How to create a financial forecast for a gluten processing firm?
Developing and maintaining an up-to-date financial forecast for your gluten processing firm is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a gluten processing firm financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a gluten processing firm?
The financial projections for your gluten processing firm act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your gluten processing firm's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
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 gluten processing firm financial forecast?
A gluten processing firm's financial forecast needs to be built on the right foundation: your assumptions.
The data required to create your assumptions will depend on whether you are a new or existing gluten processing firm.
If you are creating (or updating) the forecast of an existing gluten processing firm, then your main inputs will be historical accounting data and operating metrics, and your team’s view on what to expect for the next three to five years.
If you are building financial projections for a new gluten processing firm startup, you will need to rely on market research to form your go-to-market strategy and derive your sales forecast.
For a new venture, you will also need an itemised list of resources needed for the gluten processing firm to operate, along with a list of equipment required to launch the venture (more on that below).
Now that you understand what is needed, let’s have a look at what elements will make up your gluten processing firm's financial forecast.
The sales forecast for a gluten processing firm
From experience, it is usually best to start creating your gluten processing firm financial forecast by your sales forecast.
To create an accurate sales forecast for your gluten processing firm, you will have to rely on the data collected in your market research, or if you're running an existing gluten processing firm, 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:
- Weather conditions: Extreme weather conditions, such as droughts or floods, can affect the supply and quality of gluten-producing crops, leading to fluctuations in the average price of gluten.
- Health trends: The increasing awareness of gluten intolerance and the popularity of gluten-free diets can impact the demand for gluten products, thereby influencing the average price and number of monthly transactions for gluten processing firms.
- Government regulations: Changes in government regulations regarding food labeling and gluten-free certifications can affect the production and distribution of gluten products, potentially leading to changes in prices and sales for gluten processing firms.
- Competition: The presence of new or established competitors in the market can affect the demand and prices for gluten products, as well as the number of monthly transactions for gluten processing firms.
- Technological advancements: Advancements in technology, such as new processing methods or machinery, can impact the production efficiency and cost-effectiveness of gluten processing, which may ultimately affect the average price and number of monthly transactions for the business.
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.
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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 gluten processing firm
The next step is to estimate the costs you’ll have to incur to operate your gluten processing firm.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your gluten processing firm's operating expenses should normally include the following items:
- Staff Costs: This includes salaries, benefits, and training for your employees who will be involved in the gluten processing operations. You may also need to budget for hiring temporary workers during peak production times.
- Raw Materials: As a gluten processing firm, your main raw material will be gluten-containing grains such as wheat, barley, and rye. You may also need to budget for sourcing alternative gluten-free grains for specialty products.
- Equipment Maintenance: Your processing equipment will require regular maintenance and occasional repairs. It is important to budget for these expenses to ensure your operations run smoothly.
- Utilities: Running a gluten processing firm will require energy and water. Make sure to budget for these expenses, as well as any potential waste disposal costs.
- Packaging Materials: Your products will need to be packaged and labeled before they can be sold. This includes purchasing containers, labels, and any other necessary materials.
- Marketing and Advertising: To promote your products and attract customers, you will need to budget for marketing and advertising expenses. This may include website development, social media advertising, and print materials.
- Rent/Lease: If you do not own your processing facility, you will need to budget for rent or lease payments. This may also include utilities and maintenance costs for the building.
- Accountancy Fees: You may choose to hire an accountant to help manage your financial records and taxes. Make sure to budget for their services.
- Insurance Costs: Running a gluten processing firm comes with certain risks. It is important to have insurance coverage for your business, employees, and products.
- Software Licenses: You may need to purchase software programs to help manage your operations, such as inventory management or accounting software.
- Banking Fees: As a business, you will need to have a bank account for managing your finances. Make sure to budget for any potential fees, such as transaction or overdraft fees.
- Transportation Costs: If you will be delivering your products to customers or shipping them to retailers, you will need to budget for transportation costs.
- Employee Benefits: In addition to salaries, you may choose to offer employee benefits such as health insurance, retirement plans, and paid time off. These should be included in your operating expenses.
- Taxes and Permits: As a business, you will be responsible for paying taxes and obtaining necessary permits and licenses. Make sure to budget for these expenses.
- Training and Development: It is important to invest in training and development for your employees to ensure they have the necessary skills and knowledge for their roles. Budget for any potential training programs or workshops.
This list is not exhaustive by any means, and will need to be tailored to your gluten processing firm's specific circumstances.
What investments are needed to start or grow a gluten processing firm?
Once you have an idea of how much sales you could achieve and what it will cost to run your gluten processing firm, it is time to look into the equipment required to launch or expand the activity.
For a gluten processing firm, capital expenditures and initial working capital items could include:
- Equipment: This includes machinery and tools used in the gluten processing process, such as mixers, grinders, sifters, and packaging machines. These are essential fixed assets that require a significant investment and are necessary for the production of gluten-free products.
- Facility Upgrades: As a gluten processing firm, you need a facility that meets specific requirements to ensure the safety and quality of your products. This may include installing proper ventilation systems, upgrading the flooring and walls to meet food safety standards, and implementing pest control measures.
- Transportation Vehicles: Depending on the scale of your operations, you may need to invest in transportation vehicles to transport your products to distributors and retailers. These can include delivery trucks, vans, or even a fleet of vehicles for larger firms.
- Storage Equipment: Proper storage is crucial for maintaining the freshness and quality of gluten-free products. This may include refrigerated storage units, shelving, and temperature-controlled rooms. Investing in quality storage equipment can ensure that your products meet regulatory standards and remain safe for consumption.
- Production Software: As a gluten processing firm, you may need to invest in production software to streamline your operations and improve efficiency. This can include inventory management software, production planning software, and quality control systems.
Again, this list will need to be adjusted according to the specificities of your gluten processing firm.
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 gluten processing firm
The next step in the creation of your financial forecast for your gluten processing firm 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 gluten processing firm?
Now let's have a look at the main output tables of your gluten processing firm's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your gluten processing firm's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a gluten processing firm 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 gluten processing firm'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 gluten processing firm 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 gluten processing firm'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 gluten processing firm 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 gluten processing firm's financial projections?
Building a gluten processing firm 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 gluten processing firm'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 gluten processing firm 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 gluten processing firm's financial forecast?
Creating an accurate and error-free gluten processing firm 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 gluten processing firm, 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 gluten processing firm
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 gluten processing firm.
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 gluten processing firm. 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 revenues for a business?
- Financial forecast template for a business idea
Know someone who runs or wants to start a gluten processing firm? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
