A financial plan is a forecast of future performance and execution for a business. Sometimes, people get confused between a plan and financial statements.
The simple difference is, a financial plan is made while focusing on future assumptions, forecasting future performance, and desirable objectives, and more.
Having a pre-planned financial path can help your business to plan cash flow dips, recognize financing needs, and point to the best timing for the upcoming projects.
Whether it’s a small, medium, or large scale business, having a business plan is always helpful and plays like an early warning to unforeseen market changes.
If you are a budding venture, and working on your business areas, then a well-analyzed financial plan can help you in managing your capital better by preparing for the situations that could rest in cash shortages, particularly seasonal fluctuation in revenues. It also gives you a tool and a way to monitoring and controlling your finances. To gauge your progress and quickly head off trouble, here are few ultimate steps to write a financial plan for a small business.
Review all the possibilities and outcomes!
First of all, to commence a financial plan you need to look into your business’s strategic plan. Think about your goals, short-term objectives, and more. Plan your finances for 1 year, identity, evaluate, examine, and analyze all the needed outcomes will have in the coming future. List of your new projects, what amount you need to invest, in case you want to expand then how you would manage your capital, and so on. Ask yourself, will I need financing? If yes, then how much?
Try to figure out the budget, its outcomes, risks, and benefits to having a well-proven path to execute in the future.
Now, after reviewing you need to start working on it! Create monthly financial structure and projections by recording your anticipated income based on different aspects such as sales forecasts, expenses for labor, supplies, overhead, etc.
Now, plug in the costs for the projects you recognized in the previous step.
Use simple spreadsheet software or tools available in your accounting software. Don’t take into consideration the sales results and revenue.
Next prepare a projected income chart, or statement, and a balance sheet. It can be useful to include several scenarios- to help you anticipate the impacts of each one.
You can also take advice from your accountant when developing financial projections. Be sure to go over all aspects and explain all the needed areas to your accountant.
Arrange the financial plan
All the recognized and evaluated projections are now arranged for your financing needs. Well-prepared projections, about the needs, projects, expansion plans, and other expenses will help reassure you, bankers, that the financial plan and its management are well planned and studied. You can also approach your financial partners and team ahead of time to discuss all your options.
Now it’s time to plan for predicaments!
Now one of the most important steps to write a financial plan for a small business is to think about all the risks, and predicaments. So, question yourself: what would you do if your finances suddenly deteriorated, or what if they won’t be helpful in the future? It’s a good idea to keep in mind all the contingencies and to keep some capital for unforeseen events. This means maintaining cash or keeping aside some capital on your line of credit.
Monitor and control
With the time to monitor your plans, make them flexible to change in case of sudden emergencies. Controlling, monitoring, comparing, and, improvisation helps you spot financial problems before they get out of your lead.
Get financial support!
After going through all the steps and you still wonder if you are lacking some sort of expertise, consider hiring experts to support you and make your financial plan well-proven and highly beneficial.