How to create a financial forecast for a computer accessories manufacturer?

Creating a financial forecast for your computer accessories manufacturing business, 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 computer accessories manufacturing business 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 computer accessories manufacturing business?

In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your computer accessories manufacturing business becomes handy.

Creating a computer accessories manufacturing business financial forecast forces you to take stock of where your business stands and where you want it to go. 

Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your computer accessories manufacturing business.

Having this clear plan in place will give you the confidence needed to move forward with your business’s development. 

Having an up-to-date financial forecast for a computer accessories manufacturing business is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall. 

Finally, your computer accessories manufacturing business's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.

What information is used as input to build a computer accessories manufacturing business financial forecast?

A computer accessories 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 computer accessories 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 computer accessories 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 computer accessories 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 computer accessories manufacturing business's financial forecast.

The sales forecast for a computer accessories manufacturing business

From experience, it usually makes sense to start your computer accessories manufacturing business's financial projection with the revenues forecast.

The inputs used to forecast your sales will include the historical trading data of your computer accessories manufacturing business (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).

Your computer accessories manufacturing business's sales forecast can be broken down into two key estimates: 

• The average price 
• The number of monthly transactions

To assess these variables accurately, you will need to consider the following factors:

Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now. 

The operating expenses for a computer accessories manufacturing business

The next step is to estimate the expenses needed to run your computer accessories manufacturing business on a day-to-day basis.

These will vary based on the level of sales expected, and the location and size of your business. 

But your computer accessories manufacturing business's operating expenses should include the following items at a minimum:

This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small computer accessories manufacturing business might not have the same level of expenditure as a larger one, for example.

What investments are needed to start or grow a computer accessories manufacturing business?

Once you have an idea of how much sales you could achieve and what it will cost to run your computer accessories manufacturing business, it is time to look into the equipment required to launch or expand the activity.

For a computer accessories manufacturing business, capital expenditures and initial working capital items could include:

Again, this list will need to be adjusted according to the specificities of your computer accessories manufacturing business.

The financing plan of your computer accessories manufacturing business

The next step in the creation of your financial forecast for your computer accessories 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 computer accessories manufacturing business?

Now let's have a look at the main output tables of your computer accessories manufacturing business's financial forecast.

The profit & loss forecast

The forecasted profit & loss statement will enable you to visualise your computer accessories manufacturing business's expected growth and profitability over the next three to five years.

A financially viable P&L statement for a computer accessories 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 computer accessories 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 cash flow projection

The cash flow forecast of your computer accessories manufacturing business 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 computer accessories manufacturing business'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 computer accessories manufacturing business 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 computer accessories manufacturing business's financial plan. 

Which tool should you use to create your computer accessories manufacturing business's financial forecast?

Using the right tool or solution will make the creation of your computer accessories manufacturing business's financial forecast much easier than it sounds. Let’s explore the main options.

Using online financial forecasting software to build your computer accessories manufacturing business's projections

The modern and easiest way is to use professional online financial forecasting 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.

Calling in a financial consultant or chartered accountant

Enlisting the help of a consultant or accountant is also a good way to obtain a professional computer accessories manufacturing business financial forecast.

The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.

The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.

If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).

Why not use a spreadsheet such as Excel or Google Sheets to build your computer accessories manufacturing business's financial forecast?

Creating an accurate and error-free computer accessories 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.

Use our financial forecast templates for inspiration

The Business Plan Shop has dozens of financial forecast examples available.

Our templates contain both a financial forecast and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.

Our templates are a great source of inspiration, whether you just want to see what a complete business plan looks like, or are looking for concrete examples of how you should model financial elements in your own forecast.

Takeaways

1. A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
2. Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
3. Using financial forecasting software makes it easy to create and maintain up-to-date projections for your computer accessories 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 computer accessories manufacturing business. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!

Also on The Business Plan Shop

• Example of financial projections
• How to write a business plan for a computer accessories manufacturer
• How to project sales for a business?
• Example of financial forecast for business idea

Know someone who runs or wants to start a computer accessories manufacturing business? Share our financial projection guide with them!