Creating a long-term financial plan is crucial for all businesses.
Making financial projections and setting goals are key parts of any financial plan.
Find out how to create a detailed financial strategy for your business below!
Having a detailed financial plan is crucial to the success of any business, no matter what size or sector they’re in.
All too often, entrepreneurs make the mistake of simply looking at their financial statements and quarterly goals as a substitute for a detailed and thorough financial strategy. This is a critical mistake. Without a long-term financial plan, your business will be hampered by shortsighted goals, the lack of a long-term vision, and too little in the way of cash reserves and other contingency plans.
In short, you won’t be able to grow successfully over the long-term.
So, how exactly do you go about creating a detailed financial plan for your business? Find out here!
Review Your Strategic Goals
First, review your company’s strategic goals for the long-term.
Ask yourself a series of questions, including:
- Do I need to hire more employees?
- Do I need to invest in new equipment?
- Do I need to expand?
- Do I need to cut costs?
- What are my cash flow projections?
- Will I need new financing?
Once you have the answers to these questions, you can better proceed in crafting a detailed financial plan!
Examine Your Balance Sheets
Next, take a close look at your company’s balance sheets from the past several years. Examine them carefully and see how your business has been performing financial from a high-level in recent years. This historic information can give you a better view of both your current status and projections for the future.
Take a Close Look at Your P&L Statements
Afterwards, take a detailed look at your P&L statements from the past few years. As with your balance sheets from recent years, this data will give you a detailed look at where your company is trending financially and can help inform your future decisions.
Figure Out Your Cash Flow
After carefully reviewing your balance sheets and P&L statements from recent years, examine your cash flow closely. As with these other sets of data, your cash flow reports can help better inform you of your company’s financial health and plan for the future effectively.
Develop Financial Projections
The next step is to prepare monthly financial projections for the next year, including balance sheet and P&L projections. Take into account factors such as current and historic cash flow, supply and labor costs, overhead costs, and likely economic scenarios. Armed with these projections, you can now lay out your company’s long-term goals.
Set Out Long-Term Goals
After developing detailed financial projections, set for your long-term goals for at least the next year. Is your main goal to increase revenue by a certain percent? Expand into a new market? Create or expand a new department in your business? Now’s the time to lay it out in detail!
Plan for Contingencies
While laying out your financial projections and long-term goals are key, don’t forget to plan for the unexpected.
What would your business do if its financial health suddenly collapsed? What if it got hit hard by a natural disaster or pandemic on the scale of COVID-19? Plan for the unexpected by setting aside adequate cash reserves and keeping your credit lines open and healthy if you need to tap them quickly.
Monitor Your Financial Situation Carefully
Finally, be sure to monitor your current situation against your financial projections. Doing so can help you spot and fix problems quickly and make any needed adjustments without too much trouble.
Create a Financial Plan for Your Company Today!
Crafting a thorough financial strategy for your company takes time and effort, but the payoff is definitely worth it. Create a detailed financial plan for your business today to enjoy the long-term rewards!