Instructions for E-PLAN Financial Planning Template

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1 Instructions for E-PLAN Financial Planning Template The EPLAN template will assist you in preparing financial projections for your existing business. The template uses Microsoft Excel to prepare your projected financial statements. The template prepares a 3-year forecast the first years by the month and the annual totals for the third year. The EPLAN forecast uses 6 sheets or pages. Sheet 1 is where you enter some basic assumptions and information from your current balance sheet. Sheet 2 is the sales forecast. Sheet 3 is the personnel forecast where you forecast how many employees you expect to have in your business and how much you will pay them. Sheet 4 is the income statement or profit and loss. Sheet 5 is the cash flow statement showing how much cash your business will need. Sheet 6 is the projected balance sheet. You can move from sheet to sheet by clicking the tabs at the bottom of each sheet. As you enter information into the EPLAN spread sheet, you should follow the instructions in this document. If you have questions not answered in these instructions for your particular business, call SCORE at (619) to request help from a counselor. We recommend that you make a copy of the EPLAN from the CD and work with this copy saving the CD in case you need to start over. And you may want to make a second copy of the CD as your template for future use. Assumptions (Sheet 1) On the assumptions sheet you will answer questions about your business that will be used in preparing the forecasts in Sheets 4, 5 and 6. The following instructions are given by cell numbers on the spread sheet. Cell no. Instructions B1 Enter the starting year for your business plan; for example, The starting point can be any time during the year. B2 Enter as a whole number the percentage of sales for which you will receive cash or credit card payment. For example, if 20% of your customers will pay you cash and you plan to invoice the other 80%, enter 20. B3 If you sell products or services on credit (you invoice your customers), how many days on average do you expect it will take before your customers pay your bill? Do not enter a number greater than 60. B4 Enter the average number of days you expect to wait before you pay your bills. Do not enter a number greater than 60. B5 Enter as a whole number the percentage of your purchases for which you will pay in cash instead of being invoiced. If you plan to pay cash for 40% of your purchases, enter 40. B6 What percentage of your wages will you pay for employee taxes and benefits? If you are not certain, enter 20 as an initial assumption. B7 If you plan to sell products, how many days of inventory of your finished products will you carry? B8 If you borrowed money for your business that has to be paid back in 1 year of less, what is interest rate? Enter a whole number; for example, enter 10 if the rate is 10%. B9 If you borrowed money for your business that will be paid back over a period longer than 1 year, enter the expected interest rate as a whole number.

2 B10 B11 B12 B13 B14 B15 B17 B18 B19 B20 B21 B22 B23 B24 B25 B27 B28 B29 B30 B32 B33 Enter the number of months remaining on your existing short term loan. Enter the number of months remaining on your existing long term loan. Only enter a number in this cell if your business is taxed as a C-corporation. Enter as a whole number; for example, enter 40 for 40% combined tax rate. Enter the amount of your proposed new loan. Enter the interest rate of your prosed loan as a whole number. Enter the months to payoff for your proposed loan. This is the heading for inserting information from your current balance sheet. Enter from your current balance sheet your cash balance. Enter from your current balance sheet your accounts receivable balance. Enter from your current balance sheet your inventory value. Enter from your current balance sheet other current assets. Enter from your current balance sheet capital assets before depreciation. Enter from your current balance sheet accumulated depreciation as a negative number. Enter from your current balance sheet other assets. This computer generated number is the sum of B18-B24. Make certain that this amount is the same as the total assets on your current balance sheet. You may have another asset category not covered above, so add that amount in B18, making certain that B19 now equals the total assets on your balance sheet. Enter from your current balance sheet the account payable balance. Enter from your current balance sheet the short-term notes balance. Enter from your current balance sheet long-term debt. Sums B27-B29. Make certain that this amount equals total liabilities on your current balance sheet. Enter the total equity from your current balance sheet. This computer generated number, which is the addition of B30 and B32, should equal B25. Sales Forecast (Sheet 2) On the sales forecast sheet you will forecast expected sales by the month for the first two years and the annual total for the third year. If you are selling a product as a retailer, wholesaler, or manufacturer, you will forecast the number of units you plan to sell. If you are in a service business, you will most likely forecast the number of customers or clients you expect. In some service businesses you may forecast the number of billable hours. As you look at Column A you will see that you have space for 7 products or service offerings. If you have more than 7, try to group them into 7 or less. If you need to show more than 7 products or services categories, call the San Diego SCORE office at (619) to request a counselor to assist you. Cell or Row B1 C1 A3 A4-A9 Enter the first month of planning period; for example, Jan or 1/05. The first month does not have to be January. In C1 M1 enter the rest of the months of the year, or if you understand Excel, you can fill the series. Type in the name of your first product or service. Type in additional product or service names assuming you have more. In unused rows you can leave the row title like Product 7 or you can erase the title leaving a blank row.

3 B3 Enter the number of units of your first product that you expect to sell the first month. If you are in the service business, you will probably enter the number of customers you expect for the first month. C3-M3 Continue to enter your projected sales by the month as in B3. N3 This is the sum for the first year for your first product. It is calculated by the O3-Z3 Enter your projected sales for your second year. AA3 This is the sum for the second year for your first product. It is calculated by the AB3 Enter your projected sales for your third year. Rows 4-9 Follow the instructions for Row 3 as above for the remaining products that you expect to sell. A10 This is the heading for the next section where you will enter your expected selling prices. B11 Enter the price that you expect to charge for your first product in the first month. If you are in a service business, enter the average amount that you expect a customer to pay, assuming that you used the number of customers in B3. C11-M11 Enter the price for the rest of the months of the year. This will often be the same number as in B11 unless you plan to increase or cut price. N11 This price will be the same as the last month of the year. It is calculated by the O11-Z11 Enter your expected selling prices for the second and third years. As before, in a service business this will probably be the average expenditure per customer. AA11 This price will be the same as the last month of the year. It is calculated by the AB11 Enter the price that will apply in the third year. Rows Follow the instructions for Row 11 filling in prices for each product. A18 Introduces the next section, which calculates total dollar sales for each product or service offering. Rows These dollar sales numbers are calculated by the computer by multiplying the number of units by the unit price. A27 B28 Introduces the unit cost section for the products sold above. Enter the cost for the product that you sold in B3. If you are a retailer or wholesaler, this number is the price that you pay for the product. If you are a manufacturer, enter the cost of raw materials to make one product unit. Do not enter labor cost to make the product. Labor cost will be on the next sheet. If you have a service business, this cell will probably be blank, since the cost for providing the service will be in the next two sheets. Use the same rules for entering the cost per unit as in the price per unit, above. A35 Introduces the total cost of each product sold. This entire section (Rows 36-43) is calculated by the If you are in a service business with no entries in Rows 28-34, these cells will read 0.

4 Personnel Forecast (Sheet 3) On this sheet you will enter the names or titles of employees that you have or plan to have in your business. A2 This cell introduces the production employees section. If you are in the retail or wholesale businesses, you will probably not make any entries in this section. On the other hand, manufacturing and service businesses will have production personnel. A3 Enter the name, the title, or the title for several employees in this cell. B3-M3 For the employee or employees in A3, enter the monthly wages. These are direct wages with no benefits or employee taxes. N3 This computer generated cell sums the monthly wages to get the annual wages for the first year. O3-Z3 For the employee or employees in A3, enter the monthly wages. These are direct wages with no benefits or employee taxes. AA3 This computer generated cell sums the monthly wages to get the annual wages for the first year. AB3 Enter the annual wages for the third year. Rows 4-8 Follow the same instructions as for Row 3. Row 9 This computer generated row shows the sum of the production employees by the month and for years 1, 2 and 3. A10 Introduces the sales and marketing employee section. Rows Follow the same instructions as for production employees except the employees here are those directly involved in sales and marketing. Row 17 Subtotals direct wage costs for marketing and sales employees. A18 Introduces administrative employees cost. Employees not in production or sales and marketing should be in this section. If your business is organized as a sole proprietor or partnership, then your wages as an owner (and/or partner) would not show on this page under normal accounting practices. Instead, you would use the Owner Withdrawal row in the Cash Flow sheet (Row 20 on Sheet 5). However, to get a better picture of your business, we recommend that you use one row under Administration to show wages that you need to take out of the business each month and do not repeat these entries in the owner withdrawal row in the Cash Flow sheet. Rows Follow the same instructions as above with production and sales and marketing. Row 25 The computer subtotals the administrative employees cost. Row 26 The cells in this row are optional. You can enter the total number of employees or leave the cells blank. Row 27 Calculates the total payroll cost before employee taxes and benefits. Row 28 Calculates employee taxes and benefits using Cell B6 from the assumptions page. Row 29 Adds employee taxes and benefits to the total payroll in Row 27 to get total payroll expenses. Income Statement or P&L (Sheet 4) Many of the cells in this sheet are computer generated based on information from previous sheets. Row 2 These cells are computer generated from Sheet 2, Row 26. A3 This is a heading and no numbers are entered in this row.

5 Row 4 This row contains computer generated cost for the products sold from Sheet 2, Row 43. Row 5 This row contains labor cost to manufacture a product or the cost to provide a service in a service business. This computer generated row comes from Sheet 3, Row 9 plus the amount for employee taxes and benefits. Row 6 Enter any additional cost related to producing a product or providing a service. In most cases this row will remain blank. Row 7 Sums Rows 4-6. Row 8 Calculates the gross profit, which is Row 2 minus Row 7. Row 9 Calculates the gross profit percentage, which is gross profit divided by sales. A10 This heading introduces operating expenses, which are the expenses not related to producing the product or service. Row 11 Calculates the payroll plus employee taxes and benefits excluding the production payroll, which is included in Row 5. The payroll numbers come from the Personnel Sheet, Rows 17 and 25. Row 12 Enter the amount of money you expect to spend for each time-period for advertising and promotion. Row 13 Enter your monthly rent in each cell and the annual amount for the second and third years. Row 14 If you plan to use leased equipment, enter your monthly lease cost and annual cost for the second and third years. Rows Follow the same instructions as for Row 14. In Row 22, the most common entry will be for tax preparation. Row 23 Calculates depreciation based on the amount of equipment and office equipment from the Assumptions Sheet and capital expenditures from the Cash Flow Sheet. Row 24 Calculates amortization of organization and research and development expenses from the Assumptions Sheet. Row 25 Enter all miscellaneous expenses not covered in above rows. Row 26 Calculates total operating expenses by summing Rows Row 27 Calculates percentage of expenses divided by sales. Row 28 Calculates profit or loss before deducting interest and taxes. Row 29 Calculates short-term interest expenses based on the interest rate and the amount of short-term loan from the Assumptions Sheet. Row 30 Calculates long-term interest expenses based on the interest rate and the amount of long-term loan from the Assumptions Sheet. Row 31 Calculates the income tax based on the tax rate from the Assumptions Sheet. When there is a loss, the cells are 0. Row 32 Calculates net profit or loss by subtracting interest expense and tax from profit (Row 28). Row 33 Calculates percentage net profit divided by sales. Row 35 Allows changes to be made to accounts receivable days (A/R days) throughout the planning period. The default number that the computer places in these cells is the accounts receivable days from the Assumptions Sheet, B3. If you think that the A/R days will change, you can enter numbers in the cells, but first you must unlock the worksheet. Click on Tools, then Protection, then Unprotect the worksheet. After inserting new A/R days numbers, protect the sheet by clicking on Tools, Protection, Protect the worksheet.

6 Cash Flow (Sheet 5) The cash flow statement is often the most important financial statement because it shows how much cash you will need to operate your business. The cash flow statement starts with cash balance at the beginning of the period and ends with the cash balance at the end of the period. The beginning cash balance for each period is the cash balance from the previous period. The cash flow statement is divided into two sections: the cash coming into the business and the cash going out of the business. The difference is the net cash flow for the period. Many rows are computer generated, so the following covers only those rows where you may have to make entries. Row 7 Row 8 Row 14 Row 18 Row 19 Enter any new liabilities that have not been entered elsewhere highly unlikely. Enter the amount of new cash input. This is equity investment and not a loan. Enter new expenditures for buildings, vehicles, or equipment including office equipment. Enter dividends paid to shareholders if business is a corporation. Enter owner withdrawals if business is a sole proprietor or partnership. However, if you included the owner s wages in the Personnel Sheet as recommended, do not enter here unless you plan to take out more than you included in the Personnel Sheet. Balance Sheet (Sheet 6) The balance sheet shows the financial position of the business at any single point in time. All entries on this page are computer generated. Row 32 Proof should be 0. If not, there is an error, and you can call SCORE at (619) for assistance.

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