How to create a financial forecast for a plastic building supplies maker?

Developing and maintaining an up-to-date financial forecast for your plastic building supplies 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 plastic building supplies 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 plastic building supplies manufacturing business?

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 plastic building supplies manufacturing business becomes handy.

Creating a plastic building supplies manufacturing business 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 plastic building supplies manufacturing business.

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 a plastic building supplies manufacturing business 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 plastic building supplies manufacturing business'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.

What information is used as input to build a plastic building supplies manufacturing business financial forecast?

A plastic building supplies 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 plastic building supplies 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 plastic building supplies 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 plastic building supplies 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 plastic building supplies manufacturing business's financial forecast.

The sales forecast for a plastic building supplies manufacturing business

From experience, it is usually best to start creating your plastic building supplies manufacturing business financial forecast by your sales forecast.

To create an accurate sales forecast for your plastic building supplies manufacturing business, you will have to rely on the data collected in your market research, or if you're running an existing plastic building supplies 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:

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 plastic building supplies manufacturing business

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

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

What investments are needed to start or grow a plastic building supplies manufacturing business?

Creating and expanding a plastic building supplies manufacturing business also requires investments which you need to factor into your financial forecast.

Capital expenditures and initial working capital items for a plastic building supplies manufacturing business could include elements such as:

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

The financing plan of your plastic building supplies manufacturing business

The next step in the creation of your financial forecast for your plastic building supplies 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 plastic building supplies manufacturing business?

Now let's have a look at the main output tables of your plastic building supplies manufacturing business's financial forecast.

The profit & loss forecast

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

A financially viable P&L statement for a plastic building supplies 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 plastic building supplies manufacturing business'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 projection

The cash flow forecast of your plastic building supplies 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 plastic building supplies 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 plastic building supplies 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 plastic building supplies manufacturing business's financial plan. 

Which tool should you use to create your plastic building supplies manufacturing business's financial projections?

Building a plastic building supplies 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 plastic building supplies 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

Enlisting the help of a consultant or accountant is also a good way to obtain a professional plastic building supplies 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 plastic building supplies 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 plastic building supplies 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 plastic building supplies 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.

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 plastic building supplies 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 forecast shows expected growth, profitability, and cash generation metrics for your plastic building supplies manufacturing business.
2. Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
3. 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 plastic building supplies manufacturing business. Don't hesitate to contact us if you have any questions!

Also on The Business Plan Shop

• Financial forecast example
• How to create a sales forecast for a business?
• Sample financial forecast for business idea

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