The best financial advice anyone can give is to have a financial plan. The goal of any financial plan is to help your business attain long-term success and financial independence. But if you opt not to plan long-term financially, you must at least have an exit strategy or even build a solid retirement plan.
These plans are not to be trivialized and they can put your business into jeopardy. Thus, it is important for any business owner to be knowledgeable of the terms and how the plan works.
The question then is, what is a financial plan?
Examining A Financial Plan
A financial plan is a document that entails the total picture of your monetary goals and the strategies for implementing them. It is a plan of action containing a person’s current and long-term financial goals.
A financial plan allows you to view the status of your financial health. It tells if your business is ready to engage in third-party funding. And as small business owners, it is understood that creating a viable financial plan for your business can be quite tasking. And if that’s the case, you can seek help from experts.
It is better to get advisors that are near. Let’s say you’re in Kentucky or anywhere near the area. It is best to get help from the best financial advisors in Lexington KY. The same goes if you are in other states like California or Florida.
Financial advisors as such will help you in funding, and investment management, including investment property management. Getting the best financial advice is key to forecasting the future of your financial activities including handling assets, revenue, and capital.
Having a financial plan for your small business is important for the following reasons:
- Analyzing your financial goals
- Manage financial resources to scale up.
- Appreciate long-term thinking
- Prioritize growth
But how can you create a financial plan to reap these benefits?
Step One — Develop Key Financial Statements to Include in Your Financial Plan
The following are financial statements to consider when taking steps to create a financial plan.
1. Create a balance sheet
A balance sheet is a summation of a company’s assets, liabilities, and shareholders’ equity. It is an important document that shows your company’s financial strength or otherwise.
A balance sheet will help you do the following:
- Outline your assets and their current market value
- Take notice of your business debts and liabilities
When you deduct your assets from liabilities, the figure you’re left with is called equity. Equity is the true net worth of your business.
2. Create a cash flow statement
A cash flow statement is a financial ledger that shows the movement of cash in and around a business over a given period of time. Cash flow determines the viability of a business’s financial independence to settle debts and fund expenses.
Expenses can include paying your staff promptly and funding daily business operations. A healthy cash flow statement is good for your business. It acts as a safety net or plan B for emergencies.
3. Create an income statement
An income statement is a financial report showing the income and expenses accrued by a business over a given time. It is also referred to as a profit and loss statement prepared quarterly or annually.
Step Two — Include Recurring Themes When Creating a Financial Plan
These themes are business-related activities you’d have to face more often than not. These plans will always require constant reviews and we have listed a few of those plans below.
1. Create plans for funding
Securing access to good funding can help you grow your small business. You should consider exploring loan and grant options available to small business owners in KY.
From time to time, you’ll need to review your funding options and the measures that can generate capital to scale your business.
2. Create business goals
A business goal can be short-term and long-term. What business goals will give direction to your financial plans? You can engage the services of a financial planner in Lexington to help with the facts and figures.
Let us take, for instance, that your business goal is to increase substantially in profit margins, and attain a level of financial independence in six years. A financial advisor working in consonance with you can show you where you need to cut costs to make the goal viable.
3. Review your expenses ledger
Take stock of your expenses from time to time. Expenses are costs incurred from your daily running of the business venture. It is important to monitor the costs of operating your business so as not to overspend.
Examples of expenses may include:
- Inventory costs
- Interest payable
- Insurance payable
- Repair and maintenance
Step Three — Include Plans for Taxes and Retirement in Your Financial Plan
1. Create a retirement plan
Besides having solid investment plans for vine wealth management, all businesses should have a retirement plan. It should be a priority. Factors like retirement savings should be considered by a small business owner.
With a retirement savings plan, you can plan for a smooth transition. Your financial plans must consider retirement and life expectancy.
2. Create a plan for tax
On instituting your financial plan, create room for paying taxes. A large fine from the government authorities can impact negatively on your small business. It’s a smart decision to avoid such situations.
A tax is a mandatory contribution imposed upon businesses by government authorities. It is a primary way through which the government generates public revenue. You should consult with a financial advisor on the types of business expenses that are taxable.
Planning your tax is an effective way to organize your finances, and find out where money can be saved. This is invaluable for your small business as more finances can be set aside for the expansion of your business.
We have gone through a comprehensive list of things you need to take into consideration when creating a financial plan for your small business. You can follow our tips to create a financial plan. Planning your next steps in business is key to improving viability and ensuring sustainability.