How to create a financial forecast for a biscuit manufacturer?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your biscuit manufacturing business.
Putting together a biscuit manufacturing business financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your biscuit manufacturing business.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a biscuit manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your biscuit manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a biscuit manufacturing business enables you to look at your business in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
This gives you the visibility needed to plan future investments and expansion with confidence.
And, when your trading environment gets tougher, having an up to date biscuit manufacturing business forecast enables you to detect potential upcoming financing shortfalls in advance, enabling you to make adjustments or secure financing before you run out of cash.
It’s also important to remember that your biscuit manufacturing business's financial forecast will be essential when looking for financing. You can be 100% certain that banks and investors will ask to see your numbers, so make sure they’re set out accurately and attractively.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is used as input to build a biscuit manufacturing business financial forecast?
A biscuit manufacturing business's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing biscuit manufacturing business, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a biscuit manufacturing business startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the biscuit manufacturing business running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your biscuit manufacturing business's financial forecast.
The sales forecast for a biscuit manufacturing business
From experience, it is usually best to start creating your biscuit manufacturing business financial forecast by your sales forecast.
To create an accurate sales forecast for your biscuit manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing biscuit manufacturing business, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- Seasonal demand shifts: Depending on the time of year, certain types of biscuits may be more popular than others. For example, during the holiday season, there may be a higher demand for specialty flavors like gingerbread or peppermint, which could drive up the average price per transaction.
- Changes in ingredient costs: If the cost of key ingredients such as flour, sugar, or butter increases, this could lead to a higher cost per unit for your biscuits. As a result, you may need to adjust your prices to maintain your profit margins.
- Rise of health-conscious consumers: With more people prioritizing their health and wellness, there may be a decrease in demand for traditional biscuits made with white flour and sugar. This could lead to a decrease in the number of monthly transactions as consumers opt for healthier alternatives.
- Competitor pricing: If your competitors start offering discounts or lowering their prices, this could put pressure on your business to match or beat their prices. This may result in a decrease in your average price per transaction in order to stay competitive.
- Changes in consumer preferences: As consumer tastes and preferences evolve, there may be a shift towards certain types of biscuits. For example, if there is a trend towards gluten-free or vegan options, you may need to adjust your product offerings to meet this demand, potentially affecting your average price and number of transactions.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a biscuit manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your biscuit manufacturing business on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for a biscuit manufacturing business will include some of the following items:
- Staff costs: This includes salaries, wages, benefits, and any other expenses related to your employees, such as training and recruitment costs.
- Raw materials: Biscuit manufacturing requires various ingredients such as flour, sugar, butter, and flavorings. These costs can vary depending on the quality and quantity of materials used.
- Packaging materials: Biscuits need to be packaged properly to maintain their freshness and appeal to customers. This includes costs for boxes, bags, labels, and other packaging materials.
- Utilities: Running a biscuit manufacturing business requires electricity, water, and gas for machinery, lighting, and heating/cooling. These expenses can add up, so it's important to budget for them.
- Rent or mortgage: If you don't own your manufacturing facility, you will need to pay rent or a mortgage. This expense may also include property taxes and insurance.
- Equipment maintenance: Biscuit-making machinery needs to be regularly maintained and serviced to ensure it runs smoothly and efficiently. This includes costs for spare parts and labor.
- Transportation and logistics: If you distribute your biscuits to retail stores or sell them online, you will need to factor in shipping and delivery costs.
- Marketing and advertising: To attract customers and stand out from competitors, you will need to invest in marketing and advertising efforts, such as social media ads, print ads, and sampling events.
- Accountancy fees: You will need to hire an accountant or outsource your bookkeeping to ensure your finances are in order and taxes are properly filed.
- Insurance costs: Biscuit manufacturing businesses need to protect themselves from potential risks and liabilities, such as product recalls, injuries, or property damage. This may include liability insurance, property insurance, and workers' compensation insurance.
- Software licenses: You may need to purchase software licenses for accounting, inventory management, or other business operations. These costs can be either a one-time purchase or a recurring subscription.
- Banking fees: To manage your finances, you may need to pay fees for bank accounts, credit card processing, and other financial services.
- Legal fees: It's important to consult with a lawyer to ensure your business is compliant with laws and regulations. This may include fees for legal advice, contracts, and trademark registrations.
- Training and development: To improve your skills and knowledge, you may need to invest in training and development programs for yourself and your employees.
- Office supplies: Biscuit manufacturing businesses also have general office expenses, such as paper, printer ink, and stationery.
This list will need to be tailored to the specificities of your biscuit manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a biscuit manufacturing business?
Creating and expanding a biscuit manufacturing business also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a biscuit manufacturing business could include elements such as:
- Equipment: This includes the cost of purchasing and installing machinery and equipment needed for the production of biscuits, such as mixers, ovens, and packaging machines. This is a major capital expenditure for a biscuit manufacturing business and should be carefully budgeted for.
- Facility Expansion: If your business is growing, you may need to expand your production facility to keep up with demand. This can involve constructing new buildings, renovating existing ones, or purchasing additional land. The cost of these expansions should be included in your expenditure forecast.
- Transportation Vehicles: In order to transport your biscuits to distributors and retailers, you may need to purchase delivery trucks or vans. These vehicles are considered fixed assets and should be included in your expenditure forecast.
- Storage and Warehousing: Biscuits need to be stored in a controlled environment in order to maintain their quality. This may require purchasing or leasing warehouse space and investing in storage equipment such as shelves and refrigerators. These costs should be included in your expenditure forecast.
- Technology and Software: In today's digital age, technology is essential for businesses to operate efficiently. This may include purchasing computers, software, and other technology systems to assist with production, inventory management, and accounting. These expenses should also be included in your expenditure forecast.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your biscuit manufacturing business.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your biscuit manufacturing business
The next step in the creation of your financial forecast for your biscuit manufacturing business is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a biscuit manufacturing business?
Now let's have a look at the main output tables of your biscuit manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your biscuit manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a biscuit manufacturing business should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
Your biscuit manufacturing business's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The projected cash flow statement
A projected cash flow statement for a biscuit manufacturing business is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your biscuit manufacturing business's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the biscuit manufacturing business is appropriately capitalised.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your biscuit manufacturing business's financial projections?
Building a biscuit manufacturing business financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial forecasting software to build your biscuit manufacturing business's projections
The modern and easiest way is to use an online financial forecasting tool such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our projection software for free by signing up here.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional biscuit manufacturing business financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your biscuit manufacturing business's financial forecast?
Creating an accurate and error-free biscuit manufacturing business financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting software like The Business Plan Shop is built for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial projection templates for inspiration
The Business Plan Shop has dozens of financial forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own biscuit manufacturing business, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your biscuit manufacturing business
Takeaways
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your biscuit manufacturing business.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a biscuit manufacturing business. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Example of financial projections
- How to project sales for a business?
- Sample financial forecast for business idea
Know someone who runs or wants to start a biscuit manufacturing business? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
