Developing a Financial Plan (Part 4)

In Part 3 of this four part series on developing your financial plan, we discuss break-even analysis and developing a balance sheet forecast.

Please note: The information in the article is for informative purposes only and is not financial advice. You should seek appropriate independent professional advice before making any decisions based on material found on this website or any linked sites.

As mentioned in the explanation of cash flows, you might send an invoice in month one but not receive payment until a later time; this is called accounts receivable. Similarly, a business expense (i.e. phone bill) might be incurred at the start of the month but not due to be paid until the end of the month; this is called accounts payable.


Accounts receivable and accounts payable can heavily impact your cash flow, so managing them is important. Making sure you get paid within your payment terms and using expense payment terms to your advantage is what successful businesses do well.

Unfortunately, these two typically don’t balance each other out, as most expenses will need to be paid at point of sale yet you won’t get paid until after delivery of the product. Management of your accounts (payable and receivable) will affect all three of your financial reports(explained in the other parts of this series):

  • Profit and loss,
  • Balance sheet,
  • Cash flow statement.

If you haven’t already done so in the part one of this series, download The Financial Plan Template.

Note: This article is an extract from the resources on the Education page on this website.

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