How to create a financial forecast for an import-export company?
Creating a financial forecast for your import-export 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 import-export 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 an import-export company?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your import-export company becomes handy.
Creating an import-export company financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your import-export company.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for an import-export company is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your import-export company's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your 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.
What information is used as input to build an import-export company financial forecast?
A import-export 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 import-export company.
If you are creating (or updating) the forecast of an existing import-export 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 import-export 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 import-export 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 import-export company's financial forecast.
The sales forecast for an import-export company
The sales forecast, also called topline projection, is normally where you will start when building your import-export company financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing import-export companies), and consider the elements below:
- Fluctuations in exchange rates: As an import-export company, you are heavily reliant on international trade and exchange rates. Any changes in exchange rates can directly impact your average price and number of transactions, as it can affect the cost of your imports and the competitiveness of your exports.
- Changes in government policies: Government policies, such as trade agreements or tariffs, can significantly impact your business. For example, if the government imposes higher tariffs on the products you import, your average price will increase, leading to a potential decrease in the number of transactions.
- Supply and demand: The laws of supply and demand can also affect your business. If there is a high demand for your imported products, you may be able to charge a higher average price. On the other hand, if there is a sudden decrease in demand for your exported products, your average price may decrease to stay competitive.
- Changes in consumer preferences: Consumer preferences can also impact your business. For example, if there is a shift in consumer preferences towards more environmentally sustainable products, you may have to adjust your product offerings and potentially raise your average price to cover the cost of sourcing these products.
- Emerging markets: The growth of emerging markets can present both opportunities and challenges for import-export companies. On one hand, it can open up new markets for your products, potentially increasing your number of transactions. On the other hand, it can also lead to increased competition and potential price wars, affecting your average price.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for an import-export company
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your import-export company 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 an import-export company will include some of the following items:
- Staff costs: This includes salaries, benefits, and any other expenses related to hiring and retaining employees. As an import-export company, you will need staff to handle various tasks such as logistics, sales, and customer service.
- Accountancy fees: You will need to hire an accountant or outsource accounting services to ensure accurate financial records and compliance with tax laws. This expense will cover services such as bookkeeping, tax preparation, and financial reporting.
- Insurance costs: As an import-export company, you will need insurance to protect your business from potential risks such as damaged goods, shipping delays, and legal liabilities. Insurance costs will vary depending on the type and amount of coverage you need.
- Software licenses: To efficiently manage your import-export operations, you will need to invest in software such as inventory management, supply chain management, and customer relationship management systems. These software licenses will come at a cost.
- Banking fees: You will likely incur fees for international transactions, currency conversions, and other banking services. These fees can add up, so it's important to carefully consider your banking options and negotiate for the best rates.
- Shipping and freight costs: As an import-export company, you will have to cover the costs of shipping and freight for your goods. This includes transportation fees, customs duties, and other related expenses.
- Marketing and advertising expenses: To attract new customers and promote your import-export business, you will need to invest in marketing and advertising efforts. This can include digital marketing, trade shows, and other promotional activities.
- Travel and accommodation costs: Depending on the nature of your import-export business, you may need to travel for meetings, trade shows, or to visit suppliers and clients. This will incur expenses for airfare, accommodation, and other travel-related costs.
- Legal fees: As an import-export company, you may need legal assistance for contracts, trade agreements, and other legal matters. This can include fees for lawyers, notaries, and other legal services.
- Office rent and utilities: You will need a physical office space to run your import-export business, which will incur expenses for rent, utilities, and other office-related costs.
- Training and development: To stay competitive in the import-export industry, you may need to invest in training and development for your staff. This can include language courses, industry-specific training, and leadership development.
- Taxes and duties: As an import-export company, you will need to pay various taxes and duties, such as import and export duties, value-added tax (VAT), and income tax.
- Office supplies and equipment: You will need basic office supplies and equipment to run your import-export operations, such as computers, printers, and stationery. These expenses can add up over time.
- Professional memberships and subscriptions: To stay updated on industry trends and connect with other import-export professionals, you may need to join professional associations and subscribe to industry publications. These memberships and subscriptions may come at a cost.
- Consulting fees: At times, you may need to hire consultants for specialized projects or advice on specific aspects of your import-export business. This can include fees for market research, customs compliance, and trade negotiations.
This list will need to be tailored to the specificities of your import-export company, but should offer a good starting point for your budget.
What investments are needed to start or grow an import-export company?
Creating and expanding an import-export company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an import-export company could include elements such as:
- Warehouse space: As an import-export company, you will need a warehouse to store your inventory and shipments. This can include the cost of purchasing or leasing a warehouse, as well as any necessary renovations or repairs.
- Transportation vehicles: In order to transport goods to and from your warehouse, you may need to purchase or lease vehicles such as trucks or vans. These can be used for local deliveries or for longer distance shipments.
- Customs and import fees: When importing goods into a country, there are often fees and taxes that must be paid to customs. These can include duties, tariffs, and other import fees. Make sure to include these costs in your expenditure forecast.
- Technology and equipment: As an import-export company, you will likely need technology and equipment to help with tasks such as inventory management, tracking shipments, and communication with suppliers and customers. This can include computers, software, and other necessary equipment.
- Office space and furniture: You will need a designated office space for your import-export operations, as well as furniture such as desks, chairs, and filing cabinets. This can also include the cost of utilities and office supplies.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your import-export 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 import-export company
The next step in the creation of your financial forecast for your import-export 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 an import-export company?
Now let's have a look at the main output tables of your import-export company's financial forecast.
The projected profit & loss statement
The projected profit & loss shows how profitable your import-export company is likely to be in the years to come.
For your import-export company to be financially viable, your projected P&L should ideally show:
- Sales growing above inflation (the higher the better)
- Profit margins which are stable or expanding (the higher the better)
- A net profit at the end of each financial year (the higher the better)
This is for established import-export companies, there is some leniency for startups which will have numbers that will look a bit different than existing businesses.
The projected balance sheet
Your import-export 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 projected cash flow statement
A projected cash flow statement for an import-export company is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your import-export company's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the import-export company 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 import-export company's financial forecast?
Creating your import-export company's financial forecast may sound fairly daunting, but the good news is that there are several ways to go about it.
Using online financial projection software to build your import-export company'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.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional import-export company financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your import-export company's financial forecast?
Creating an accurate and error-free import-export company 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.
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 forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own import-export company, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your import-export company
Takeaways
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your import-export company.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for an import-export company. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
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
- Example of financial projections
- How to create a turnover forecast for a business?
- Sample financial forecast for business idea
Know someone who runs or wants to start an import-export company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
