SMB Finances: How to Create a Reliable Financial Plan

SMB Finances: How to Create a Reliable Financial Plan

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SMB Finances: How to Create a Reliable Financial Plan

A financial plan for your small to medium business is more than just a good concept. Instead, it is a smart move to make for your own sake to determine how well you are managing your business’s finances. Plus, it is necessary to give to most investors as well as to financial institutions that are considering loaning your business money. Here are a few tips to make sure that the plan you create is truly good.

Make Sure the Plan is Comprehensive

The business’s financial plan must be comprehensive. You must have numerous statistics and numbers in place before you can compile your plan because this paper is designed to forecast how well your business is going to perform. By looking thoroughly at all financial aspects of your business, you will be able to set workable goals for the upcoming year.

Create a Sales Forecast

Begin with a sales forecast for at least the next three years. This section should also include the cost of sales so that you can compare industry ratios for gross margin. This forecast should take changes in the cost of the goods that you offer into account.

Consider if You Need a Little Extra

Your financial plan will need to take into account cash flow, income projections and your assets and liabilities as well. Not all assets and liabilities will make it onto your profit and loss statement and thus must be calculated separately. You may be able to qualify for a business loan if your assets and liabilities are in the correct ratio. A business loan attorney is able to help see you through this process, no matter what your situation.  Make sure to take the time to find a reliable individual to work with.

Include a Budget for Expenses

Just as a budget is vital for any homeowner to plan accurately for upcoming expenses, so it is equally if not more important for business owners to have. Without an accurate idea of expenses, your sales forecast will be worthless. Plus, a budget will help show you where you may need to lower costs, particularly those that are variable, such as advertising budgets.

Be Sure to Use It

This plan is not just helpful for businesses that are trying to attract investors or apply for credit. While financial plans are good for showing others how your company hopes to operate and what its overall financial goal is, this plan will really only work as long as owners and managers continue to go back to it regularly. Consider scheduling executive meetings monthly to see how closely the plan is being followed and how it is working.

Your small to medium business’s financial plan will look significantly different if you are just starting up versus if you are well-established. If your business is already established, you will be able to include more thorough cash-flow charts and will not have to rely so heavily on estimates. However, the overall reliability of your financial plan will be directly related to how thorough it is.

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