So you are used to creating a budget for your home or your business and then all of a sudden a potential lender or investor asks you to create a set of financial projections. You say, “of course! I will get that to you ASAP” now you are frantically searching on Google to find out what in the world a financial projection means.
Well if you are familiar with the budgeting process, then you are in luck because creating financial projections is really the same thing. Here are the definitions for both terms from Business Dictionary.
Financial Projections – “A forecast of future revenues and expenses for a business, organization, or country. A financial projection will typically take into account both internal information such as historical income and cost data, and estimates of the development of external market factors, providing estimated figures in addition to projections of the general financial condition of the company in the future.”
Budget – “An estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.”
Typically, it seems that the term budget is used for existing businesses who tend to have stable results from year to year. Financial projections on the other hand may be used if you are a startup or fast growing business with rapidly changing financials.
The good news is you can use our web application ProjectionHub to create a set of financial projections or a budget for your business for free right here.
If you have any questions about the process, please don’t hesitate to contact us and ask for help.
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