When talking about financial plans, many people think about their personal finances and how they can better manage their money. With rising costs of living, there has been an increase in the demand for additional funds to help with financial emergencies in the form of an online payday loan or other such personal finance, despite these customers having a financial plan in place to help manage their funds. When it comes to business financial plans, being strategic and looking forward can help to better solidify the future of the business. Here, we’re taking a look at some of the top tips for you to solidify and execute a financial plan for your business.
When it comes to financial planning, many individuals will typically head straight for the numbers. However, there are a number of strategic steps you should consider before you get started. Understand exactly what you want to achieve and what your business goal are, and how you’re going to achieve those in order to more closely align your financial plan. Then get a clear understanding of what you’re going to need in order to achieve these goals – for example, in order to achieve a turnover of x will you need to hire more staff or build more technology or improve your processes? If so, how are you going to do this and when? Strategic planning can help to better structure your plan, helping to make your milestones more achievable and realistic.
Whether you are just starting your business or you have an existing business that you are looking to build a new financial plan for, you should consider having and using the following to get started:
- Profit & loss statements
- Cash flow statements
- Balance sheet
- Sales forecast
- Personnel Plan
- Business rations and break-even analysis
All of the above should be based on the existing running of the business but also the strategic planning in stage 1. Then, use this information to build financial projections based on your goals, the costs that it will take to help you get to these goals, any other expenses, your revenue, COGS and gross margin. Take into consideration an optimistic projection, a realistic projection and a less than ideal situation so you can properly benchmark and measure against these in the later stages.
Now we all know that business doesn’t always go right. Take the COVID-19 pandemic as an example, albeit an extreme one, as many businesses didn’t survive as they didn’t plan for contingencies such as no cash flow coming in. Having a clear contingency plan even for an extreme example on how the business is going to continue to break even or how long the business can last for without cash flow – and where you may be able to go to seek help in this scenario – can help to keep you fully prepared.
Ongoing evaluation is one of the most important components to your financial plan, as this will need to evolve based on whether or not you’re hitting your business goals outlined within your strategic plan and to adapt based on changing environments. Not every financial plan is going to have the same requirements from day 1 of the business through to day 100 as there are many things that could change within that time. Regularly reviewing the financial plan can help to determine if you’re still on target and allow time and space to closely analyse. This will also allow you to modify the plan where necessary based on any external factors and existing performance.
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