How to create a financial forecast for a cargo handling company?
Creating a financial forecast for your cargo handling company, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your cargo handling company is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a cargo handling company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your cargo handling company and ensure that it can be financially viable in the years to come.
A financial plan for a cargo handling company 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 cargo handling company 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 cargo handling company'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 cargo handling company financial forecast?
A cargo handling company'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 cargo handling company, 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 cargo handling company 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 cargo handling company 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 cargo handling company's financial forecast.
The sales forecast for a cargo handling company
The sales forecast, also called topline projection, is normally where you will start when building your cargo handling company financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing cargo handling companies), and consider the elements below:
- You should consider the fluctuation of fuel prices as a major driver that could affect your business's average price. As fuel prices increase, shipping costs will also increase, potentially leading to higher prices for your services.
- The overall economic climate can also greatly impact the number of monthly transactions for your cargo handling business. During a recession, businesses may cut back on their shipping needs, resulting in fewer transactions for your company.
- The introduction of new tariffs or trade agreements between countries can also have a significant impact on your business's average price. Changes in import/export fees and regulations can affect the cost of shipping for your clients, ultimately impacting your pricing strategy.
- Weather conditions, such as hurricanes or severe winter storms, can cause delays or cancellations in shipping, leading to a decrease in the number of monthly transactions for your business. It is important to monitor weather patterns and plan accordingly to minimize any potential disruptions.
- Changes in consumer demand for certain goods can also affect the average price and number of transactions for your cargo handling company. For example, if there is a sudden increase in demand for a particular product, you may need to adjust your pricing and shipping capacity to meet the needs of your clients.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a cargo handling company
The next step is to estimate the costs you’ll have to incur to operate your cargo handling company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your cargo handling company's operating expenses should normally include the following items:
- Staff Costs: This includes the salaries and wages of your employees, as well as any benefits such as health insurance, vacation pay, and retirement contributions.
- Accountancy Fees: You will need to hire an accountant or accounting firm to handle your financial records, tax preparation, and other financial tasks.
- Insurance Costs: As a cargo handling company, you will need to have insurance to protect your business from potential risks such as property damage, liability claims, and workers' compensation.
- Software Licences: To efficiently manage your operations and keep track of shipments, you will need to invest in software licenses for programs such as inventory management, logistics tracking, and accounting software.
- Banking Fees: You will have to pay fees for services such as wire transfers, credit card processing, and bank account maintenance.
- Fuel Costs: As a cargo handling company, you will need to cover the costs of fuel for your trucks, forklifts, and other equipment used for transportation.
- Maintenance and Repair Costs: Your equipment and vehicles will require regular maintenance and occasional repairs, which can be a significant operating expense.
- Rent/Lease: If you do not own your warehouse or office space, you will need to factor in the cost of rent or lease payments.
- Utilities: Your cargo handling operations will require electricity, water, and other utilities, which can add up to a significant expense.
- Marketing and Advertising: To attract new clients and promote your services, you may need to spend money on marketing and advertising efforts.
- Training and Development: To ensure that your employees have the necessary skills and knowledge to handle cargo efficiently, you may need to invest in training and development programs.
- Legal Fees: As a business owner, you may need to seek legal advice or services, which can be a significant operating expense.
- Vehicle and Equipment Leasing: If you do not own your trucks, forklifts, and other equipment, you will need to lease them, which can be a recurring expense.
- Taxes and Permits: You will need to pay taxes and obtain necessary permits and licenses to operate your cargo handling company.
- Office Supplies: From printer ink to paper to staplers, you will need to purchase office supplies regularly to keep your business running smoothly.
This list is not exhaustive by any means, and will need to be tailored to your cargo handling company's specific circumstances.
What investments are needed to start or grow a cargo handling company?
Creating and expanding a cargo handling company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a cargo handling company could include elements such as:
- Forklifts: These are essential equipment for a cargo handling company as they are used to lift, move, and stack heavy cargo containers, pallets, and other materials. Forklifts come in different sizes and capacities, and the cost can vary depending on the type and model you choose.
- Cargo Trucks: Cargo trucks are used to transport cargo from one location to another. They are crucial for a cargo handling company as they allow for efficient and timely delivery of goods. The cost of a cargo truck can vary depending on its size, make, and model.
- Crane Systems: Crane systems are used to lift and move heavy cargo containers and materials from ships to the warehouse or vice versa. They are fixed assets that require significant capital investment, but they are essential for the smooth operation of a cargo handling company.
- Fencing and Security Systems: A cargo handling company deals with valuable goods and materials, making it necessary to have proper fencing and security systems in place to protect them. This can include CCTV cameras, security personnel, and access control systems, all of which require capital expenditure.
- Warehouse Equipment: A cargo handling company needs various warehouse equipment, such as pallet racks, conveyor belts, and loading docks, to store and move goods efficiently. These fixed assets require a significant capital investment, but they are essential for the company's operations.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your cargo handling company.
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 cargo handling company
The next step in the creation of your financial forecast for your cargo handling company 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 cargo handling company?
Now let's have a look at the main output tables of your cargo handling company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your cargo handling company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a cargo handling company 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 cargo handling company'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 cash flow projection
The cash flow forecast of your cargo handling company will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the cargo handling company's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your cargo handling company is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your cargo handling company's financial plan.
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 cargo handling company's financial projections?
Building a cargo handling company 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 projection software to build your cargo handling company's forecast
The modern and easiest way to build a forecast is to use professional financial projection software 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 forecasting 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 cargo handling company 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 cargo handling company's financial forecast?
Creating an accurate and error-free cargo handling company financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.
Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes.
Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon.
Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer.
Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection 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 cargo handling company, 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 cargo handling company
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your cargo handling company.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a cargo handling company. Don't hesitate to contact us if you have any questions!
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
- Financial forecast example
- How to create a turnover forecast for a business?
- Financial forecast template for a business idea
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Founder & CEO at The Business Plan Shop Ltd
