How to make a financial plan for a business is an important thing that every business owner needs to learn. With proper financial planning, you can control expenses and predict cash flow to develop your business sustainably.
Here are tips for making a financial plan for both small and large businesses so you can make wiser decisions.
How to Make a Financial Plan for a Business Guide
- Determine Your Business Goals
You will be able to start planning your finances smoothly if you start by determining your business goals. Do you have short-term business goals (usually around 1 year) or medium-term (usually around 3 to 5 years)? You may even have long-term business goals or more than 5 years so that your financial strategy is right.
- Record and Review Your Strategic Plan
Every business, whether small or large, needs good financial planning, especially if it’s still starting out. A strategic plan in finance can start by thinking about whether you need to add employees and equipment. Think carefully about whether you want your small business to be mediocre or want to expand it immediately.
In addition to thinking about new employees and equipment, ask yourself if other resources are needed to grow the business. After that, you can plan your cash flow according to the needs for the business expansion. You must know the details of the amount of the cost and know the financial impact in the next year.
- Create Monthly Financial Projections
How to write a financial plan is by recording anticipated revenues based on estimated sales and anticipated expenses. Monthly financial projections like this are more likely for business owners with stable finances. For business owners with tight financials, projections can be created weekly rather than monthly to keep track of cash flow.
Making your own financial projections can be quite difficult if this is your first time because your business is small. When you want to make it perfect so that it can grow, ask for help from an accountant or professional. Financial plans can run smoothly if you know how to make neat financial projections with important details.
- Determine Financing Needs
From the weekly or monthly financial projections that you have made, it will be easier to determine financing needs. If you’re worried that your business expenses could exceed the limit, this is where financial projection records come in handy. If you have a financial partner, there is nothing wrong with discussing this with them.
- Estimate Operating Cost and Analyze Profit and Loss
Write your business plan in detail so that you can start making the right financial plan. In a business’s financial planning, it’s important to have an estimate of operating costs or business expenses. Make sure nothing is missed, especially fixed costs which include rent, insurance, and fixed salaries, plus the variable costs
Variable costs also need to be taken into account, including commissions, raw materials and shipping costs. Operating costs aren’t only about those costs, but also costs for others such as taxes, maintenance, and marketing. Also analyze profits and losses with the formula: Profit = Total Income – Total Costs to be reported monthly/annually.
- Plan Investment
If the financial condition of your business is considered good and stable, you can start planning investments. In the investment and financing plan for business interests, you must decide whether you want to use your own capital. Another option is to apply for a loan or find investors, which may not be easy but not impossible.
- Be Prepared for Financial Risks
How to make a financial plan for a business plan isn’t always smooth because there are also various risks. However, you can prepare a strategy for financial risks that may occur with calm and a clear mind. This can be handled through some good strategies consisting of emergency funds, insurance, or income diversification.
- Monitor and Make Financial Reports
Once the financial plan is successfully created, run it well while continuing to monitor your actual and projected results. Do it throughout the year to see if you can achieve the targets of the goals set at the beginning. Monitor finances through monthly financial reports in the form of profit and loss reports, balance sheets, and cash flows.
How to make a financial plan for a business isn’t easy at first if you are inexperienced. But everything can be learned while running a business slowly. If you feel very new, consider asking an expert to help you put together your business finances.
