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In LivePlan, there is no separate entry point for start-up costs - instead, they are entered as part of your regular forecast entries.
If you want to represent your start-up costs in LivePlan, we recommend setting your forecast start date to the first month with any financial activity instead of the month when you start earning revenue. That way, you can represent your start-up costs in the months before revenue begins, which results in more accurate cash planning.
Start-up expenses vs. start-up assets
Depending on the nature of your start-up costs, you may use the Expenses or the Assets pages of your forecast to enter them:
- Expense entries are great for smaller purchases you'll use up quickly, such as office supplies or uniforms.
- Asset entries are for those large purchases of durable goods that your business will use over a period of time, such as equipment or vehicles.
With those forecast entries in place, you might also want to include an itemized list of your start-up costs in your plan. To do this, you can add a custom topic to your plan outline and use it to describe your start-up costs as a bulleted list. The video below walks you through those steps:
Balancing start-up costs with start-up funding
Keep in mind that your start-up cost entries represent money spent. If you don't have a Financing entry to balance them, your financial statements will show you have negative cash flow in the months before you start earning revenue.
Depending on your business scenario, you should balance these start-up entries with a representation of the funds you're using to make these purchases - for example, an Investment or Loan entry. You might already have these funds, or perhaps the entry represents your needed funding.
There's no hard-and-fast rule here; there are also cases where a new business might show negative cash flow in the start-up months and then start showing positive cash flow later, after revenues begin. If you're unsure of the best option for your business, consider consulting your financial advisor.
Figuring out how much start-up funding you require
Once you've entered your start-up costs and assets into the forecast, the Cash Flow statement can give you a baseline sense of how much starting cash you might need. It's helpful to consider the Cash at End of Period line of this statement and locate the largest deficit balance that appears in the first 12 months of your forecast. This number is a good starting point for determining your needs:
However, remember that this may only be a starting point. You may also need some additional cash buffer to cover your first months of operating expenses. You might have more asset purchases planned in the near future. If you need clarification on what the bigger picture of your starting cash needs will be, consult your financial advisor for more help.
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