Which Type of Technology Is Best for Laying Out Financial Projections?
In order to lay out the different scenarios that may play out in a startup’s future, it’s often helpful to use a financial model. These tools, typically Excel-based, can take current financial statements and market trends and predict how they might look in the future. This allows a business to play out the effects of both internal and external factors, giving confidence to lenders, investors and other stakeholders in the company’s long-term viability.
To create a projection, a startup will need to use past and current statements such as an income statement/P&L, balance sheet and cash flow statement. The projection will then be based on these historical documents and logical assumptions about revenue, COGS (cost of goods sold), SG&A (sales, general and administrative) expenses, capital investments and other line items. It’s important to strike a balance with these assumptions, as being too aggressive or conservative could skew the projections and damage their credibility.
A great way to simplify the process of creating and analyzing these models is using online accounting software such as FreshBooks, which has countless reporting features that allow for easy scenario planning. Get started with FreshBooks for free today.
