Creating financial projections is an important step in determining the feasibility of your business. It is essential that a business is aware of its current and future cash position to ensure sufficient cash is available for business operations.
Additionally, financial projections are a critical part of your business plan and/or loan proposal. The projections are estimates of the financial future of your business. Although the numbers are based on estimates, do not consider such projections as "a guess." Research plays an important role in accurately determining future sales and costs. The projections serve as a basis for planning and are likely to change as more information becomes available. Creating financial projections may seem intimidating. It is important to remain conservative throughout the development of the statements. In other words, understate revenues and overstate costs.