How to create a financial forecast for a preserved pastry goods manufacturer?

Developing and maintaining an up-to-date financial forecast for your preserved pastry goods manufacturing business 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 preserved pastry goods manufacturing business 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 preserved pastry goods manufacturing business?

Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your preserved pastry goods manufacturing business and ensure that it can be financially viable in the years to come.

A financial plan for a preserved pastry goods 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 preserved pastry goods 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 preserved pastry goods 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.

What information is used as input to build a preserved pastry goods manufacturing business financial forecast?

A preserved pastry goods 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 preserved pastry goods 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 preserved pastry goods 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 preserved pastry goods 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 preserved pastry goods manufacturing business's financial forecast.

The sales forecast for a preserved pastry goods manufacturing business

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

The inputs used to forecast your sales will include the historical trading data of your preserved pastry goods 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 preserved pastry goods 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:

• Health and Wellness Trends: Monitor the growing emphasis on health-conscious eating habits. Position your preserved pastries to align with health trends, impacting both product development and potential pricing adjustments.
• Packaging Innovations: Advances in sustainable or eye-catching packaging solutions can influence consumer perception and willingness to pay. Consider how packaging choices might impact your average product price.
• Competitor Actions: Keep a watchful eye on your competitors, as changes in their pricing strategies or product offerings could directly affect your market positioning and transaction volume.
• Economic Conditions: Fluctuations in the overall economy can impact consumer spending habits. Assess the potential effects of economic downturns or upswings on the demand for your preserved pastry goods.
• Distribution Channel Expansion: If you explore new distribution channels or markets, it can affect both your average price and transaction volume. Consider how these expansions may alter your sales dynamics.

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 preserved pastry goods manufacturing business

Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your preserved pastry goods 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 preserved pastry goods manufacturing business will include some of the following items:

• Staff Costs: Salaries, wages, and benefits for production, administrative, and sales personnel.
• Ingredient Procurement: Costs associated with purchasing high-quality ingredients for your preserved pastries.
• Utilities: Expenses for electricity, water, and gas required for your manufacturing facilities.
• Rent: Leasing costs for your production facility, warehouse, or office space.
• Packaging Materials: Costs of acquiring packaging materials for your pastry products.
• Equipment Maintenance: Expenses related to the regular upkeep and maintenance of your manufacturing machinery.
• Transportation: Costs associated with the transportation of raw materials and finished products.
• Marketing and Promotion: Expenditures on advertising, promotions, and other marketing initiatives for your pastry goods.
• Accountancy Fees: Fees paid to accounting professionals for financial management and reporting services.
• Insurance Costs: Premiums for business insurance coverage, including liability and property insurance.
• Software Licences: Costs associated with licensing and maintaining software used in your manufacturing and business operations.
• Quality Control: Expenses for implementing and maintaining rigorous quality control processes.
• Banking Fees: Charges for various banking services, including transaction fees and account maintenance.
• Training and Development: Costs for training programs to enhance the skills of your workforce.
• Environmental Compliance: Expenses related to adhering to environmental regulations in your manufacturing processes.

This list will need to be tailored to the specificities of your preserved pastry goods manufacturing business, but should offer a good starting point for your budget.

What investments are needed to start or grow a preserved pastry goods manufacturing business?

Creating and expanding a preserved pastry goods manufacturing business also requires investments which you need to factor into your financial forecast.

Capital expenditures and initial working capital items for a preserved pastry goods manufacturing business could include elements such as:

• Production Equipment: Investment in specialized machinery such as ovens, mixers, and packaging equipment to enhance and streamline your pastry manufacturing process.
• Cold Storage Facilities: Acquisition and installation of refrigeration units and cold storage infrastructure to preserve the freshness and quality of ingredients and finished products.
• Delivery Vehicles: Purchase of vehicles specifically designed for transporting your preserved pastry goods to distribution points, ensuring timely and efficient deliveries.
• Facility Expansion: Capital investment in expanding your production facility or warehouse space to accommodate increased demand and facilitate future business growth.
• Quality Assurance Lab Equipment: Acquisition of specialized laboratory equipment to conduct rigorous quality control and testing, ensuring the highest standards for your preserved pastry products.

Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your preserved pastry goods manufacturing business.

The financing plan of your preserved pastry goods manufacturing business

The next step in the creation of your financial forecast for your preserved pastry goods 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 preserved pastry goods manufacturing business?

Now let's have a look at the main output tables of your preserved pastry goods manufacturing business's financial forecast.

The forecasted profit & loss statement

The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.

A healthy preserved pastry goods manufacturing business's P&L statement should show:

• Sales growing at (minimum) or above (better) inflation
• Stable (minimum) or expanding (better) profit margins
• A healthy level of net profitability

This will of course depend on the stage of your business: numbers for an established preserved pastry goods manufacturing business will look different than for a startup.

The projected balance sheet

The projected balance sheet gives an overview of your preserved pastry goods manufacturing business's financial structure at the end of the financial year.

It is composed of three categories of items: assets, liabilities and equity:

• Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
• Liabilities: are the debts of your preserved pastry goods manufacturing business. They include accounts payable (money owed to suppliers), taxes due and bank loans.
• Equity: is the combination of what has been invested by the business owners and the cumulative profits 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 forecast

Your preserved pastry goods manufacturing business's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.

It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the preserved pastry goods manufacturing business:

• Operating cash flow: shows how much cash is generated by the operating activities
• Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business 
• Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)

Keeping an eye on (and regularly updating) your preserved pastry goods manufacturing business's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.

If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your preserved pastry goods manufacturing business's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.

Which tool should you use to create your preserved pastry goods manufacturing business's financial forecast?

Creating your preserved pastry goods manufacturing business's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.

Using online financial forecasting software to build your preserved pastry goods 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.

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 preserved pastry goods 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 preserved pastry goods manufacturing business's financial forecast?

You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free preserved pastry goods manufacturing business financial forecast on a spreadsheet is likely to prove challenging.

Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.

Creating forecasts in Excel is also inefficient nowadays:

• Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
• With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.

Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your preserved pastry goods manufacturing business's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially for this.

Use our financial projection templates for inspiration

The Business Plan Shop has dozens of financial forecasting templates available.

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

Whether you are just starting out or already have your own preserved pastry goods manufacturing business, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.

Takeaways

1. Having a financial forecast enables you to visualise the 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 projections up-to-date is the only way to get a view on what your preserved pastry goods manufacturing business future cash flows may look like.
3. Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.

This is the end of our guide on how to build the financial forecast for a preserved pastry goods manufacturing business, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.

Also on The Business Plan Shop

• Example of financial forecast
• How to project revenues for a business?
• Example of financial forecast for business idea

Know someone who owns or is thinking of starting a preserved pastry goods manufacturing business? Share our forecasting guide with them!