A financial plan affects day-to-day fiscal decision-making, defining the future of a business and shaping a company’s journey. A detailed financial plan brings a company’s objectives into focus and helps in developing viable strategies.
What is financial planning for a business?
Financial planning is the task of determining how your business will finance its strategic goals and objectives. The plan is a document that describes the activities, resources, equipment and materials needed to achieve these objectives. It sets time frames for your goals and strategies for achieving them. It helps you be in control of your company’s income, expenses and investments and is essential to building a successful business. A good plan includes an assessment of the business environment, company goals, resources needed to reach these goals, team and resource budgets and risks that might be faced. It ensures a company is equipped in advance to deal with changing circumstances at both personal and business levels.
Why create a financial plan for your business?
- To manage your risk and respond quickly to financial issues: A business must plan for a lot of risks (death or disability of central figures, illness, property ownership loss, lawsuits, interruption of business, lower than expected revenue, high overheads, etc.). By regularly reviewing risks and planning a response, a company is prepared to tackle issues quickly, before they become hard to manage.
- To provide a road map for growth: It’s easy to focus on daily issues and neglect long-term planning. A financial plan helps a company focus on the future by providing clear goals for company growth and performance. It helps you analyze your current situation and project where you want the business to be in the future.
- To help you develop a good tax strategy: Financial planning is helpful when it comes time to submit your tax return or if you sell the company.
- To identify sales trends: A financial plan that includes quantifiable targets and sales records helps determine which individual products and which initiatives are most lucrative, making it possible to adjust your marketing strategy appropriately.
- To prioritize expenditures: A financial plan sets clear expectations for cash flow and helps a business owner to consider spending priorities.
- To identify necessary cost reductions: A financial plan helps you refer to past spending and identify unnecessary or over-inflated costs so you can adjust accordingly.
- To create transparency with staff and investors by sharing key figures (revenue, costs, profitability, etc.).
- To show progress: A financial plan is helpful in showing increased revenues, cash flow growth and overall profit in quantifiable data, encouraging business owners.
Every financial decision your business makes has a significant impact on the overall strength of your company. Financial planning helps you be better equipped to make decisions. Corporate financial planning demands a strong understanding of commerce and how companies operate fiscally. It also calls for attention and care for the immediate financial needs and specificities of your enterprise.
Need help with financial planning? Looking for business advice? Contact Cook and Company Chartered Professional Accountants. We are based out of Calgary, Alberta, serving clients across Canada and the United States. We provide high-quality tax, assurance, financial and succession planning services for a wide variety of privately-owned and managed companies. Contact us for a complimentary consultation.