FINANCIAL PLANNING

A good financial plan keeps you focused and on track as the company grows, when new challenges arise, and when unexpected crises hit. It helps you communicate clearly with staff and investors, and build a modern, transparent business.

Your company’s financial plan is essentially just the financial section of your overall business plan. It applies real financial data and projections to put the rest of your business plan in context.

And crucially, it is forward-looking. While you use existing accounting figures (if you have them already) and experience to create your plan, it’s not simply a copy/paste of your accounting data. Instead, you look at your business goals and define the level of investment you’re willing to make to achieve each of these.

This probably won’t come as a surprise to most readers, but financial planning is essential to building a successful business. Your business plan dictates how you plan to do business over the next month, quarter, year, or longer - depending on how far out you plan. It includes an assessment of the business environment, your goals, resources needed to reach these goals, team and resource budgets, and highlights any risks you might face. While you can’t guarantee that everything will play out exactly as planned, this exercise prepares you for what’s to come.

Benefits of financial planning for business:

• Clear company goals
• Sensible cash flow management
• Smart budget allocation
• Necessary cost reductions
• Risk mitigation
• Crisis management
• Smooth fundraising
• Have a growth roadmap
• Transparency with staff and investors

The financials form a critical part of your overall business plan, without which you’ll have a hard time assessing your performance as a company. Of course, this exercise requires projection - you can’t just rely on the numbers you have today. But that’s not the same thing as guesswork. Follow best practices and consider all potential outcomes, and you’ll walk away with a clear roadmap to get you to business success in the foreseeable future.

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