Lori WadeLori WadeSeptember 29, 2017


The financial section of a business plan could be regarded as the lifeline of the business. It is what breathes an air of life and practicality into the business. The financial section many times appears at the back of the plan, but this does not downplay its importance. In fact, it is the most scrutinized section of the plan. Investors may actually pay more attention to it than other parts of the plan because the value of a business is in its figures.

The financial section gives insight into the profitability of the business, aspects of debt and equity estimated operating expenses, financial statement forecasts, future growth projections and business financing.

The financial data that’s contained in this section is quite structured and in-depth. You may find charts, formulas, tables, graphs, and spreadsheets. It may require the input of a financial expert such as an accountant in order to write it accurately.

This article will consider how you can go about writing the financial section of your business plan.

Introduction to the Financial Plan

The financial section of a business plan normally starts with the introduction to the financial plan. The format and structure of the introduction is purely left to the drawer of the business plan.

The introduction basically gives the reader a basic outline to what is contained in the section.

An example of an introduction is as follows:

“This financial plan gives the forecasted financial statements of Company ABC for a three year projected period. The income statement, cash flow statement and balance sheet have been drawn and the assumptions made have been outlined.

The end of each fiscal year has been set for September 2nd.

The business capital requirements at startup are valued at $100,000. The business owner will inject $50,000 while the remaining $50,000 will be financed through a bank loan.”

Financial Statements and Analyses

The second part of the financial section will revolve around the forecasted financial statements and analyses. Here, the following financial statement and analyses are laid down:

I Forecasted income statement

II Cash flow statement (Forecasted)

III Forecasted balance sheet

IV Sensitivity analysis

V Breakeven analysis

VI Ratio analysis

It is best to put each statement and analysis on its own page. It is also time saving to use spreadsheets when drawing these statements and analyses.

There are three financial statements that are normally written in business plans. They include:

1) Balance Sheet (Statement of Assets and Liabilities)

This statement shows what the business is worth. It states all the assets that a business has and their respective values; as well as all the liabilities and debt that the business may have.

Simply, it adds all that the business owns (assets) and what it owes (liabilities) and the difference between these two forms the business’ net worth.

The net worth of the business is referred to as equity in some circles. The balance sheet normally states the net worth of the business as at a certain date. Most businesses draw it at the end of their fiscal year.

2) Income Statement (Profit and Loss Statement)

This statement shows the earnings of a business over a given period. It adds all the revenues and subtracts all the expenditures to get the net profit or loss in that trading period. When writing the plan, one can use the statistics of other businesses in the industry to get the figures that are useful in drawing the income statement.

3) Cash Flow Statement

As the name suggests, this statement tracks the flow of cash in a business over a period. It also shows the users of the statement the cash at hand at any given moment in time.

The cash flow statement typically analyzes the changes that occur on the balance sheet. The inflow and outflow of cash in the company is captured, and the description of how the cash was spent is given.

The Break-Even Analysis

This financial tool is used to determine the point of sales that a business should reach for it to get neither profit nor loss from trading. Simply, it is the point at which the difference between the total revenues and total expenses of the business is zero.

Important elements that are considered in the break even analysis include:

  • The fixed costs
  • Variable costs
  • Selling price

Also, the items present in the income statements are quite vital when doing the break-even analysis.

When calculating the break even points, it is recommended to do them over a three year period for consistency. It also remains your own prerogative to decide whether you will provide readers of the business plan with explanations on the finer details of the analysis.

The Sensitivity Analysis

This analysis is used to identify the effect that increased and decreased forecasted sales have on the net income of the business. This increase and decrease are usually in percentage form. The reader of the business plan will see how your net income changes when your sales go up or down by say, 15%, 20%, and 30%. The percentage chosen remains in the prerogative of the business plan writer. However, when using the sensitivity analysis, one should know that a forecasted sale is never 100% accurate. Also, values below 14% should be avoided.

Ratio Analysis

A ratio analysis is a general tool used by investors to ascertain the performance of a business (existing or potential).

Values from the balance sheet are divided with other values from the income statement. This is done mostly under the time frame of three fiscal years. A percentage or decimal is then deduced.

The ratios are then compared to other businesses’ in the industry to gauge performance. Financiers may also use ratio analyses to inform their financing decisions particularly regarding the feasibility and return on equity.

A business plan writer can describe how the ratio has changed over the three years of the forecast.

  • Ratios have specific labels, for example:
  • Current ratio
  • Quick ratio
  • Debt ratio
  • Debt to equity ratio
  • Return on Equity

In each ratio, the formula used to calculate is given, and the corresponding dollar value is assigned to each item.

Notes to the Financial Statements

This is the last part of the financial section of the business plan. It summarizes every idea, assumption, and thought-processes that were used to create the forecasted financial statements. It is usually written in the period of three years of the forecast.

These notes are vital to the readers of the business plan as they give the detailed information that aids them to understand the forecasts and projections.

The notes should always come after the financial statements and analyses. It beats logic to have them before the statements and analysis. It also serves to avoid confusion and incomprehension by readers.

The notes should also have labels with specific reference to the item being described. For example:

  • Net income note to the financial statements
  • Accounts payable note to the financial statements
  • Accounts receivable note to the financial statements
  • Retained earnings note to the financial statements

The positive value that notes to the financial statements in the financial section have is that they make readers of the business plan understand your projections. Hence, the investors and financiers are more certain of your business. Certainty is a motivating factor for financiers and investors to invest in a business.

The financial section of a business plan benefits not only the investors and financiers but also the business owner. It aids them to understand their business better. It is also a vital aid in running the business. Most writers prefer the turabian paper format when writing the financial section and in extension the whole business plan.

The credibility of the financial section will purely rely on how realistic you are when writing it. A good way of doing this is by breaking the figures into components such that they can be analyzed on an individual basis.


The highlighted tips on how to write the financial section of your business plan are sure to help you run your business better. They can also draw more investors to your business. Hence, a win-win situation for your business.

Lori WadeLori WadeAugust 30, 2017


Financial education has always been thought to be a reserve for investors or anyone in business. In fact, if you go to the streets and capture the reaction of most people if asked to go to a financial education class, you would be surprised. Most people will ask “Why should I?” A good number of people think that they don’t need any personal financial education. They have strong reason to believe that they would never apply anything with regard to finances. Well, the point that these people miss is that financial education traverses the investment and business aspects. Everyone uses money in their daily lives. Thus, personal finance applies so it makes sense teaching personal financial education to just about anyone regardless of age.

Well, in light of the above, this article will consider why personal financial education is important and why everyone regardless of age should have a basic understanding of finances.

Financial Literacy

The end point of financial education is financial literacy. In the basic sense, it is the knowledge that’s required to manage debt, credit and that which makes us make responsible decisions that involve money in our daily lives. It includes the most basic of things such as:

  • How to use a credit card
  • How a checking account works
  • What money is and its uses, and all other financial factors.

The need for personal financial education is growing owing to the increasing sophistication of financial markets. Consumers are nowadays making complex financial decisions by themselves that revolve around borrowing, saving, loans, and pensions. They are shouldering more financial decisions than before. A case could be given of retirement planning and pensions. In the past, decisions revolving around retirement planning were done by professionals and the financial burden was placed on governments and private entities that sponsored them. Consumers were not involved in any of these decisions. In the present time, consumers are being actively involved. We could give a case of the 401K savings plans, where employees are required to make investment decisions.

Another case could be given of the multiplicity of financial service companies in the market. Examples include:

  • Credit unions
  • Banks
  • Brokerage Firms
  • Mortgage companies
  • Insurance companies
  • Financial planners

All these companies are competing for the assets of consumers who are confused.

This implies that the risks that come with these financial decisions are transferred to the consumers. Undertaking such financial decisions requires a thorough understanding of finances.

Thus, we can deduce that failure to have this understanding can have detrimental effects on the lives of individuals. It will spike the instances of fraud and individuals will not be able to make the right choices with regard to saving money and investments.

According to the OECD, it has been noted that in emerging economies, financially educated persons help stabilize the economy. Their actions contribute to the real economic growth and other aspects such as poverty reduction. In developed countries, financially educated people are better placed to make sound retirement plans without having to acquire high levels of debt. This forestalls the instances of personal bankruptcy and foreclosures.

In developed countries, the issue of credit cards is a menace. The increase in the use of credit cards has contributed greatly to personal bankruptcies. This is an implication brought about by the increased availability of credit to people who are not financially literate.

The modern day world is characterized by electronic transactions. However, it has been observed that many people are missing out on basic things such as bank accounts. Statistics from the OECD countries show that about 1%-3% of the population do not have a bank account. This implies that they are isolated financially from electronic payments and welfare benefits.

Another upcoming trend that necessitates the need for personal financial education is the proliferation of financial and investment experts. No doubt, they may have authority over financial matters but they give conflicting advice. So who is the consumer supposed to believe if the experts cannot agree amongst themselves?

To illustrate:

Conservative experts at most times give advice that revolves around reducing risks and diversifying. On the other extreme, non-conservative experts may brush off such advice by telling you to give your all; the greater the risk, the higher the return. Who will you believe?

Another expert might tell you to avoid debt like a plague. He/she might tell you that all debt is bad and if you have any, you better pay them down quickly. On the other hand, another expert encourages you to take up on debt; the good type of debt. He/she might indulge you on how to leverage on it and build your own wealth with it. Which side will you take?

Lastly, an expert might tell you that in order to be rich, you have to invest in the stock market whereas another expert brushes it off and tries to convince you that the path to riches is in the property market. Where will you invest your money?

Considering the above illustrations, one can literally go nuts especially if they have no financial education. In extreme cases, one might lose all of their hard-earned cash and then depression kicks in and you start wondering why bad things happen to good people!

All these boil down to acquiring personal financial education. It serves as a means of sieving through the financial half-truths of financial experts and know how to make a financially sound decision.

Indeed, gaining financial education exposes your mind to many financial ideals. John Bogle, a popular investment analyst, observed the secrets to investment success is that there is no secret at all. It’s all about understanding the fundamentals. This is the essence of personal financial education. It gives you the basic ideals from which you will base all your financial decisions on. It makes people come to the realization that different investments are just a manifestation of “one size does not fit all and a case of different strokes for different folks.”

At face value, financial illiteracy might seem like an individual problem. However, the effects are broad in nature as they affect entire populations and economies. A case in point is the financial crisis of 2008 in the US. The bulk of the contributing factors that led to this crisis is financial illiteracy. Many people did not understand how mortgage products work.

When Should Financial Education Start?

Well, the above arguments point out a great need for personal financial education. The question arises, “How soon should financial education occur?” Some circles are of the opinion that it should start as early as high school. The aspects of financial planning should be complemented with some incremental mathematics to give students mastery of not only numbers but also managing money.

Ideals such as pay yourself first and the importance of budgeting should be introduced as early as the high school level. When joining college, there are specific instructions given to prospective such as the college application essay format. There should be a section for demonstrating basic financial knowledge.

When the basics of amortization are taught to students, they will be better off understanding the entire costs of making large purchases. It will inevitably enhance their decision making in the same aspects later in life.

If you did not receive this education in high school, all hope is not lost. You can join a financial coaching class today and you can get acquainted with the basics if finance. Technology has even made things better one as can acquire basic knowledge of finance in online forums.

If you’d already acquired a basic personal financial education knowledge, embrace an attitude of learning. There is always something new to learn owing to modern day dynamics. Governments also have to take charge in this endeavor. They ought to foster better education in schools. Programs should be put in place at national and local levels to promote access to financial services and also to promote financial awareness.

What are the Benefits of Financial Education?

  • It will teach you to sieve through all financial advice to see what works and what does not work
  • It will help you build a financial plan that suits your preferences
  • It will enable you to demonstrate personal responsibility for your financial security
  • It will ultimately raise your financial intelligence.


With all the above insights on financial education, we conclude by stating that financial education is the best financial investment that you can ever make in life. We are of the opinion that it is invaluable and anyone that does not have it is holding themselves back from enjoying the benefits of personal financial education.

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