How to create a financial forecast for a sweet potato flour producer?
If you are serious about keeping visibility on your future cash flows, then you need to build and maintain a financial forecast for your sweet potato flour producing company.
Putting together a sweet potato flour producing company financial forecast may sound complex, but don’t worry, with the right tool, it’s easier than it looks, and The Business Plan Shop is here to guide you.
In this practical guide, we'll cover everything you need to know about building financial projections for your sweet potato flour producing company.
We will start by looking at why they are key, what information is needed, what a forecast looks like once completed, and what solutions you can use to create yours.
Let's dive in!
Why create and maintain a financial forecast for a sweet potato flour producing company?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your sweet potato flour producing company and ensure that it can be financially viable in the years to come.
A financial plan for a sweet potato flour producing 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 sweet potato flour producing 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 sweet potato flour producing 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 sweet potato flour producing company financial forecast?
A sweet potato flour producing company'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 sweet potato flour producing company.
If you are creating (or updating) the forecast of an existing sweet potato flour producing company, 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 sweet potato flour producing company 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 sweet potato flour producing company 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 sweet potato flour producing company's financial forecast.
The sales forecast for a sweet potato flour producing company
From experience, it usually makes sense to start your sweet potato flour producing company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your sweet potato flour producing company (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 sweet potato flour producing company'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:
- Weather conditions: As a sweet potato flour producing company, your business is heavily reliant on the availability and quality of sweet potatoes. Weather conditions such as droughts, floods, and extreme temperatures can greatly affect the crop yield and quality, which in turn can impact your average price and number of monthly transactions. Keep an eye on weather forecasts and plan accordingly to mitigate any potential losses.
- Competition: The sweet potato flour market is becoming increasingly competitive, with more companies entering the industry. This can lead to price wars and promotions, which may affect your average price and number of monthly transactions. Stay updated on your competitors' pricing strategies and adjust your prices accordingly to remain competitive.
- Consumer trends: As consumers become more health-conscious, there is a growing demand for alternative flours such as sweet potato flour. However, consumer preferences and trends can change quickly, and it's important to stay on top of these changes to ensure that your product remains desirable and your prices remain competitive.
- Government regulations: Your sweet potato flour producing company may be subject to various government regulations and policies, such as food safety regulations, import/export restrictions, and taxes. These can directly impact the cost of production and, in turn, your average price. Stay informed about any changes in regulations and plan accordingly.
- Crop diseases and pests: Sweet potatoes are vulnerable to various diseases and pests, which can significantly reduce the crop yield and quality. This can lead to a shortage of supply and increase in production costs, ultimately affecting your average price. Implement proper pest management and disease prevention strategies to minimize the impact on your business.
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.
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 operating expenses for a sweet potato flour producing company
The next step is to estimate the expenses needed to run your sweet potato flour 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 sweet potato flour producing company's operating expenses should include the following items at a minimum:
- Staff costs: This includes salaries, wages, and benefits for all employees involved in the production, packaging, and distribution of sweet potato flour. This may also include training and development expenses for staff to improve their skills and knowledge.
- Raw materials: This expense covers the cost of purchasing sweet potatoes from farmers or suppliers. This may also include transportation and storage costs for the raw materials.
- Packaging materials: This includes the cost of purchasing packaging materials such as bags or containers to store and transport the sweet potato flour.
- Utilities: This expense covers the cost of electricity, water, and other utilities used in the production process.
- Rent: If you are operating from a rented space, this expense covers the cost of leasing the premises for your production facility.
- Insurance costs: This includes the cost of insuring your production facility, equipment, and employees against potential risks and accidents.
- Accountancy fees: This expense covers the cost of hiring an accountant to handle your company's financial records and taxes.
- Marketing and advertising: This includes the cost of promoting your sweet potato flour to potential customers through various channels such as social media, print media, and events.
- Transportation costs: This expense covers the cost of delivering the sweet potato flour to retailers or distributors.
- Software licenses: This includes the cost of purchasing licenses for software programs used in the production process, such as inventory management or accounting software.
- Banking fees: This expense covers the cost of maintaining a business bank account, including transaction fees and other related charges.
- Maintenance and repairs: This includes the cost of repairing or replacing any equipment or machinery used in the production process.
- Legal fees: This expense covers the cost of hiring a lawyer to handle any legal matters related to your sweet potato flour producing company, such as obtaining necessary permits and licenses.
- Office supplies: This includes the cost of purchasing necessary office supplies, such as stationary, printer ink, and office equipment.
- Training and development: This expense covers the cost of providing training and development opportunities for employees to improve their skills and knowledge in the production process.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small sweet potato flour 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 sweet potato flour producing company?
Your sweet potato flour producing company financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a sweet potato flour producing company, these could include:
- Sweet Potato Harvesting Equipment: This includes machinery such as harvesters and diggers that are used to efficiently and effectively harvest sweet potatoes from the ground. These are essential for a sweet potato flour producing company as they ensure a steady supply of raw materials for production.
- Drying and Processing Equipment: Once the sweet potatoes are harvested, they need to be dried and processed into flour. This requires specialized equipment such as dryers, grinders, and sifters. These are important investments for a sweet potato flour producing company to ensure high-quality and consistent production.
- Packaging and Labeling Equipment: After the flour is produced, it needs to be packaged and labeled for distribution. A sweet potato flour producing company would need equipment such as packaging machines, scales, and labeling machines to efficiently package and label their products.
- Storage and Warehouse Facilities: A sweet potato flour producing company would require storage and warehouse facilities to store their raw materials, finished products, and packaging materials. These facilities need to be climate-controlled and have adequate space to ensure the quality and safety of the products.
- Transportation Vehicles: To distribute their products to customers, a sweet potato flour producing company would need transportation vehicles such as trucks or vans. These are important capital expenditures to ensure timely and efficient delivery of products to customers.
Again, this list will need to be adjusted according to the size and ambitions of your sweet potato flour 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 sweet potato flour producing company
The next step in the creation of your financial forecast for your sweet potato flour 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 sweet potato flour producing company?
Now let's have a look at the main output tables of your sweet potato flour producing company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your sweet potato flour producing company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a sweet potato flour 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 sweet potato flour 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 forecast
Your sweet potato flour producing company'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 sweet potato flour producing company:
- 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 sweet potato flour producing company'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 sweet potato flour producing company's financial plan - so that banks or investors can assess seasonal variation and ensure your business 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 sweet potato flour producing company's financial projections?
Building a sweet potato flour 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 sweet potato flour 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 sweet potato flour 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 sweet potato flour 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 sweet potato flour 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 sweet potato flour 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 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 sweet potato flour producing company, 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your sweet potato flour 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 sweet potato flour 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 create a sales forecast for a business?
- Financial forecast for a business idea
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Founder & CEO at The Business Plan Shop Ltd
