“All financial projections are wrong, by definition. We’re human and we don’t predict the future accurately. So don’t expect accuracy. Go for plausibility, and then follow up with regular plan versus actual analysis, review and revisions. We call that management.”
– From one of my posts on Amex OPEN forum
Please don’t use financial terms incorrectly. Banking, finance, and investment assign exact meanings to several important financial terms. They are easy to learn and really important because using them wrongly in business plan financials is at best going to make a very bad impression, and at the worst could even be fraud.
The guardians of financial correctness live in an unforgiving world. Banking and securities laws make even some innocent financial errors look like fraud. Preserving the details of financial standards is the only way business numbers can stand up to legal scrutiny. Numbers in financial statements have to mean what they are supposed to mean.
And seriously, it doesn’t take an MBA degree or CPA certification to know essential financials required for business planning and, really, running a business. It takes focusing your attention for an initial few minutes and then having the discipline to check back when you need to. Read and understand this section, keep it in mind when you deal with financial projections, and you will be fine.
This topic includes:
- Six Financial Terms All Business Owners Should Know
- Three Essential Projections
- What’s Accrual Accounting and Why Does It Matter
- Months and Years in Financial Projections
- Financial Projections Tips and Traps
- Other Important Details