What banks look for in projections
- Every projected year balances — not just year one
- Reserves move by exactly the projected profit after tax and drawings
- Loan balances reduce in step with the repayment schedule
- Net block reduces by the depreciation charged in the P&L
- Current assets and liabilities reflect the stated holding assumptions
- Closing cash agrees with the cash flow statement
- Assumptions are stated explicitly rather than implied
The chain that has to hold
Most manual projection errors trace to one broken link. Opening balances flow from the prior year's close; profit flows to reserves; depreciation flows from the asset schedule to both the P&L and the net block; repayment flows from the loan schedule to both interest cost and the closing liability. Break any one and the sheet goes out — usually in year three, where it is hardest to spot.
Where the projections get used
- Project reports for PMEGP, Mudra, MSME and MMUY applications
- CMA data submitted for working capital and term loan limits
- Annual renewals of existing bank limits
- Internal planning for the client's own budgeting