Financial planning with the support of a qualified financial advisor will help small businesses set both short-term and long-term goals. By having a clearer understanding of cash flow, budgets, and expenses, small businesses can determine what are realistic goals to set for the future and where they may have to consider cutting down on spending.
What is business financial planning?
Business financial planning is the process of allocating resources, setting goals and predicting future financial outcomes for a business. The goal of financial planning is to ensure that a business has enough funds to meet its financial obligations and continue to grow.
Why is financial planning important?
Financial planning is important for businesses of all sizes. By creating a financial plan, businesses can make informed decisions about how to allocate their resources. This includes understanding where money is being spent, setting goals and budgeting for future growth.
Improving cash flow
One of the main goals of financial planning is to improve cash flow. This involves understanding where money is coming in and going out, as well as forecasting future income and expenditure. By having a better handle on their finances, businesses can make sure they always have enough money to meet their obligations. This may include setting up a contingency fund to cover unexpected costs or putting systems in place to better manage invoicing and payments.
Preparation for the unexpected
As they say ‘expect the unexpected’, in business you can simply never be 100% certain of the future. Never has it been more relevant than now, to expect the unexpected. In times of economic uncertainty, businesses should be prepared financially for potential losses or changes in income that may be out of their control. With the help of a financial advisor, small businesses can put plans in place for times where cash flow may change.
This might include taking out business insurance or setting up an emergency fund.
Saving for the future
One important aspect of financial planning is saving for the future. This may include putting money away into a pension fund or making provision for long-term business goals. For example, if you’re a small business owner looking to retire in the next 10-15 years, you’ll need to start thinking about how you’re going to fund your retirement. A financial advisor can help you understand how much you should be putting away now and where the best place to invest your money is. With plans in place, a business owner can begin making savings, where necessary, to ensure these financial goals are achieved.
When done correctly, financial planning gives small businesses a roadmap to follow which can help them make informed decisions about their finances. If you’re thinking about starting a small business or you’re already running one, we recommend seeking professional advice from a qualified financial advisor to ensure your business is on the right track.
