What's the best way to create a balance sheet for your business plan?

A balance sheet is a snapshot of a company’s worth at a given date in time - usually the reporting date, but can be run at any time. This is a very difficult hypothetical exercise for a business plan as you need to project your assets (what you own) and liabilities (what you owe) at a date in the future. I would suggest that you seek support from an accountant or bookkeeper if you require a projected balance sheet, they can also support you with a cash flow statement which is much more relevant in terms of predicting future stability of the business.

A balance sheet shows what you have at a specific point in time: Assets: ?? Cash ?? Accounts Receivable (who owes you what) ?? Inventory (traditionally valued at cost) ?? Property and equipment (assets with longer lives which will provide benefits over a long period of time) Liabilities: ?? Accounts Payable and Accrued Expenses (you owe money) ?? Deferred Revenue (money received for services to be provided) ?? Long term debt (you owe money for financing received in the past) ?? Equity (accumulated net income plus any contributions of cash/property less distributions of cash/property)

Look at what your most important costs are and what your bread and butter is that is generating revenue. With the increased revenue now you can budget for extra costs. And as a business grows, extra costs always incur.

To create a balanced balance sheet for a business plan: 1. Start by gathering accurate and up-to-date financial data. 2. Organize your balance sheet into three main sections: assets, liabilities, and Equity, ensuring that the equation Assets = Liabilities + Equity always holds true. 3. List current and non-current assets and current and long-term liabilities, calculate Equity, and include explanatory notes for clarity. A well-structured balance sheet is vital for conveying your business's financial position to potential investors and stakeholders.

Using a general ledger package such as QuickBooks or Xero, is a great way to get your information organized and allow you to run reports, such as a balance sheet or profit and loss statement. Using more manual methods can work, but introduces the possibility for error.

I disagree with this approach to building a balance sheet. A balance sheet varies depending on the financial regulations you report under but under UK GAAP (generally accepted accounting practice) and IFRS (International Financial Reporting Standards), a balance sheet will show fixed assets, current assets, current liabilities and long term liabilities as being equal to shareholder equity. The terms for these categories and the balance sheet equation (assets - liabilities = equity) can vary and the balance sheet can be presented in different ways. Speak to a bookkeeper or accountant in your location for support with this.

While reviewing ratios is important, it’s important to understand the industry averages as well. Key ratios will differ if you are running a restaurant, a manufacturer, or an automobile dealership. I recommend to you work with your accountants, bankers, or other industry publications to get comparable information.

While the balance sheet is important, you really need to get an understanding of: ?? The income statement, or the profit and loss statement, which will show your revenues and expenses for the year. ?? The statement of cash flows will explain all of the increases and decreases in cash during the year. The balance sheet is extremely important but should be considered alongside the other financial statements as well.