Balance Sheet Assumptions
There are a few specific inputs required to for the calculations in the Balance Sheet. Here are the instructions on entering each of these:
Opening Cash Balance – This is the opening cash amount you will have in Month 1, Year 1 of your plan. For example, if you've put 25,000 into the business to get it started and still have 10,000 on the Balance Sheet in your launch month, then you should enter 10,000. If you are entering a historical round of investment capital in the Capitalization Assumptions section, subtract that amount from your actual Opening Cash Balance so that it is not counted twice. If your model includes an asset that has already been purchased, add back the expense here. This number can be negative if necessary. See our blog post Modeling Historical Data for more details.
Days Accounts Payable – This is the number of days that elapse between when you experience the direct expenses and when you pay for those direct expenses. This number depends upon your industry and your vendor's invoices for Direct Expenses such as COGS. While the number can vary, it is usually 20 - 30 days. Most vendors will invoice with up to 30 days to pay prior to the due date.
Pre-Sales Inventory – This allows you to show build-up inventory expense in the months prior to any sales. Once you are experiencing sales, the model will maintain inventory at this pre-sales level plus the Days of Inventory level. This expense might include raw materials (COGS) or Direct Labor expense of any inventory. See our blog post Inventory Assumptions for more details.
Inventory On-Hand – Enter the number of days of inventory you expect to carry once sales are underway. For example, if you enter 30, then the model will automatically grow your inventory with sales in order to maintain 30 days of inventory on hand as well as the initial inventory you entered above. Most businesses will operate on at least 30 days of inventory. If your business does not require inventory, leave this field blank.