NBA Operating Plan Forecast (OPF) or Projected Profit & Loss Statement, is an excellent tool for the small business owner. The forecast plan will not only show you what to expect in profits, it will also forewarn you of impending problems. This program will allow you to complete "What If" types of analyses. It was designed so that you can customize the forecast plan for your own business which will better prepare you when requesting funding from a financial or government institution
Value of this Forecast
An OPF can yield multiple benefits to the small business owner. First, the OPF is a valuable planning tool. Second, when the planning phase has been completed, the OPF becomes a key management tool in controlling the business operations to achieve the results planned for.
As a Planning Tool - The OPF enables the owner to develop a "preview" of the amount of profit or loss, which can be expected to be generated each month, for each quarter, and for the business year - based on reasonable predictions of monthly levels of sales, costs, and expenses. By having a "preview" of future operations the owner can compare, ahead of time, the year's expected profit or loss against profit goals and needs established for the business. If the results as forecasted are not satisfactory, there is time to identify what must be done in order to achieve satisfactory results for the year.
As a Control Tool - A completed Forecast enables the owner-manager to compare the figures for the actual results, as they become known, with the estimated or "targets" projected for that month. Where the results are out of line, steps can be taken to correct undesired deviations. By being able to see quickly where the trouble is, less time and money will be lost in getting back on track towards overall profit goals.
Limitation Regarding Cash Flow - Valuable as the Forecast is both as a business planning tool and as a management tool for controlling the business, the Forecast does not provide information about cash. Profits and cash are not the same thing. In order to project the firm's future cash requirements- as well as project the amount of cash it will have available to meet those requirements-it will be necessary to complete a separate schedule specifically designed for that purpose. (See SBA Form 1100, titled "Monthly Cash Flow Projection.") However, monthly estimates of sales, cost of sales, and expenses, needed for a cash flow projection can be easily obtained from this Forecast once it is completed.
Industry "Averages" - In starting the estimating process it may be desirable to enter into the "Industry Percentage" column of the Forecast, the average operating percentages for your industry. These percentages may be obtained from various sources such as Trade Associations, accountants, or banks. Also, the reference librarian in your nearest public library can refer you to appropriate documents containing the percentage figures. Industry "averages" can serve as a useful benchmark against which to compare cost and expense estimates being developed for your firm. Later, they will be useful for comparing the firm's actual operations.
Developing the Estimates - To get the most out of an Operating Plan Forecast, estimates should be developed for each operating element (sales, cost of sales, and expenses) for each month of the firm's operating year. When a firm's business cycle covers more than twelve months, or where special factors influencing the firm's activities will not properly be reflected during that period-example, long term construction projects-the Forecast should be extended for the appropriate additional period.
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