Low starting capital and good profit-margins make small businesses relatively easy to start. Unfortunately, the vast majority of small businesses still fail.
Two of the biggest reasons why these businesses fail is
- Lack of proper financial planning
- Cash flow problems
Having a solid financial planning process for your business is vital so that you can be able to keep your business a float and grow it over time.
Financial planning and analysis is the process of budgeting, evaluating, predicting, and planning the expected economic outcomes of a business to achieve its financial goals. The financial planning process assists in wealth management and business growth forecasting.
A financial plan is a document that paints a comprehensive picture of your business’s current finances, its financial goals and any strategies you've set to achieve those goals. Good financial planning should include details about your entity’s cash flow, savings, debt, investments, insurance, and any other elements of its financial life
The process of financial planning and analysis should be all-inclusive and tailored to your business’s financial goals, risk tolerance, and existing situations in your planning cycle.
Financial planning for your business will help you:
Define your financial goals
A financial plan empowers you to build a streamlined workflow that guarantees more customers, a high rate of return, and a profitable financial future. Financial planning knowledge helps in the development of strategic performance management systems.
Check the viability of your financial goals
A financial planning process prevents you from setting non-realistic financial and business goals.
Avoid a negative cash flow
Financial planning advice and strategic decisions help ensure proper money management.
You could be making a lot of sales in your business. However, if you do not have a financial plan to check cash inflow and outflow, you may be spending more than you earn.
Create yardsticks to measure your process
With a financial plan, you can set monetary goals to measure your business’s achievements.
Your goals serve as touchstones that let you know if you’re making progress in your online store or not.
Reduce business-induced anxiety
When you have a financial plan in place, you get a sense of relief from financial worries. If you have done financial forecasting and strategic planning, you’ll have the confidence to get through your e-commerce website’s financial troubles.
You can decide to create an effective financial plan for your business by yourself or seek the help of a certified financial planner. As I finish off, always remember the wise words of Alexander Graham “Before anything else, preparation is key to success”. Just as you plan for other facets of your life, you should prioritize planning financially for your business.
