7 things nobody tells you about financial projections template

A projections template is not a spreadsheet with pretty formatting. It is a list of rows, each with a note beside it saying where the number came from and what would have to happen for it to be wrong.

Build the notes and the arithmetic follows. Build the arithmetic first and you have a model nobody, including you, can defend six months later.

Here are seven things the template does not tell you, in the order they bite.

What to take away

1. The assumptions sheet is the template

Most people open a workbook and go looking for the statements. The statements are the cheap part. One row per input, four columns beside the value, and the last column does the work.

That last column is the one people leave out and the one a reader uses. It turns a number into a claim somebody can disagree with precisely. A row marked "assumed, because we have not opened, and a week of trading replaces it" is stronger than a confident figure with no origin.

2. Capacity caps revenue, so fill it first

Capacity is the physical ceiling in the unit you sell: covers per night, jobs per bay per day, pallets per week. One row per constraint, with a note naming what the constraint is. It comes out of the operations plan.

Utilization is the share of that ceiling you expect to sell, and the reason. Not a wish. A count from a real week, or a stated assumption you intend to replace. Revenue is capacity times utilization times price. Fill it in that order and a missed month tells you which of the three failed.

3. Cash flow decides whether you survive

Profit is an opinion held at month end. Cash is a fact that arrives on a date. A plan can show a healthy margin and run out of money in March because a customer paid in April.

The cash flow statement includes several items:

4. The balance sheet is a consistency check

In a small plan the balance sheet has one job: proving the other two statements agree. Closing cash on the balance sheet and closing cash on the cash flow have to be the same number. If they are not, a formula is wrong somewhere, and the error is usually in the timing rows.

5. Some costs jump rather than climb

The second vehicle, the larger unit, the supervisor, the license tier. These are step costs, and a percentage growth rate will never produce them.

Each step cost needs a trigger written beside it: the volume at which you take on the second van, the head count that requires a supervisor. A trigger is a decision you can point to later. A percentage is a number nobody can check.

6. Growth has to come from a named row

If growth appears in the revenue block, it must come from a change in a row above it. A hire starting in month four. A second bay opening in September. A channel that has been tested and produced a countable number of enquiries.

A growth percentage applied to last month is the one construction a lender will not accept. It is also useless to you, because when the month misses you cannot say which assumption failed.

7. The tests matter more than the numbers

Four rows, each recording what you changed and what happened to the lowest cash balance of the year. Halve the volume. Delay the start. Assume customers pay a month later than agreed. Reduce volume until cash runs out and record the level.

The response column matters more than the result column. A reader wants to know what you would do, not that you can operate a spreadsheet. What the whole set has to add up to is covered in the projections guide.

The rows to fill, in fill order

Price. One row per unit of sale, taken from the product and service section. Add a row for your discount policy, because there will be one.

Direct cost per unit. Materials, direct labor at the loaded rate, delivery, payment processing, and an allowance for work redone. Each gets its own row, so a supplier increase changes one cell.

Head count. One row per role, with start month, hours, pay basis, and the employment costs sitting on top of the wage. The scale of that load is published in the federal breakdown of employer costs, but your own comes from your payroll provider and your insurer. The roles here must be the roles in the team section.

Fixed costs.

Rent, insurance, subscriptions, professional fees.

Opening costs. Everything spent before the first sale. The categories are listed plainly in the federal outline of startup costs, and the two people forget are deposits and the wages paid during training.

Timing. A row for each: how long customers take to pay in practice, supplier terms, payroll dates, the months annual costs fall, and any deposit taken before work starts.

Working capital. Days of stock held, work in progress at any moment, and money owed to you at the busiest point of the year.

Funding.

Sources and uses

Two short tables that total the same figure. Sources lists owner cash, the amount requested, money already spent, and any other financing. Uses itemizes equipment, fit-out, deposits, opening stock, working capital and a named contingency.

Then one paragraph, not a table: how the money comes back, taken from the cash flow rather than the profit line, with the term and rate you were actually quoted.

What to write beside every row

One sentence, in the note column, in this shape: the value, its origin, and the thing that would make you change it. Written that way the assumptions page becomes readable on its own, which is what a reviewer will do with it.

If a row cannot be written that way, it is not an assumption. It is a number somebody wanted, and it should be marked as unverified or removed.

Common questions

Can I use a template someone else built?

Yes, if you can see and edit every formula. A model whose arithmetic is hidden cannot be defended when a reader asks how a figure was derived, and you cannot correct it when it is wrong.

How many months should the grid cover?

Monthly for as far as you can defend, usually the first year or two, then annual summaries. A monthly grid running five years implies a precision nobody has and invites questions about the later columns.

What goes in the plan document and what stays in the workbook?

Summaries and the assumptions page go in the document. The grid goes in an appendix or as a separate file. Never retype a figure into prose; refer to the model, because typed figures stop matching it at the first revision.

My business has two revenue streams. One template or two?

One workbook, two revenue blocks, one set of shared costs. Combining them into a single average hides which stream carries the other, and that is usually the first thing a reader wants separated.