The first statements you need to prepare are your forecasted statement of earnings and retained earnings for the first three years of your business. These statements should be prepared on a monthly basis for the first year, quarterly for the second year, and annually thereafter. Your forecast will show the revenues and expenses you expect your business to generate. This exercise is more complex for a new business than for an existing business because historical data is not available on which to base the forecast. To obtain guidelines for revenues and expenses, you can consult with other businesses engaged in similar operations or use magazines, periodicals, or other publications.
Guidelines are just a benchmark.
Your particular circumstances will determine their relevance. The following is an example of an annual forecasted statement of earnings and retained earnings. Next, you must prepare cash flow statements for the first three years of your business. Although based on your forecasted statement of earnings and retained earnings, your cash flow statement is not concerned with profitability, but rather with the flow of cash through your business. It systematically breaks down revenue and expense items by recording cash that will be taken in and paid out.