Creating a financial plan is critical to the long-term health of your business. Even though there are many factors at play — most of which are in a constant state of change — a business financial plan can help keep you grounded.
There’s no right or wrong way to create a financial plan for your business, but there are some steps that any organization can take to get on the right track. Here are five of the most important.
This is where it all starts. Review your company’s strategic plan so you can answer financial questions such as:
Without a thorough review of your strategic plan, you’ll struggle to make decisions that could affect many aspects of your company.
Now that you have a sound understanding of your strategic plan, review your current financial circumstances. This can include an in-depth study of details such as:
Reviewing your current financial circumstances will help you create a plan that allows you to reach all your long-term goals. It can also help you pinpoint any areas of concern, such as too many liabilities or employee costs that have grown out of control.
It’s one thing to create a business financial plan but another thing entirely to know where you want it to take you in the future. Create a plan with the idea that it will walk you toward your goals, not away from them.
For example, if you want to move into a new office building by 2025, set short-term goals that will allow you to accomplish your long-term goal.
Tip: Be realistic when creating both short and long-term goals. It’s okay to have big dreams, but unrealistic goals set you up for failure.
It’s not something you want to think about, but it’s something you need to think about. Even if you have a solid financial plan that’s designed to guide your company into the future, things can (and probably will) go wrong every now and again.
Potential issues include losing a key client, increased cost of goods, losing an important employee, or a lawsuit.
Your business financial plan should account for any type of emergency that could come to light. Protect your organization by keeping funds in a defined bank account and/or leaving room on your business line of credit.
Cashflow is the lifeblood of any business. If you don’t have money flowing into your company, it’s difficult — if not impossible — to have money flowing out of your company. And when that happens, it’s challenging to pay your employees, pay your bills, and take advantage of expansion opportunities.
Focusing on cashflow will help you answer questions such as:
A lack of cashflow is one of the quickest ways to kill your business. A focus on this while creating your financial plan is essential to your future.
By taking the five steps above, you’re in a better position to create a financial plan that your business can lean on for years to come (with a few tweaks here and there, of course). Even if you don’t get it perfect the first time around, you’ll at least have a structure in place to guide you.
If all of this has you thinking about invoice factoring, contact Revolution Capital online or via phone at 1-855-489-0310. We can help you decide if this is the right way for your business to improve its cashflow.