Business financial management starts with a plan. If “business” can be summarized as the prioritizing of limited resources, how you manage those resources can make or break your business. What, then, are the best practices when it comes to managing your business’ finances? It starts with a look at your company’s current reality and creating or reviewing your business and financial plan to be sure it is complete. In a sense, this process is aimed at creating a culture of financial management that is essential to business success. Beck and Company Certified Public Accountants and Business Advisors can help you with these financial plans. Feel free to contact us and request a free consultation.
Current Reality: How do you manage your business today?
A financial plan can only be truly accurate and applicable if you first determine how your business is currently managed. By knowing what gaps exist or what elements need more attention, you know which parts of a financial plan need the most attention. Consider the following questions and how many can be answered affirmatively for your business.
– Do you have a formal planning process?
– Do you know what the drivers are behind historical trending and forward looking plans?
– Do you know if resources are aligned with your revenue and profitability goals?
– Do you know which employees are more effective than others?
– Do you know which customers or sources of revenue are more profitable than others?
If you cannot answer yes to some of these questions, you’ll need to put your focus on those aspects initially when you make or add to your plan. Then, all you need to do is fine-tune the other aspects of your business that are already in place in your plan. Stay tuned next week for a deeper look at fine-tuning key aspects of your business’ finances.
Business Plan: An overview of what to include
Now that you know more about your current reality, you are ready to take a look at your existing plan or create a new one. If you have an existing one in place, be sure all essential components are included or add where necessary. A business plan should include the following: an executive summary of your company’s overall objective, mission statement, and keys to success. This should be followed by a company summary of ownership, history, and locations. Next, you’ll need a description of products and/or services that you offer. A market analysis summary of your target market, needs, trends, and growth in addition to industry and competitor analysis is another important part of this plan. You will also need a summary of strategy and implementation for pricing, promotion, distribution, and sales. Two other important elements of your business plan are a web plan summary including website marketing strategies and a management summary of the organizational structure and management teams. Finally, your business plan will need to include a financial plan. Let’s take a closer look at what this should include.
Financial Plan:
A financial plan is one of the most important elements of your overall business plan. All of the other elements of your overall plan that we just discussed should correlate to the finances. The plan creation or revision also encourages your business to be financially transparent and open. To learn more about the importance of financial transparency, visit here.
Within a financial plan, you’ll need to address important assumptions to ensure clarity and agreement. These should include timing (when to do your plan- calendar or fiscal year), prioritization of new initiatives, run rate versus new business mix, competition and cyclical variations and their impact, employee utilization rate, and fixed plus variable cost structure.
After the assumptions are laid out, then you’ll need to include other elements in your plan such as key financial indicators, break-even analysis, projections of profit and loss, projected cash flow, business ratios, and a long-term plan. These financial aspects combined with the business plan components comprise your overall plan.
If you are in need of support with your business and financial plan, please contact Beck and Company CPAs for a complimentary consultation.