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Guide to Writing a Financial Plan

Writing a business plan? Check out our Biz Plan Generator to help you through the process. 

Why writing a financial plan is necessary

Having a financial plan is important whether you’re in the business planning stage, or your business is up and running. Writing a financial plan can seem like an intimidating process, but this tool is here to help.

A financial plan is simply a collection of information about your business or organization that helps you plan for the future. To complete a financial plan you need to compile information from your budget, sales records, inventory, and financial reports. This data will provide the foundation for a forecast that will outline the business’s performance in coming years.

The best way to start the process of writing a financial plan is to gather all the information and advice you need. This will require you to maintain good financial records of information and will often require input from your accountant to get a complete overview of your financial position. This page gives an overview of a financial plan and insight into the information you’ll need. Often, businesses will work with experts to develop their business plan to ensure their data and estimates are as accurate as possible. To reduce the time and cost of working with a consultant, it’s good to be prepared and have your information well organized.

When following these steps, keep in mind that if your business is already operating, you will use numbers from your existing records and financial statements, and if you are creating a business plan, these numbers will be estimates about your future business.

Company Info

Start with the basics. Include your company’s name, address, and contact information. It’s important to indicate what type of business your company is (ie. whether it’s a partnership, corporation, co-operative, etc.). You’ll also need to say whether you export good, and which NAICS (North American Industry Classification System) code you fit under.


You’ve got this. Take a look at the products your business produces, break them into logical categories (breads, donuts, cakes, beverages), and let the numbers do the talking. It’s always good to break these numbers down to highlight which products generate the most revenue and what percentage of total sales they account for. Using these numbers, you can usually get a good sense of what the next few years’ sales will look like. Highlight any assumptions that you use when calculating projected sales. This is important to convey to the reader who wants to know how much money is coming through the door.

Cost of Sales

Your ‘cost of sales’ analysis should be structured like you sales overview, and provide a break-down of the costs that go into selling your products. This will often include material costs, utilities, depreciation, labour, overhead, and repairs. Again, it’s important to identify what assumptions you’re making when forecasting the cost of sales into the future; for example, an increase in sales activity might require an additional employee. These are what it costs to sell the goods.


This section provides an overview of all other expenses not included in cost of sales. These are the costs that allow you to run the business. Costs will likely include insurance, professional fees, office salaries, bank charges, and other administrative expenses. It’s important to show the value and percentage of these expenses so you can examine where your costs are coming from while you write a financial plan.

Income Statement

This is where people really pay attention. Your income statement should simply demonstrate your annual net income by subtracting total expenses from total sales. Most lenders or potential partners will be interested in this as it reflects your company’s profitability year-to-year.

Statement of Financial Position

This is where it gets a little complex. While the income statement summarizes your business’s year-to-year cash transactions, the statement of financial position gives a more robust look at your business’ financial health. This will include all assets and liabilities including debt, shareholders’ equity, accounts receivable, accruals, taxes payable, and other general financial items. This will be a much better indicator of the organization’s health than the income statement and will indicate to lenders if an investment is risky.

Cash Flow

This is where things get tricky. A cash flow statement shows how changes in balance sheet accounts impact cash. It is organized into operating, investing, and financing activities and shows the cash flow from these activities. It provides a much more detailed overview of the organization’s financial activities and well-being. Unless your company has an accountant on staff, you’ll likely need to work with an external expert to generate an adequate cash flow statement.

Financial Requirements

Let’s get down to business. This section highlights the funds required for your business’s operations. In many cases, funds may come from your own sources such as reserves, cash, or share equity. If a loan is required, it should be detailed in this section to include the sources, principle, collateral, maturity date, and interest rate. Lenders need to know this information as it demonstrates that other creditors are invested in the business.

Performance Indicators

Show us what you’ve got. Use this section to demonstrate your company’s performance, and expected performance, using some common indicators of financial health. The Business Development Bank of Canada (BDC) recommends using the following indicators in a financial plan:

  • Current Ratio: total assets relative to total liabilities.
  • Age of Accounts Receivable: days in a year relative to your turnover ratio (the percentage of turnover in a year).
  • Inventory Turnover (times): the number of times inventory is sold or used in each year.
  • Interest Coverage: indicates how easily you can pay interest on debts. Calculated by dividing a company’s pre-tax earnings by its interest expenses.
  • Total Debt to Equity (%): total debt relative to investors capital.
  • Return on Investment (%): profits relative to funds invested.
  • Return on Assets (%): profits relative to total assets.
  • Asset Turnover (times): average net sales/revenue relative to total assets.

Personal Status

When you’re writing a financial plan, this section is typically used to give the reader a sense of your personal financial position. This is a measure of whether you can personally secure a loan. In a limited liability company, personal liability is usually not necessary unless a financial institution requires members/directors to personally guarantee a loan. Determining the purpose of your plan and requirements of the readers will help determine the content for this section.

If you liked this tool on writing a financial plan, you’ll be sure to enjoy our tool on financing your co-operative, or our blog on co-operative audits

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