How to create a financial forecast for a sunflower-seed oil producer?
Creating a financial forecast for your sunflower-seed oil producing 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 sunflower-seed oil producing 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 sunflower-seed oil producing company?
The financial projections for your sunflower-seed oil producing company 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 sunflower-seed oil producing company'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.
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What information is used as input to build a sunflower-seed oil producing company financial forecast?
A sunflower-seed oil producing 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 sunflower-seed oil producing 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 sunflower-seed oil producing 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 sunflower-seed oil producing 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 sunflower-seed oil producing company's financial forecast.
The sales forecast for a sunflower-seed oil producing company
From experience, it is usually best to start creating your sunflower-seed oil producing company financial forecast by your sales forecast.
To create an accurate sales forecast for your sunflower-seed oil producing company, you will have to rely on the data collected in your market research, or if you're running an existing sunflower-seed oil producing company, 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: As a sunflower-seed oil producing company, your business may experience fluctuations in demand throughout the year. During the summer months, when people tend to cook more and use more oil, you may see an increase in sales. However, during the winter months, when people may eat out more and cook less, you may see a decrease in sales.
- Crop Yield: The yield of sunflower seeds can vary from year to year depending on factors such as weather conditions and pest infestations. This can directly impact the availability and cost of raw materials for your sunflower-seed oil production, which in turn can affect your average price.
- Competition: The sunflower-seed oil market can be highly competitive, with many other companies producing and selling similar products. Changes in pricing or marketing strategies of your competitors can influence your business's average price and number of monthly transactions.
- Government Regulations: As a food product, sunflower-seed oil is subject to various government regulations and standards. Changes in these regulations, such as labeling requirements or import/export restrictions, can affect your production process and ultimately your average price.
- Consumer Trends: In recent years, there has been a growing trend towards healthier and more sustainable food choices. This can impact your business in two ways - first, by increasing demand for your sunflower-seed oil as a healthier alternative to other cooking oils, and second, by driving up the cost of raw materials as more companies compete for sustainably sourced sunflower seeds.
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 operating expenses for a sunflower-seed oil producing company
The next step is to estimate the expenses needed to run your sunflower-seed oil producing company 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 sunflower-seed oil producing company's operating expenses should include the following items at a minimum:
- Staff costs: Salaries, benefits, and taxes for employees such as production workers, quality control technicians, and administrative staff.
- Accountancy fees: Fees for professional accounting services to keep your financial records in order and file taxes accurately.
- Insurance costs: Premiums for property insurance to protect your facilities, equipment, and inventory from damage or loss.
- Software licenses: Fees for software programs needed to manage various aspects of your business, such as accounting, inventory tracking, and customer relationship management.
- Banking fees: Charges for services provided by your bank, such as checking and savings accounts, wire transfers, and credit card processing.
- Raw materials: Costs for purchasing sunflower seeds to produce oil, including transportation and storage fees.
- Utilities: Expenses for electricity, water, and gas used in the production process and to operate your facilities.
- Packaging materials: Cost of materials used to package and label your sunflower-seed oil, such as bottles, labels, and caps.
- Marketing and advertising: Expenses for promoting your sunflower-seed oil, including creating marketing materials, attending trade shows, and running online ads.
- Freight and shipping: Costs for transporting your sunflower-seed oil to customers, including packaging and handling fees.
- Repairs and maintenance: Expenses for maintaining and repairing equipment and facilities used in the production process.
- Professional services: Fees for consulting services, legal advice, and other professional services needed to run your business.
- Training and development: Costs for training programs and workshops to develop the skills of your employees and improve production processes.
- Rent or lease payments: Monthly payments for leasing or renting facilities, equipment, or vehicles used in your operations.
- Taxes and licenses: Payments for business licenses, permits, and taxes required to operate a sunflower-seed oil producing company.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small sunflower-seed oil producing company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a sunflower-seed oil producing company?
Creating and expanding a sunflower-seed oil producing company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a sunflower-seed oil producing company could include elements such as:
- Purchase of land or building: As a sunflower-seed oil producing company, you may need to purchase land or a building to set up your production facility. This will be a significant capital expenditure and may require financing.
- Machinery and equipment: To extract oil from sunflower seeds, you will need specialized machinery and equipment such as seed cleaners, oil presses, and filters. These are essential fixed assets for your company and will require a significant investment.
- Storage tanks: Sunflower-seed oil needs to be stored in large tanks before it is packaged and sold. Investing in storage tanks of the appropriate size and quality is crucial for your company's operations.
- Transportation vehicles: As your company grows, you may need to invest in transportation vehicles to deliver your sunflower-seed oil to customers. This could include trucks or vans specially designed for carrying liquid products.
- Packaging equipment: Sunflower-seed oil needs to be packaged in bottles or containers before it is distributed. Investing in packaging equipment such as filling machines, capping machines, and labeling machines is necessary for your company's production process.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your sunflower-seed oil producing 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 sunflower-seed oil producing company
The next step in the creation of your financial forecast for your sunflower-seed oil producing 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 sunflower-seed oil producing company?
Now let's have a look at the main output tables of your sunflower-seed oil producing company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your sunflower-seed oil producing company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a sunflower-seed oil producing 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 sunflower-seed oil producing company's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 sunflower-seed oil producing 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 sunflower-seed oil producing 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 sunflower-seed oil producing 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 sunflower-seed oil producing 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 sunflower-seed oil producing company's financial projections?
Building a sunflower-seed oil producing 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 forecasting software to build your sunflower-seed oil producing company'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 sunflower-seed oil producing company 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 sunflower-seed oil producing company'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 sunflower-seed oil producing company 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 sunflower-seed oil producing company'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.
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 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your sunflower-seed oil producing 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 sunflower-seed oil producing 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 project revenues for a business?
- Sample financial forecast for business idea
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