This is essentially a table that lists all of your revenue or income streams as well as all of your expenses for generally a period of 3 months at a time. At the bottom should be the total amount of net profit or loss for that period of time. The following three components should be in your profit and loss statement: your sales or revenue, the cost of these goods sold (or COGS), and your gross margin, which is your revenue minus your COGS. If your business is service oriented, you may not have COGS. You will also list your operating expenses, such as rent, utilities, and insurance. The operating expenses will include just the fixed amounts that don't fluctuate each month. Then you calculate your operating income by taking the total of your gross margin and subtracting the operating expenses from that number, leaving your operating income. Your operating income is the same as your gross profit. The final step is figuring out your net income. To do this, you take the amount of your interest, taxes, depreciation, and amortization and subtract this total from your operating income. This will be your net income, and the last line on your profit and loss or income statement.

Your cash flow statement is basically an accounting of how much cash your business brought in, how much cash it paid out, and how much it's cash balance is at the end of a month's time. It helps you understand the difference in the income from your profit and loss statement and your actual cash position, so you can better comprehend why you may be quite profitable and yet be unable to pay your expenses to keep your business afloat. Or conversely, you may not be turning a profit but still have enough cash on hand to stay running for several months. Keeping excellent records of your transactions every day is the best way to do this, and there are basically 2 methods of keeping your books; accrual or cash accounting. Accrual is the highest recommended method, because it keeps everything easier to manage and understand, by keeping your income and expenses related to that specific income, together on your cash flow statement. You can learn more about each type of accounting and decide which way is best, or simply hire an accountant. Your balance sheet is a standard form including 3 categories: 

• assets = accounts receivable: money in the bank, inventory, etc.
• liabilities = accounts payable: credit card balances, loan payments, etc.
• equity = investor's shares, stock proceeds, retained earnings, etc. (for most small businesses this is just the owner's equity)

Your assets should be a total of your liabilities plus your equity, and these figures will balance for your balance sheet. 

The final two components sound more intimidating than they really are. Your sales forecast is basically just a prediction of future sales, but should be an ongoing part of your financial plan. It should be consistent with the numbers from your profit and loss statement. You can break it down into segments that are helpful for planning and marketing purposes, and don't forget to include the COGS when figuring. Your business ratios and break-even analysis are a little more complicated, but assuming you have the first 3 parts done correctly, you have all the numbers you need to calculate some standard business ratios. You can research these on your own and figure out which ones are important for you. Your break-even analysis is exactly what it sounds like: a calculation of how much you need to make or sell to break even. In conclusion, the financial plan for your business is extensive as well as ongoing, but obviously extremely important. If you need help with any part of this, a great resource is Boyd Group Services.