| forecast for year beginning the 1st. | May 2017 | May 2018 | May 2019 |
| Fixed Assets | 56,624 | 54,081 | 77,791 |
| Current Assets | 217,675 | 261,733 | 506,750 |
| Total Assets | 274,298 | 315,813 | 584,540 |
| Current Liabilities | 154,652 | 125,407 | 181,409 |
| Long Term Liabilities | 13,878 | 4,095 | 11,648 |
| Total Liabilities | 168,530 | 129,502 | 193,057 |
Net Current Assets (Working Capital) | 63,022 | 136,326 | 325,341 |
| Net Assets | 105,768 | 186,311 | 391,483 |
| Capital | 5,000 | 5,000 | 5,000 |
Retained Profits Bfwd | 20,000 | 100,768 | 181,311 |
add: Profit / Loss after Tax | 80,768 | 80,543 | 205,172 |
less: Dividend | 0 | 0 | 0 |
Retained Profits C/Fwd | 100,768 | 181,311 | 386,483 |
Capital and Reserves (Equity) | 105,768 | 186,311 | 391,483 |
Out of all the forecasts supporting a business plan, it is the balance sheet that answers all of the questions concerning forecast liquidity and solvency.
That makes it more than a simple list of assets and liabilities. This one is produced from nothing more than your own figures for sales, gross profit margin, overheads, bank overdraft, other loans and so on plus a few simple ratios.
Its two main elements are net current assets. also known as working capital, defining financial liquidity plus equity / net assets, which should (but not always does) define solvency. As working capital tells you and others (for example the bank) how well you expect your business plan to generate enough cash to support your core trading operations for the year or years ahead, a working capital forecast in deficit is never acceptable.
"Net current" refers to core trading assets such as cash itself, accounts receivable and stock that can reasonably be expected to be turned into cash within a year less debt scheduled to be paid within a year.
That is working capital the principal component of any balance sheet forecast.
It tells you and others (for example the bank) how well your business plan will be generating cash to support its core trading operations for the year or years ahead, which is why working capital deficits must always be corrected.
As this example illustrates, equity represents paid up capital plus retained profits after tax. That in turn describes how the assets less liabilities (net assets) of the business are financed.
Positive balance sheet net assets / equity might appear to indicate solvency but that is not actually always the case. More often than not, a "fair value" for fixed assets (were they to be put up for sale) is usually lower than their net book value, meaning that that net assets are often overstated in realiseable cash terms. This is described next.
Cost less depreciation describes the net book value of fixed assets in the balance sheet. That represents the residual value of their forecast working life in the business, not their estimated fair market values.
That is an important distinction. Depreciated net book values for fixed assets are almost always significantly lower than what they could be expected to fetch if put up for sale. In the event of a forced sale (which is how bank managers will assess their value) those prices will be lower still.
Fixed assets play no part in defining liquidity other than depleting it upon their acquisition; regardless of asset financing.
The What-If Calculator and Planner gives you the opportunity to update / change forecasts in real time. Here it is used to improve working capital and cash by reducing forecast wages and fixed overheads - Each by increments of 5%
| Year 1 less | Fixed O/Heads & Wages | Pre-Tax Profit | Equity | Working Capital | Increase / Decrease Borrowings | Bank Year End |
| 0% | 430,000 | 94,381 | 105,052 | 59,993 | 53,854 | -35,439 |
| 5% | 408,500 | 116,779 | 123,911 | 81,165 | 33,488 | -13,261 |
| 10% | 387,000 | 138,712 | 141,677 | 98,931 | 9,962 | 8,452 |
Improved working capital and cash flow are also affected by investment in new fixed assets. Their cost plus any new debt associated with financing always reduces balance sheet liquidity.
For example, in this sample forecast £30,000 of new main pool assets (e.g. plant and machinery, fixtures, equipment, trucks and vans) and £25,000 for company cars have been entered, a total of £55,000. Seventy percent of that is financed over 24 months.
The table below shows how that £55,000 will affect liquidity (working capital) and cash flows, followed by what happens to these if first the £25,000 for new cars is removed followed by the £30,000 of new main pool assets.
Despite these assets being 70% financed, the liquidity and cash flow improvements are significant.
| Fixed Asset Acquisitions | Fixed Overheads | Interest Charges | Equity | Working Capital | Increase / Decrease Borrowings | Bank Year End |
| 55,000 | 430,000 | 5,062 | 105,052 | 59,993 | 53,854 | -35,439 |
| 30,000 | 408,500 | 3,104 | 127,097 | 100,956 | 5,616 | -691 |
| 0 | 387,000 | 1,488 | 143,371 | 135,789 | -48,780 | 69,719 |
No intervention by a user is called for to calculate this balance sheet forecast. Figurewizard will automatically produce it just from your forecast sales, margins, overheads, investment and a few simple cash ratios.
VAT and corporation tax .are automatically calculated and applied to the forecasts and the calculator / planners by the system. As with everything else, intervention on your part is not called for.
Your business plan should always be angled towards making sure that your business iwill be generating enough cash to finance costs associated with core trading.
That means working towards positive working capital and operating cash flow..
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