| 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 |
Not just just a list of assets and liabilities, this balance sheet forecast ranks as the foremost component ofoperating your business plan.
It's two main elements are net current assets (working capital) which describes liquidity and net assets / equity, which can (but not always) describe solvency. Of the two, forecast working capital is the most important. If that is negative, your planned profit forecast might be at risk..
For that reason banks, other lenders and senior creditors will always rely on the strength of forecast working capital when assessing a business plan. If yours is negative your message will be that the business does not expect to be able to pay its bills on time.
Shareholders funds (also net assets / equity) represent paid up capital and profits after tax that have been retained in the business.
In law, a company has an identity that is completely distinct from its shareholders. The funds represent investments in the company made by its shareholders and which are therefore due to them. That is why shareholder funds are shown in the balance sheet as a liability.
Net current assets (current assets less current liabilities) defines working capital which in turn describes liquidity; the sole source of cash flow from core trading activity.
"Net current" means core trading assets such as accounts receiveable and stock that will reasonably be expected to be turned into cash within a year (plus cash) less debt scheduled to be paid within a year.
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.
This is an important distinction. Depreciated net book values for fixed assets are invariably significantly lower than the prices they could reasonably be expected to reach if put up for sale. In the event of a forced sale (which is how bank managers will assess their value) those sale 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 makes it possible for you to update / change forecasts in real time. Here it has been 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.
Borrowings and Solvency
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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