Financial planning is a process, not a product. It is the long-term method of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise at every stage along the way.
The lack of planning and management of cash resources is the reason often given for the failure of many small businesses. By undertaking good financial forecasting, businesses can help reduce this risk.
Much like a map helps you plan a long road journey, a financial forecast (often called a business plan, cash flow or forecast) helps you achieve your goals and get your business to where you want it to be. A good financial forecast provides a guide for the overall operation of the business. Essentially, it’s impossible for an organization to function and be financially stable without financial planning.
Many people do a business plan/forecast when they start a business as this is often when some initial finance is needed and the banks require it. However, it then it gets put to one side and forgotten about. Your financial plan should be regularly updated to keep up to date with the way your business changes and evolves.
It’s not easy to predict the financial future of your business, especially if you are a start-up business and do not have a trading history. This is where Robinson & Co can help, we are experienced in preparing financial forecasts that are both achievable yet still challenging.
Advantages of an effective financial forecast:
- Demonstrates the financial viability of a new business venture (must be regularly updated).
- Enabling you to construct a model of how your business might perform financially in if certain strategies, events and plans are carried out.
- Allows you to measure the actual financial operation of the business against the forecast and make adjustments where necessary
- Helps you to manage and improve your cash flow by easily identifying risks and cash shortfalls
- Provides an estimate of future cash needs and whether additional private equity or borrowing is necessary
- Assists you with funding as lenders and investors require financial forecasts to show your ability to repay the loan
Following the examination of financial reports, you and your business can become more proactive. Through financial planning, different conditions, problems, losses and gains are predicted. This kind of planning allows you to think ahead of your current situation and become much more prepared. Different business opportunities can also be identified via financial planning i.e.; recruitment, opening a new site, product diversification etc…