How to Make a Financial Plan for Business:- Finance is one of the weaknesses of entrepreneurs. Although not have to be experts, have knowledge in accounting and finance is important when creating the financial plan of a company. In this way, they will be able to analyze the economic viability of their project and see what they need for their continuity or for their implementation.
The financial plan of a company is part of the business plan of a company with other areas such as marketing, human resources, and operations, legal. Once all the previous areas have been defined, it is time to check if it is feasible and to see our financing needs that involve the office costs, the purchase of material, and the salary of the employees.
Why should I pay attention to the Financial Plan?
The first year of any company is the most difficult; getting a niche in the market and without having many losses is the goal of all entrepreneurs. A good financial plan can avoid making mistakes that lead to more capital or even closing the business.
Among the main benefits of creating a financial plan we include:
- Knowing if the business idea or our project is profitable.
- Financial health checkand see what our current and future needs
- Identify theinitial investment needed to raise revenue.
- Knowinghow many resources we need to offer our products and services for an estimated time.
- Know what ourproduction capacity to calculate the revenue that we can obtain.
- Identifyfunding sources to which it is due and can appeal
- Define strategies and scenarios(short, medium and long term) to improve the financial situation
- Publicize all the financial information of the company to the other actors: partners, investors, suppliers …
As entrepreneurs, we can take advantage of all these advantages as long as we continue with our financial plan even if the business is already set up and working. It is necessary to periodically review it and update it according to the needs that arise; this way will anticipate future developments and be ready for constant changes in the field of accounting and finance them from happening in the market.
The 5 key Aspects of a Financial Plan
Depending on the nature of the company, the financial plan may have more or less variables. In any case, we must never ignore the following points:
- Investment plan. In this first point we must define what the investments will be necessary for the start-up.Here also the needs of operational treasury, payment to suppliers, stock of materials …
- Cash Budget.It is the sum of the different budgets (sales, administration, development, capital …), sales forecast, personnel plan and cost of sales. Also, you should check the status of cash flow, whereby you register transactions that affect the amount of cash available.
- It allows analyzing and knowing the financial situation of the company in a finished moment. Essential for identifying the value of a company, how much it owes and how much it has.
- Provisional account profit and loss. You should make a forecast of the future results in which you include the volume of sales and other income and the costs necessary to offer your products and services.From here, you have to make an assessment of the provisional situation in which forecasts investment, financing and income are integrated. So we will calculate the break-even point or threshold of profitability of the company, and we will see if with the expected sales we can reach.
- Treasury plan.It reflects the outflows and inflows of money based on the operations that a company will carry out during a certain time. We can know at all times the liquidity situation of the project and if it is necessary to resort to external financing.
From these five points you can already elaborate the financial plan of your company and see how much you need to get it ahead and in how much time you will be able to achieve it. For this reason it is vital to pay attention to any detail to avoid last minute surprises. If you have a company, you should not neglect your training to find the best solutions for your business.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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