How to create a financial forecast for a tissue and toilet paper maker?
Developing and maintaining an up-to-date financial forecast for your tissue and toilet paper 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 tissue and toilet paper 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 tissue and toilet paper manufacturing business?
Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your tissue and toilet paper manufacturing business and ensure that it can be financially viable in the years to come.
A financial plan for a tissue and toilet paper 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 tissue and toilet paper 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 tissue and toilet paper 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.
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 tissue and toilet paper manufacturing business financial forecast?
A tissue and toilet paper 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 tissue and toilet paper 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 tissue and toilet paper 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 tissue and toilet paper 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 tissue and toilet paper manufacturing business's financial forecast.
The sales forecast for a tissue and toilet paper manufacturing business
From experience, it usually makes sense to start your tissue and toilet paper manufacturing business's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your tissue and toilet paper 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 tissue and toilet paper 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:
- Seasonal Demand: As a tissue and toilet paper manufacturing business, you may experience fluctuations in demand throughout the year. For example, during cold and flu season, the demand for tissues may increase, resulting in higher prices and more monthly transactions.
- Raw Material Costs: The cost of raw materials, such as wood pulp and recycled paper, can greatly impact your average price. If these costs increase, you may need to raise your prices to maintain profitability.
- Competitor Pricing: Your competitors' pricing strategies can also affect your average price. If they lower their prices, you may need to adjust yours accordingly to remain competitive.
- Economic Conditions: Economic factors, such as inflation and unemployment rates, can impact consumer spending and ultimately affect the number of monthly transactions for your business.
- Environmental Regulations: As a tissue and toilet paper manufacturing business, you may be subject to regulations regarding the use of sustainable materials and manufacturing processes. Compliance with these regulations may result in increased costs and potentially higher prices for your products.
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 tissue and toilet paper manufacturing business
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your tissue and toilet paper 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 tissue and toilet paper manufacturing business will include some of the following items:
- Raw materials: This includes the cost of purchasing raw materials such as pulp, recycled paper, and chemicals used in the manufacturing process.
- Labor costs: This covers the salaries and wages of your production staff, machine operators, and other employees involved in the manufacturing process.
- Utility bills: This includes the cost of electricity, water, and gas used in the manufacturing process.
- Packaging materials: This covers the cost of packaging materials such as plastic, cardboard, and labels used to package your finished products.
- Transportation costs: This includes the cost of transporting raw materials and finished products to and from your manufacturing facility.
- Accountancy fees: You may need to hire an accountant to help you with bookkeeping, tax preparation, and financial reporting for your business.
- Insurance costs: You will need to purchase insurance to protect your business from potential risks and liabilities.
- Software licenses: You may need to purchase software licenses for accounting, inventory management, and other business operations.
- Banking fees: This includes the cost of maintaining a business bank account and any transaction fees associated with it.
- Rent or mortgage payments: If you do not own your manufacturing facility, you will need to pay rent or mortgage payments.
- Maintenance and repairs: This covers the cost of maintaining and repairing equipment and machinery used in the manufacturing process.
- Marketing and advertising: You may need to allocate funds for marketing and advertising to promote your products and reach potential customers.
- Training and development: This includes the cost of training your employees to ensure they have the necessary skills and knowledge to operate machinery and equipment effectively.
- Taxes and licenses: You will need to pay taxes and obtain necessary licenses to operate your manufacturing business.
- Office supplies: This includes the cost of purchasing office supplies such as paper, ink, and other materials used in administrative tasks.
This list will need to be tailored to the specificities of your tissue and toilet paper manufacturing business, but should offer a good starting point for your budget.
What investments are needed to start or grow a tissue and toilet paper manufacturing business?
Your tissue and toilet paper manufacturing business 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 tissue and toilet paper manufacturing business, these could include:
Again, this list will need to be adjusted according to the size and ambitions of your tissue and toilet paper manufacturing business.
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 tissue and toilet paper manufacturing business
The next step in the creation of your financial forecast for your tissue and toilet paper 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 tissue and toilet paper manufacturing business?
Now let's have a look at the main output tables of your tissue and toilet paper manufacturing business's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your tissue and toilet paper manufacturing business's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a tissue and toilet paper 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 tissue and toilet paper 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 forecast
Your tissue and toilet paper 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 tissue and toilet paper 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 tissue and toilet paper 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 tissue and toilet paper manufacturing business'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 tissue and toilet paper manufacturing business's financial projections?
Building a tissue and toilet paper manufacturing business 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 projection software to build your tissue and toilet paper manufacturing business's forecast
The modern and easiest way to build a forecast is to use professional financial projection 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 tissue and toilet paper 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 tissue and toilet paper manufacturing business's financial forecast?
Creating an accurate and error-free tissue and toilet paper 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.
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 tissue and toilet paper 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
- A financial forecast shows expected growth, profitability, and cash generation metrics for your tissue and toilet paper manufacturing business.
- 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 tissue and toilet paper manufacturing business. 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 template for a business idea
Know someone who runs a tissue and toilet paper manufacturing business? Share our business guide with them!
Founder & CEO at The Business Plan Shop Ltd
