Building a business is challenging. You have to create a business plan, acquire financing and hire staff. In the midst of all this work, you may think that you can forego a financial plan, at least in the beginning, but small business financial planning is vital, especially in the beginning. Not only does your financial plan provide a roadmap, but it also has several other benefits.
Here are some of the advantages of working with a financial planner:
Guides Cash Flow Management
As you create your financial plan, outline your expected cash flow. Your cash flow is every dollar that enters or leaves your company through revenues and expenses. You need iron control over your expenditures to expand your profit potential.
In addition, you should have clear revenue goals and expectations. This is especially important for seasonal businesses. Seasoned financial experts can accurately track where your money is and where it is going.
Improves Transparency
Financial plans increase your company’s transparency. As you share your plan with your stakeholders, they learn where your company started and how far it has come. They also understand where you hope to go next.
When you encounter other challenges, such as economic downturns or business emergencies, your plan reveals these issues and guides you and your employees on your next step.
Enables Accurate Budgeting
If you don’t know how much money you have coming in and going out, you cannot accurately budget your expenses. You need a clear picture of your income and investments before you can address your expenses. Then, your plan should break your overall company expenditures into departmental and team budgets, where each team is responsible for their financial allocations.
These teams should also be responsible for tracking where they spend money and why each expenditure is important to the company and its overall goals. Because each team has specific monetary constraints, they know how much they can spend on each of their projects, such as marketing, service or production.
Clarifies Company Goals
Your financial plan should include your short- and long-term goals. For example, what do you hope to achieve this month or quarter, and what are your 5-year goals? The planning process helps you determine whether your target market needs your products or services. It distinguishes how you will fit in the market or industry and what makes you unique and able to compete with more established companies.
Your plan will break down the financial expenditures you anticipate needing to achieve each of these goals. Without business goals, your company is left floundering when it comes to its purpose and budgeting.
Company Conclusion
If you are starting or have an established business, consider working with a financial advisor to create a financial plan that will help you meet your company goals.
Continue reading more articles here on Lean Startup Life to help maximize your small business budget or entrepreneurial earnings!
