6 EASY WAYS TO DEVELOP A FINANCIAL PLAN FOR YOUR SMALL BUSINESS

 

Financial Planning is different from financial statements.


Alternately looking at what is already happening, you plan for upcoming months, forecasting income and outlays. 


Your planning will be a warning system helping you to track cash flow, identify monetary needs, and pinpoint the best time for the project. 


The financial plan is a part of an overall business planning process, during which goals and strategies are agreed upon to grow the business in the upcoming years. 


It also gives you tools to monitor your finances, allowing you to measure progress and quickly manage the head-off problem. 

Here are six easy steps to create your financial plan.

  • EXAMINE YOUR STRATEGIC PLAN


Financial outlining should start with your company's strategic plan. You should ask yourself what you want to achieve at the start and ask yourself a set of questions- 


  • Do I need to hire more staff?

  • Do I need more equipment?

  • Will I need more finance? Yes, how much?

    Then, determine the financial repercussions in the next 12 months, including the spending on some big projects. 

     

    • DEVELOP FINANCIAL PROJECTIONS


    Create a monthly financial forecast by recording your predictable income based on sales and expenses for labor, supplies, etc. 


    For this job, you can easily use spreadsheet software and tools available in accounting software. Don't expect sales will convert to cash right away. Enter them as cash only when you anticipate to get paid based on previous knowledge. 


    Also, prepare a profit and loss statement and a balance sheet forecast. It can be useful to manage various scenarios - most likely positive and negative - for your projections to help you predict the impact of each.


    It may be a good idea to take advice from your accountant when developing a financial plan. Be sure to go over the financial plan together, as it is you who will be seeking financing and who will be explaining to investors and bankers. 

     

    • ARRANGE THE FINANCE


    Use your financial forecast to determine the finance needed. Approach your financial partners to discuss your options ahead of time. A well-prepared financial statement can assure bankers and investors that your financial management is well-founded. 


  • PLAN FOR EMERGENCIES


What will you do if your finances suddenly worsened? 

It's a better option to have some source of money before time. Possibilities include ensuring a cash reserve or keeping a lot of room on your line of credit. 




  • MONITORING


At the year-end, compare the actual result with your financial forecasts to see if you're on target. Monitoring helps you to detect financial problems before they get out of hand. 


  • ASK FOR HELP


If you lack expertise, consider hiring a specialist to help to put together your financial plan. 


One point should be understood when it comes to financial planning for the small business owner: the do-it-yourself drive that helped start your business will not serve you well.


When it comes to managing your financial issues created by business, that is where professional expertise often becomes necessary. 


Their help can make all the difference in developing your chances of business success. Expertise can give you peace of mind that your family's finance is secure, and you can focus on growing business. 



EXTRA TIP


  • MANAGING RETIREMENT


After selling or transferring a small business, the owner may have significant financial assets but not the experience to manage the investments. At this point, an advisor is likely to assume the more conventional role of maintaining the investment. 


Many companies offer retirement plans for their employees to participate in it. Business owners can off receive a break from corporate taxes by having a qualified retirement plan.


After retirement plans are established at a small business, employees may also become direct clients for maintaining assets outside their retirement. 

 

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