How to create a financial forecast for a veneer sheets and wood panels maker?

Developing and maintaining an up-to-date financial forecast for your veneer sheets and wood panels 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 veneer sheets and wood panels 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 veneer sheets and wood panels manufacturing business?

The financial projections for your veneer sheets and wood panels manufacturing business 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 veneer sheets and wood panels manufacturing business'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.

What information is used as input to build a veneer sheets and wood panels manufacturing business financial forecast?

A veneer sheets and wood panels manufacturing business'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 veneer sheets and wood panels manufacturing business.

If you are creating (or updating) the forecast of an existing veneer sheets and wood panels manufacturing business, 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 veneer sheets and wood panels manufacturing business 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 veneer sheets and wood panels manufacturing business 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 veneer sheets and wood panels manufacturing business's financial forecast.

The sales forecast for a veneer sheets and wood panels manufacturing business

From experience, it is usually best to start creating your veneer sheets and wood panels manufacturing business financial forecast by your sales forecast.

To create an accurate sales forecast for your veneer sheets and wood panels manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing veneer sheets and wood panels manufacturing business, 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:

• Raw Material Costs: Keep a close eye on the prices of wood and veneer raw materials as they directly impact your production costs. Fluctuations can affect your average price, influencing your pricing strategy.
• Supply Chain Stability: Assess the stability of your supply chain, especially for specialized wood species used in your manufacturing. Disruptions can affect production volumes, potentially impacting the number of monthly transactions.
• Product Customization Trends: Stay informed about evolving trends in customized wood panels and veneer sheets. Adapting to customer preferences for unique finishes or designs can influence both your average price and transaction volume.
• Environmental Certifications: Consider obtaining and promoting eco-friendly certifications for your products. A growing demand for sustainable materials may allow you to command higher prices and attract environmentally conscious customers.
• Technological Upgrades: Invest in technology upgrades that enhance your manufacturing efficiency or introduce innovative finishes. Such improvements can contribute to product differentiation and potentially justify higher prices.

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.

The operating expenses for a veneer sheets and wood panels manufacturing business

Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your veneer sheets and wood panels 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 veneer sheets and wood panels manufacturing business will include some of the following items:

• Staff Costs: Salaries, wages, and benefits for your production team, including machine operators, quality control personnel, and administrative staff.
• Raw Material Procurement: Costs associated with purchasing wood logs and veneer sheets, including transportation and storage expenses.
• Utilities: Expenses for electricity, water, and gas required for your manufacturing processes and facility maintenance.
• Rent: Leasing costs for your manufacturing facility, warehouse, or office space.
• Insurance Costs: Premiums for business insurance coverage, including property insurance and liability insurance for potential manufacturing-related risks.
• Accountancy Fees: Fees paid to accounting professionals for financial management, tax preparation, and compliance specific to your wood manufacturing business.
• Quality Control: Expenses related to implementing and maintaining rigorous quality control processes to ensure the production of high-quality wood panels and veneer sheets.
• Maintenance and Repairs: Costs for regular upkeep and repair of manufacturing machinery and equipment to minimize downtime and maintain operational efficiency.
• Transportation: Expenses associated with the transportation of raw materials and finished products to and from your manufacturing facility.
• Packaging Materials: Costs for acquiring packaging materials for the protection and presentation of your wood panels and veneer sheets during transportation and storage.
• Software Licences: Costs associated with licensing and maintaining software used in your manufacturing and business operations, such as inventory management or production planning software.
• Marketing and Promotion: Expenditures on promoting your wood panels and veneer sheets, including website maintenance, product catalogs, and promotional materials.
• Training Programs: Costs for training programs to enhance the skills of your production team and keep them updated on industry best practices.
• Environmental Compliance: Expenses related to adhering to environmental regulations in your manufacturing processes, including certifications and compliance monitoring.
• Banking Fees: Charges for various banking services, including transaction fees and account maintenance specific to your business transactions.

This list will need to be tailored to the specificities of your veneer sheets and wood panels manufacturing business, but should offer a good starting point for your budget.

What investments are needed to start or grow a veneer sheets and wood panels manufacturing business?

Once you have an idea of how much sales you could achieve and what it will cost to run your veneer sheets and wood panels manufacturing business, it is time to look into the equipment required to launch or expand the activity.

For a veneer sheets and wood panels manufacturing business, capital expenditures and initial working capital items could include:

• Wood Processing Machinery: Investing in advanced machinery such as veneer peeling machines, saws, and laminating presses to enhance the efficiency and precision of your wood processing operations.
• Dryers and Kilns: Acquiring industrial dryers and kilns to ensure proper drying and curing of wood veneer sheets and panels, contributing to the quality and durability of your products.
• Veneer Stitching Equipment: Purchasing specialized equipment for stitching and joining veneer sheets, facilitating the creation of larger and more versatile wood panels.
• Automated Finishing Line: Investing in automated finishing systems, such as spray booths and coating machines, to improve the efficiency and consistency of applying finishes to your wood panels.
• Material Handling Equipment: Acquiring equipment like forklifts, conveyor systems, and palletizers to streamline the movement of raw materials and finished products within your manufacturing facility.

Again, this list will need to be adjusted according to the specificities of your veneer sheets and wood panels manufacturing business.

The financing plan of your veneer sheets and wood panels manufacturing business

The next step in the creation of your financial forecast for your veneer sheets and wood panels 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 veneer sheets and wood panels manufacturing business?

Now let's have a look at the main output tables of your veneer sheets and wood panels manufacturing business's financial forecast.

The profit & loss forecast

The forecasted profit & loss statement will enable you to visualise your veneer sheets and wood panels manufacturing business's expected growth and profitability over the next three to five years.

A financially viable P&L statement for a veneer sheets and wood panels 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 veneer sheets and wood panels 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 projection

The cash flow forecast of your veneer sheets and wood panels manufacturing business 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 veneer sheets and wood panels manufacturing business'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 veneer sheets and wood panels manufacturing business 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 veneer sheets and wood panels manufacturing business's financial plan. 

Which tool should you use to create your veneer sheets and wood panels manufacturing business's financial forecast?

Creating your veneer sheets and wood panels 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 veneer sheets and wood panels manufacturing business'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

Outsourcing the creation of your veneer sheets and wood panels manufacturing business financial forecast is another possible solution.

This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.

Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000. 

Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra. 

If you decide to outsource your forecasting:

• Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively. 
• Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).

Why not use a spreadsheet such as Excel or Google Sheets to build your veneer sheets and wood panels manufacturing business's financial forecast?

Creating an accurate and error-free veneer sheets and wood panels manufacturing business financial forecast with a spreadsheet is very technical and requires a deep knowledge of accounting and an understanding of financial modelling.

Very few business owners are financially savvy enough to be able to build a forecast themselves on Excel without making mistakes. 

Lenders and investors know this, which is why forecasts created on Excel by the business owner are often frowned upon. 

Having numbers one can trust is key when it comes to financial forecasting and to that end using software is much safer. 

Using financial forecasting software is also faster than using a spreadsheet, and, with the rise of artificial intelligence, software is also becoming smarter at helping us analyse the numbers to make smarter decisions.

Finally, like everything with spreadsheets, tracking actuals vs. forecasts and keeping your projections up to date as the year progresses is manual, tedious, and error-prone. Whereas financial projection software like The Business Plan Shop is built 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 veneer sheets and wood panels 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. A financial projection shows 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 forecast up-to-date is the only way to maintain visibility on future cash flows.
3. Using financial forecasting software makes it easy to create and maintain up-to-date projections for your veneer sheets and wood panels manufacturing business.

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 veneer sheets and wood panels manufacturing business. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!

Also on The Business Plan Shop

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

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