Financial Projections and Analysis

For most businesses that evolved from startup to successful enterprise, the fruits of their labor were ripened by diligent financial planning, projection, and analysis. They used their financial records as roadmaps towards growth, allowing them to build accurate budgets and optimally allocate their company spend. 

If you want to leverage your historical financial data to accurately project business growth and predict potential expenses—this guide is for you.


Why Perform Financial Projections and Analysis?


From a high level, analyzing financial projections can help you:

  • Grow your business without running out of cash 
  • Gauge previous strategic actions or investments, and then make adjustments
  • Derive greater value from the budgeting and planning processes
  • Measure your liquidity 
  • Determine how much additional equity or debt you require
  • Optimize your capital use 
  • Predict trends or assumptions that could impact future performance

Financial projections and analysis helps align your company with your overall business strategy.

Think of these as the pillars beneath a building’s foundation. If one ascends at a different angle, then the larger your business scales, the weaker it will become. 

Additionally, financial modeling is not only important for internal purposes, it is also used by third parties to evaluate the business holistically. Investors and creditors will want to see your historical financial performance and financial projections. For investors, it allows them to see whether there is potential ROI. For lenders, it proves (or disproves) that you are trustworthy.


Financial Forecasting


Financial projection and analysis is an internal process that helps a company explain their most recent earnings and growth (or lack thereof). The financial data can then be extrapolated upon to more accurately anticipate (forecast) what is to come and what actions need to be taken to reach the charted destination. Per Harvard Business Review


“The forecast is a vital tool for value creation. Finance theory points out that the value of an enterprise is the present discounted value of its future cash flows, and the forecast provides a roadmap for earning those cash flows.” 

Harvard Business Review


This sounds great, right? Who would pass up a roadmap, a telescope, and a compass to navigate the murky waters of their business venture?

Well, while financial projections and analysis might seem manageable to someone attempting to understand their cash flow, the intricacies and nuances complicate the process. If it were straightforward, every company would have bulletproof modeling. Yet, when taken into account that 9 out of 10 startups fail, the difficulty of “business foresight” becomes apparent. 

So, how do you effectively perform financial projections and analysis? 

There are a variety of models and ratios that you can use to forecast future revenues and expenses. Despite, the root of all accounting and forecasting comes down to developing your business’ three primary financial statements: 

  1. Income statement 
  2. Cash flow projection
  3. Balance sheet   
Income Statement


Also known as your Profit and Loss (P&L) statement, this document demonstrates a business’ profitability, listing the company’s net income growth or loss over a specified period of time. Per CFI, “The most common type of financial forecast is an income statement, however, in a complete financial model, all three financial statements are forecasted.” 

Key sections of a P&L statement include:

  1. Revenue – The money you earn selling goods or services
  2. Expenses – Both fixed and variable costs
  3. Total income – Revenue minus expenses (before taxes) 
  4. Net income – Total income without income taxes 

Using a P&L, you can identify several critical financial projection ratios, including: 

  • Profitability: “Net profit margin ratio” – (Net income ÷ Revenue)
  • Efficiency: “Asset turnover ratio” – (Revenue ÷ Assets)
  • Liquidity: “Current ratio” – (Current assets ÷ Current liabilities)
  • Leverage: “Debt ratio” – (Liabilities ÷ Assets)
Balance Sheet


This document demonstrates a snapshot of a business’ net worth at a particular moment in time. It shows what the compay owns and what it owes for a given reporting period. The balance sheet summarizes the business’ financial data across three major categories:

  1. Assets – The tangible objects of value owned by the business (both short and long term) 
  2. Liabilities – Debts the business owes
  3. Equity – The business’ total assets minus total liabilities 

As the name suggests, a balance sheet needs to be balanced. Your total assets must always equal the sum of liabilities and equity. Armed with this information, you can better gauge the business’ liquidy, efficiency, and leverage. 

Cash Flow Protection


The cash flow projection shows how much money is flowing into and out of the business, as well as your cash on hand at a specific time. This is used by lenders and investors to determine whether you are a safe credit risk, capable of repaying a loan.

It is divided into three key sections:  

  1. Cash revenues – Estimated cash sales over a given time
  1. Cash disbursements – A listing of all cash expenditures expected over the month
  1. Reconciliation of cash revenues to cash disbursements – Total cash revenue minus the cash disbursements 


This leverages the financial data within income statements and balance sheets to help you predict future cash flow and plan future business liquidity, while also demonstrating changes in assets, liability, and equity. 

Leveraging Financial Projections and Analysis


Financial forecasting is necessary for a variety of reasons. Most importantly, it can help you:

  • Forge a clear path towards achieving your goals
  • Build confidence in investors and lenders in fundraising
  • Identify how, where, and when you need to allocate your resources 

In enterprise companies, financial projection and analysis is typically the job of a Financial Planning & Analysis (FP&A) team. They support the CFO in analyzing previous strategic plans, building budgets, and creating and updating forecasts. 

But what about small- to medium-sized businesses (SMBs)? 

Typically, the company’s CFO (if it has one) is solely responsible for taking the historical and current financial data and then advising management how to propel the company forward in regard to risk mitigation, efficiency and performance optimization, and growth discovery.  

If they do not have a CFO, that job—like so many others—falls on you, the CEO. And even if you have accurate historical financial data, running the numbers and forecasting your future is easier said than done. It can get complicated, especially when you start wading into high-level accounting and analysis.  

It is because of that exact reason we exist. 

CFO Hub: The Right Way to Handle Financial Projections and Analysis


A CFO brings a deeper and more strategic financial perspective to a business. Yet finding the right person for the job can be an overwhelming (and time-consuming) process. Hiring is resource intensive, and staffing a full-time role may be out of budget.   

But what if you could hire the perfect candidate the moment you need them, for however long the role needs to be filled? 

At CFO Hub, we contract veteran CFOs, controllers, and accounting personnel to support your organization. Whether you want the assistance of a single financial expert or an entire team, we will custom-tailor a suite of offerings (and professionals) for your business’ specific needs. 

We offer: 


Finding the right CFO is difficult because companies are unique. For that reason, you need a team that understands your business model intuitively. You need a team who can plug into your existing infrastructure and provide actionable insights. 

You need us. 

Welcome to CFO Hub.

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