there are five parts of the projections:<\/p>\n

\n
1. a statement of operations<\/strong> that will show how successful and profitable the venture will be, and when.<\/li>\n
2. a statement of cash flows<\/strong> that shows how much cash is needed, and when, and how and when it will be paid back.<\/li>\n
3. a balance sheet<\/strong> that shows snapshots of the company at various stages of development.<\/li>\n
4. detailed assumptions<\/strong> describing the basis of how every amount has been determined showing the care that went into it and the limiting conditions, if any.<\/li>\n
5. the fifth part is the accountant\u2019s report<\/strong> detailing their level of responsibility. generally, the projections will consist of an accountant\u2019s compilation or examination report in accordance with attestation standards established by the american institute of certified public accountants. this is not included where company personnel have prepared the projections.<\/li>\n<\/ol>\n

   the end product is some numbers on pieces of paper. however, preparing the projections is an extremely creative process using all the skills of the preparer and principals, and ends up with a document that not only is used to raise funds, but one that will show how the project will be financially achieved, and can serve as a framework for an operating budget once activities commence. an occasional byproduct of the projections is the development or addition of secondary product lines or ways of doing business, and the company\u2019s marketing advantages.<\/p>\n

   part of the projection process is to determine the best business and tax structure for the company and investors. many businesses seeking funds have various layers of capital and borrowing. accountants can be very helpful in suggesting ways to do this. this usually evolves as the business takes shape through the projections.<\/p>\n

   starting a business and obtaining funds is a very serious undertaking and needs to be treated as such by advisors and those assisting in the initial stages with the same degree of care and importance as the principals ascribe to it. the process, once started, will take a concentrated effort on everyone\u2019s part and will require numerous and frequent meetings to achieve the intended results and to provide a valuable tool that will be used extensively by the principals and others.<\/p>\n

   in many instances the principals will only get a single opportunity with an investor to present their case \u2013 and the investors need to be provided with the right business plan and projections to show what the principals believe will occur, what they need and what type of company they can build.<\/p>\n

   when all is said and done, a business plan is a marketing document and needs to capture the small moments that were devoted to its examination with thoroughness, thoughtfulness, imagination, creativity and excitement.<\/p>\n

   summary of significant assumptions and accounting policies<\/h3>\n

   this is a fourth part of the projected financial statements, and it is essential that the projected accounting policies be stated and which basis the projections have been prepared under. it is mandatory for the underlying assumptions to be clearly presented.<\/p>\n

   a self-test that should be applied to the assumption to determine if it is clear is whether a reader will need to ask a question about how the amount was obtained and if there could be an issue of the assumption skirting credibility under the context of the projections.<\/p>\n

   illustration: basic assumptions<\/strong><\/p>\n

   an example of the types of information that should be included in the assumptions is shown in the table:<\/p>\n

    <\/p>\n\n\n\n\n\n\n\n\n\n\n\n

   item<\/strong><\/td>\n	type of details needed<\/strong><\/td>\n<\/tr>\n
   sales<\/strong><\/td>\n	the types of customers; the number of customers; the frequency of orders and reorders; the size of each order; the identity (signified by an anonymous id) of the projected four or five largest customers and the aggregate concentration of their business; the reliance on a single customer or group or industry the customer is in; how the customers will use the product; who will maintain the inventory; the potential for style becoming stale; the uniqueness of the product, or the reason the customers will patronize the company; the need for contracts with a customer and their length.<\/p>\n indicate if the business cycle is seasonal and make sure that is provided for in the projections of monthly sales.<\/p>\n if seasonal, provide a schedule showing each month\u2019s percentage of the annual sales and use this information in the purchasing, manufacturing and inventory buildup projections. besides providing dollars show the units that will be manufactured, inventoried and sold. provide schedules for growth in units and sales prices.<\/p>\n also indicate the geographic area the company will sell in \u2013 will they have a local, regional, national or international customer base, and why and what expectations of success does the company have?<\/p>\n if not local, what warehousing and distribution facilities will the company have and how will they be staffed and controlled?<\/td>\n<\/tr>\n
   sales returns, discounts and markdowns<\/strong><\/td>\n	explain what is considered normal in the industry and the potential for these items occurring in the proposed company.<\/p>\n the size and nature and frequency of such reductions in sales and penalties the company will be subject to for late delivery or delivery of defective merchandise.<\/td>\n<\/tr>\n
   sales costs<\/strong><\/td>\n	indicate what the sales compensation policy will be. explain whether the company will use its own salespeople, independent agents or reps, or will sell direct to the consumer or end user, and to what extent sales will be generated from the web.<\/p>\n if the company will be using salespeople, will advances or minimum income guarantees be provided, and who will bear the costs of selling expenses?<\/p>\n also indicate the type and quantity of marketing materials and support that will be provided to the salespeople.<\/td>\n<\/tr>\n
   facilities<\/strong><\/td>\n	provide details of the type of office, factory and warehouse space that will be needed and the approximate location, and the importance or lack of importance of the location. indicate the estimated square footage, and utilities, maintenance and rent costs.<\/p>\n also provide information as to the availability of suitable, employable personnel in the area.<\/td>\n<\/tr>\n
   personnel<\/strong><\/td>\n	provide a schedule of the types and numbers of employees, expected duties, salary ranges, and bonus and raise policies; the payroll taxes, insurances and fringe benefits; and whether there will be any worker unions.<\/td>\n<\/tr>\n
   cash flow from customers<\/strong><\/td>\n	indicate the expected accounts receivable and credit-setting policies. for example, provide estimates of the percentage of the sales that is expected to be collected in the month of sale and each month afterward.<\/p>\n go out as long as possible and be as conservative as possible.<\/p>\n collections occurring sooner than projected can only help you, while collections later than projected might be devastating to your cash balances.<\/td>\n<\/tr>\n
   manufacturing cycle<\/strong><\/td>\n	be very clear of the manufacturing cycle. explain how long it will take to receive raw materials, convert into a completed product, the stages of manufacturing and finishing, the workstations and potential for bottlenecks.<\/td>\n<\/tr>\n
   raw materials<\/strong><\/td>\n	you need detailed assumptions for every number you enter on the projection.<\/p>\n the more the better, just be clear and concise and don\u2019t ramble.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n  <\/p>\n accountants\u2019 report letter when a cpa works on the projections<\/h3>\n comment: this report letter is a sample that is included for educational purposes and likely will not be the prescribed report that should be included with the projections at the time the projections are prepared. further, the language of these reports is continually revised and changed.<\/p>\n the cpa issuing the report is responsible for including the current report as of the date they issue their report.<\/p>\n accountants\u2019 report \u2013 compilation of a projection<\/strong><\/p>\n to intended management of projected startup company:<\/p>\n we have compiled the accompanying projected balance sheets, statements of income, and cash flows of projected startup company as of end of startup period and each 12-month period through month 60, and for the period and years then ending, based on management\u2019s assumptions described in note 1, in accordance with statements on standards for accounting and review services promulgated by the accounting and review services committee of the aicpa. we did not examine or review the pro forma financial information nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. accordingly, we do not express an opinion, a conclusion, nor provide any form of assurance on the projected financial information or any evaluation of the support for the assumptions underlying the projection.<\/p>\n furthermore, even if the proposed financing is obtained and the business commences operations during the time frames indicated, there will usually be differences between the projected and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. we have no responsibility to update this report for events and circumstances occurring after the date of this report.<\/p>\n the accompanying projection was prepared for the purpose of management obtaining financing in connection with a proposed business startup and is part of, and should be included in, a comprehensive business plan, and is intended solely for the information and use of those obtaining from management the comprehensive business plan and who signed a letter of confidentiality and these statements are not intended to be used and should not be used by anyone other than these specific parties.<\/p>\n cpa firm signature<\/p>\n city and state of cpa firm<\/p>\n date of report<\/p>\n","protected":false},"excerpt":{"rendered":" inside: a checklist of the five essential elements in projections. a table of basic assumptions. a sample accountants\u2019 report for compilation of a projection.<\/strong> \n<\/a> \nby ed mendlowitz<\/i> \n77 ways to wow!<\/i><\/a><\/p>\n","protected":false},"author":1341,"featured_media":99998,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":""},"categories":[3184,3120,3002],"tags":[],"class_list":["post-110662","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-advisory","category-pro-member-exclusive","category-special"],"acf":[],"yoast_head":"\n