financial plan.
Where Does a Bootstrapped Business Plan Fit In?
Where does a bootstrap business financial plan fit in?  Well, first you must understand bootstrap financing. Starting a small business without borrowing is the ultimate goal of a bootstrapped business' financing strategy. Many new entrepreneurs just don't realize that you can start up a business, even if you have very little money, poor credit or don't own a home. How is this possible? I know that I'm going against conventional wisdom here, but you really can start up a brand new business without BIG bank loans or a stockpile of cash.
Find the free sources of business start up funding your new business needs to survive and thrive. Start by claiming your free copy of The Bootstrapper's Business Start-up Planner, by visiting my website.
©2009 Kimberly Kelly - All Rights Reserved Worldwide.
Permission to reprint this article is granted strictly on the condition that it be reprinted in its entirety, with all live links and author bio in tact.

Business Financial Reporting - Creating the Foundations of Performance

Building the foundations of a sustainable and profitable business is essential for long term viability of the operation. Having complete and timely information about the business and its performance in the marketplace is essential for managerial decision making about the productive capacities, directions and profitability of the business. These foundations are created by implementing a solid structure of business financial reporting. The accounting process needs to take into account, organise and accurately record all financial dealings of the company. At the end of each financial period, these records are then used by the company's accountant to prepare the necessary statements required. The four most common financial reports include the balance sheet, income report or statement, cash flow analysis and the statement of capital.

The balance sheet itemizes all assets that are owned by the business, along with the total debts owed by the business and the value of equity that is invested and owned by the company. The common equation for the balance sheet is the assets total the liabilities, or total amount being owed, plus the value of equity that is in the business. The balance sheet provides businesses with a snapshot in time of how the company is performing and its current financial position.

The income statement is presented in a flow format, which shows a summary of revenue types and amounts, as well as an overview of expense types and amounts, for a specific period of time. The analysis of the income statement provides the level of net profit or loss of the business, visually representing the difference between the company's revenue and expenses. Income statements are particularly important to those charged with the responsibility of managing the business as they represent the bottom line performance of the business over a set period of time.

The cash flow analysis or statement provides an overview of all the sources of income during a set period, as well as how the money has been used. Important for analysing the business's cash flow, identifying specific causes of any increase or decrease in the level of income and profit, business owners and managers utilise the information presented on the cash flow statement to ascertain the success of previous business initiatives as well as identify potential areas of concern.

Representing changes in the level and total amount of the owner's equity in the business over a period of time, the statement of capital represents the level of net income that is at the discretion of the owners to use as they choose.

Manage Business Debt

During this up and down economy most people are thinking that personal debt is a HUGE problem. I don't discount the fact; but managing business debt can be just as much of a horrendous monster. Personally, I've struggled with debt, good and bad, but recovered. This article is to help businesses in debt jump back up on their feet, get company cash flow under control (a little bit at a time) and on the fast track to financial stability.

Business lines of credit, revolving accounts and lack of cash flow can all lead to financial trouble and if not managed properly can head down the road of maxed credit limits and detrimental financial binds. At the moment I have worked with 3 businesses that are struggling financially but would have been in a better situation if they managed their business debt to work in their favor rather than against them.

A couple rules of thumb for business credit:

Don't mix personal profits/expenses with business profits/expenses.
The fact of the matter is if you can't manage your personal finances, don't think that you'll be able to manage both. Both should be treated as two separate accounts. Mixing them together can cause nothing but headache. Smaller businesses have a tendency to do this. Do you?

Have a trusted individual handle the numbers.
When I started Hue Magazine, I knew I was terrible with numbers, so I needed a money person to manage the finances. This worked out great! All I needed was a report at the end of the month and then I knew exactly what I needed to do in order to keep the business afloat.

Use logical sense when leveraging loans.
Loans should be used to help grow a business or improve a financial situation such as renovations (which build equity), or consolidation (which releases cash flow). It should not be an excuse to have a night on the town, even if you're treating that hard-to-nail-down client.

Watch Late Fees, APR's and Due Dates
Be mindful of the WAD. Late fees are inexcusable because it's like giving away FREE money. I see a lot of business owners run into the "Debt Trap" of not wanting to pay small bills because they feel they don't have the cash flow to cover the cost but continue to pay for dinners on a daily basis without a second thought. Strange.

APR's are vitally important too! If you have two cards one with 12% APR and the other at 0% APR, use the 0% for necessary cost. I say necessary cost because 0% APR to a lot of people translate to "FREE" credit which can bite you in the butt in the end.

Finally, payment dates. These can be disastrous if missed. A once $20 minimum payment can change to a scary $200 minimum if neglected. So be mindful of the dates in which a card payment is due. Remember be mindful of the WAD!

These are just a few rules of thumb from my experience of seeing businesses fall into the "Debt Trap." It is hard during this economic time because a lot of small businesses get in over their heads with cost not realizing that if the right measures are taken many money problems can be avoided.

Doing a little bit at a time can help you see the minor details that many may have missed the first go-around. Ensure that you have someone looking at your finances regularly and do a double check because after you look at numbers for a so long, they all start to look the same.

A general rule of thumb for all finances is to ensure that you are not spending more then you make, minimize expenses and maximize cash flow.

I hope this helps. Good luck small businesses!

Business Financial Reporting

The operations of any business are dependent on timely and accurate financial reporting to ensure the decisions concerning the direction and strategies of the business are accurate. Furthermore, as decisions are made and operations occur, the businesses financial position constantly changes.

Profit planning is a term given to the process of originating a prescribed series of steps to be taken to ensure that a profit will be made. Having accurate information through financial reporting software empowers businesses, both large and small to easily assess their information pertaining to their current financial position, trace changes in the businesses financial position and evaluate the success or otherwise of various product, service, branding and marketing activities that the company undertakes.

In order to have set figures to assess the businesses performance against, benchmarking should be undertaken. This is the practice of setting up standards of reference and then measuring them against performance. To action this, a firms accounting records must accurately reflect the performance and changes occurring in the operations assets, liabilities, income, expenses and equity.

The continued operation of your business also relies on maintaining the proper balance among its investments, revenues, expenses and profits. Because profit margins are so critical to the success of a company, any decline in them should trigger an immediate search for the cause. In addition, any sudden increase in revenue should also be assessed to ascertain what triggered the response and whether the company can replicate the ingredients of such success so it may become a long term strategy.

As businesses are competing in an ever increasing competitive environment, controls over performance are essential in driving the company in the most profitable direction possible. Control is the process of assuring that organizational goals are achieved, which usually involves five key steps: setting up the standards of performance, measuring actual performance, comparing actual performance with planned performance, deciding whether any deviations are excessive, and determining the appropriate corrective action needed to bring actual performance into conformity with planned performance.

Software programs allow business operators to easily add input, access and monitor key figures, while empowering them to have timely and accurate business financial reporting records and analysis to base decisions upon. Additionally, software management tools which have financial reporting functions also enable the efficient processing of information, automatic generation of financial documents such as account statements and invoices, while reducing the costs of a manual accounting system. Furthermore, unlike a manual accounting system, the data entered into the program will automatically be posted to the various ledgers and accounts set up.

Business Financial Plan

If you own or operate a business, it is essential that you have a financial plan. Without proper organization or management of your finances, your business could crumble. To avoid this it is important from the point you are starting up, that you plan the various aspects of your business carefully and appropriately. The financial aspect of any business is sensitive and needs to be treated as such. It is necessary to channel the funds available effectively to ensure growth of the business.

A business financial plan covers various aspects of finance which help in achieving financial growth and the business objectives. The objective of the business is a key element when organizing how to run your company. This objective should be able to reflect what you want to achieve in a practical and realistic way. It should also be clearly defined and detailed on the position the company intends to be in a certain time period.

The plan should be able to show an estimate of profits. There will have to be a financial projection of the sales and the amount it will cost to operate the business. It is also important when you are coming up with a business financial plan that you have control of its implementation. There should be a clear and systematic delegation of financial responsibilities put in place. Since you are dealing with money here, there needs to be a level of sternness that has to be put into effect. There has to be control and accuracy when dealing with finances and this will make it easier for you and the company when it comes to dealing with taxes.

Risk is always a part and parcel of any business venture. Your financial plan should include a risk management aspect. Since you are already planning, you are in essence reducing your business risks. Despite all this, it is impossible to know what the future holds, so it is advisable to always have as much shortcomings as possible covered.