A financial plan is the most significant thing a small business requires. It is a road map, a principle, a reminder of what your goals are–what you are planning to achieve in the long-term and short-term. It lays out what your potential costs are, and it seeks out to address avenues for how to manage these costs. It is so significant that bankers, investors, and creditors would not even set up a meeting with you if you do not have a financial plan for your small business.
Your financial plan helps you manage your cash flow. Maximum businesses have income that differs from season to season. According to Joseph Stone Capital, a good financial plan takes these things into account so that there are no shortages in the long term. Having a cash cushion helps make sure that your business can take a poor season and still come out on top. Planning your taxes, prudishly spending your cash flow, and budgeting cautiously can result from careful financial planning.
Financial planning can also help you prioritize expenditures. In small businesses, conserving financial resources is important. A well thought out financial plan can help you prioritize what areas need to be funded immediately, and where your expenses can wait until you have a better season. Even the world’s largest corporations go through a process of prioritization of expenditures resulting from careful cost/benefit analysis.
Financial planning is done to attain the following objectives:
- The main objective of financial planning is that adequate fund must be available in the company for various purposes such as for purchase of long term assets, to meet daily expenses, etc. It guarantees timely availability of finance. Along with availability financial planning also tries to specify the sources of finance.
- Excess funding is bad as inadequate or shortage of funds. If there is surplus money, financial planning should invest it in the best possible manner as keeping financial resources idle is a great loss for an organization. Financial Planning includes both short term as well as the long term planning. Long term planning pays attention on capital expenditure plan whereas short term financial plans are called budgets. Budgets comprise detailed plan of action for a period of one year or less.
Joseph Stone Capital says that financial planning is broader in scope as it does not end by raising estimated finance. It comprises long term investment decision. In financial planning finance manager analyses different investments plans and selects the most appropriate. Finance managers make short term financial plan known as budgets.
Financial planning is broader in reach as it does not end by raising estimated finance. It comprises long term investment decision. In financial planning finance manager analyses several investments plans and chooses the most appropriate. Finance managers make short term financial plan known as budgets.