If you’re looking for financial backing for your venture, this section will include the facts and figures necessary to woo money lenders.

But, let’s assume that you’re funding your business with your own resources—cash on hand, anticipated sales, savings, business credit cards. You won’t need the complex financial analysis required to attract outside lenders. But you will need to develop a solid financial picture for your business. Completing this section will give you a good understanding of the flow of income and expenses you can expect.

At minimum, include the three basic business financial statements—a balance sheet, a profit and loss statement (also known as an income statement) and a cash flow projection. Together, these will show your revenues, expenses and profits (or losses).

Your balance sheet adds up your liabilities and owner’s equity to determine your total assets. Liabilities are your debts, loans, accounts payable and other obligations that you owe. Assets are cash and business items that can be converted to cash, such as accounts receivable, inventory and equipment. Subtract your liabilities from your company’s assets and the result is the net worth of your business.

The profit and loss statement measures your sales volume during a certain time period against your expenses during the same period. The difference is your profit or loss.

Your cash flow projection may be the most important of your financial statements. It shows when your money from sales is coming in and where it’s going out to pay expenses. A look at your cash flow projection each month will tell you whether you have enough money to operate the business.

Using an accounting software package is the quickest and easiest way to create your financial statements. The software takes the data you enter and generates the statements.

Of course, projecting what your income and expenses will be in the future requires common sense as well as thorough research. And your financial plan for the future will be only as good as your predictions. So be realistic when estimating income and expenses.