Financial experts recommend that every business owner learn to create and use a projected balance sheet. Preparing this operating document is a key requirement for initial and ongoing funding proposals. The balance sheet is an essential management tool, as well, and provides the most accurate indication of financial health or problems.

Collect Records

1. Step1

   Collect the company’s financial records. Separate them into income and expenses. These two broad categories form the basic structure of your balance sheet.

2. Step2

   Prepare an estimate of current assets. Total your cash on hand and outstanding receivables. Calculate and list the value of inventory, securities, vehicles and anything else that could be converted into cash or business income.

3. Step3

   List the current value of real property, land, machinery and equipment owned by the business. These are fixed assets. These items are the only tangible assets allowed in business balance sheet.

4. Step4

   Identify intangible assets, their value and any associated costs. Treat patents and copyrights as intangible assets. The fees for filing patent applications and the actual research and development labor costs are also intangible. List these separately and add them to the tangible assets list.

5. Step5

   Create a summary of the company’s liabilities. A good rule of thumb to follow is to put all day-to-day operating costs due within the next 12 months in current liabilities. Payroll, taxes, accounts payables, insurance, mortgages or rent, and monthly vehicle or equipment payments go into this section.

6. Step6

   Make a separate list of expenses that are not due within 12 months, like bank loans. These will the company’s long-term liabilities.

7. Step7

   Finish the balance sheet by calculating the owner’s equity, sometimes referred to as the company’s net worth. Include stock shares, the original start-up cash investment, additional investments and retained profits.