How to create a financial forecast for an office equipment manufacturer?

office equipment manufacturing business financial forecast

Creating a financial forecast for your office equipment manufacturing business, 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 office equipment manufacturing business 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 office equipment manufacturing business?

Creating and maintaining an up-to-date financial forecast is the only way to steer the development of your office equipment manufacturing business and ensure that it can be financially viable in the years to come.

A financial plan for an office equipment 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 office equipment 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 office equipment 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.

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What information is used as input to build an office equipment manufacturing business financial forecast?

A office equipment 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 office equipment 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 an office equipment 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 office equipment 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 office equipment manufacturing business's financial forecast.

The sales forecast for an office equipment manufacturing business

The sales forecast, also called topline projection, is normally where you will start when building your office equipment manufacturing business 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 office equipment manufacturers), and consider the elements below:

The introduction of new technology in the office equipment industry may affect your business's average price. As new and more advanced products enter the market, customers may be willing to pay a higher price for your equipment, increasing your average price per transaction.
The economic climate can also impact your business's average price. During times of economic growth, businesses may be more willing to invest in new office equipment, allowing you to charge a higher price for your products. On the other hand, during economic downturns, customers may be more price-sensitive, resulting in a decrease in your average price.
The availability of raw materials and their cost can also affect your business's average price. If the cost of raw materials increases, it may impact the cost of production and, in turn, your average price. Additionally, if there is a shortage of certain raw materials, it may result in a decrease in supply and an increase in price for your products.
Changes in government regulations and policies can also have an impact on your business's average price. For instance, if there are new tariffs or taxes imposed on imported materials or finished products, it may increase your production costs and, consequently, your average price.
The level of competition in the market can also affect your business's average price. If there are many competitors offering similar products at lower prices, it may put pressure on you to lower your prices to remain competitive. On the other hand, if there are fewer competitors, you may be able to charge a higher price for your products.

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 office equipment manufacturing business

The next step is to estimate the expenses needed to run your office equipment manufacturing business 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 office equipment manufacturing business's operating expenses should include the following items at a minimum:

Staff costs: This includes salaries, wages, bonuses, and benefits for all employees, including production workers, administrative staff, and management.
Accountancy fees: You will need to hire an accountant to handle financial statements, tax filings, and other financial tasks for your office equipment manufacturing business.
Insurance costs: This includes property insurance for your manufacturing facility, as well as liability insurance to protect against any potential accidents or lawsuits.
Software licenses: You will need to invest in software licenses for programs such as CAD software, accounting software, and other tools necessary for your business operations.
Banking fees: These fees include transaction fees, wire transfer fees, and other charges associated with managing your business bank accounts.
Raw materials: As an office equipment manufacturer, you will need to purchase raw materials such as plastic, metal, and electronics to produce your products.
Utilities: This includes electricity, water, and gas bills for your manufacturing facility.
Rent: If you do not own your manufacturing facility, you will need to budget for monthly rent payments.
Marketing and advertising: You will need to allocate funds for marketing and advertising efforts to promote your office equipment products and reach potential customers.
Packaging and shipping: This includes the cost of packaging materials and shipping fees to send your products to customers.
Maintenance and repairs: You will need to budget for maintenance and repairs of equipment and machinery used in your manufacturing process.
Travel expenses: If your business requires travel for meetings, trade shows, or other events, you will need to include travel expenses in your operating expenses forecast.
Professional services: This includes fees for legal services, consulting services, and other professional services that your business may require.
Taxes and licenses: You will need to budget for business taxes, as well as any required licenses or permits for your office equipment manufacturing business.
Office supplies: This includes the cost of office supplies such as paper, ink, and toner for printers, and other supplies needed for day-to-day operations.

This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small office equipment manufacturing business might not have the same level of expenditure as a larger one, for example.

What investments are needed to start or grow an office equipment manufacturing business?

Creating and expanding an office equipment manufacturing business also requires investments which you need to factor into your financial forecast.

Capital expenditures and initial working capital items for an office equipment manufacturing business could include elements such as:

1. Machinery and Equipment: - This includes items such as manufacturing machinery, assembly line equipment, and tools used in the production process. - These are essential investments for your office equipment manufacturing business, as they directly impact the efficiency and quality of your products. - You may also need to regularly update or upgrade these assets to keep up with technological advancements and maintain your competitive edge. 2. Manufacturing Facility: - The cost of purchasing or leasing a manufacturing facility is a significant capital expenditure for your business. - This includes costs for building purchase or rent, renovations, and necessary utilities and equipment installations. - Your facility should be strategically located to ensure easy access to suppliers, customers, and transportation routes. 3. Inventory: - As an office equipment manufacturing business, you will need to maintain a stock of raw materials, components, and finished products. - The cost of purchasing and storing inventory can be a substantial capital expenditure for your business. - It is essential to carefully manage your inventory levels to avoid excess stock and minimize holding costs. 4. Research and Development: - In order to stay competitive and meet the evolving needs of customers, your office equipment manufacturing business may need to invest in research and development. - This could include costs for designing and testing new products, as well as obtaining patents and trademarks. - Research and development expenses are long-term investments that can lead to significant returns in the future. 5. Transportation and Delivery Vehicles: - If your business involves delivering products to customers, you may need to invest in transportation and delivery vehicles. - This could include trucks, vans, or other vehicles, as well as expenses for insurance, maintenance, and fuel. - Having your own transportation and delivery vehicles can save costs in the long run compared to outsourcing these services.

Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your office equipment manufacturing business.

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The financing plan of your office equipment manufacturing business

The next step in the creation of your financial forecast for your office equipment 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 an office equipment manufacturing business?

Now let's have a look at the main output tables of your office equipment manufacturing business's financial forecast.

The profit & loss forecast

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

projected office equipment manufacturing business income statement

A financially viable P&L statement for an office equipment 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

The projected balance sheet gives an overview of your office equipment manufacturing business's financial structure at the end of the financial year.

It is composed of three categories of items: assets, liabilities and equity:

Assets: are what the business possesses and uses to produce cash flows. It includes resources such as cash, buildings, equipment, and accounts receivable (money owed by clients).
Liabilities: are the debts of your office equipment manufacturing business. They include accounts payable (money owed to suppliers), taxes due and bank loans.
Equity: is the combination of what has been invested by the business owners and the cumulative profits to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.

financial forecast: office equipment manufacturing business balance sheet example

The cash flow projection

The cash flow forecast of your office equipment manufacturing business will show how much cash the business is expected to generate or consume over the next three to five years.

office equipment manufacturing business cash flow projection

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 office equipment 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 office equipment 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 office equipment manufacturing business's financial plan.

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Which tool should you use to create your office equipment manufacturing business's financial projections?

Building an office equipment 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 forecasting software to build your office equipment manufacturing business'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

Outsourcing the creation of your office equipment 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 office equipment manufacturing business'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 office equipment manufacturing business 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 office equipment manufacturing business'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.

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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 office equipment manufacturing business, 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 office equipment manufacturing business

The Business Plan Shop's financial forecast templates

Takeaways

Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your office equipment manufacturing business future cash flows may look like.
Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.

This is the end of our guide on how to build the financial forecast for an office equipment manufacturing business, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.

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Guillaume Le Brouster

Founder & CEO at The Business Plan Shop Ltd

Guillaume Le Brouster is a seasoned entrepreneur and financier.

Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.

Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.

Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.