How to Write a Financial Plan for Your Small to Midsize Business
Nov 23, 2022
Financial planning may vary depending on how you use it. For instance, if you want to manage personal finances, you would consider your savings and budget to create financial planning. Meanwhile, you can write a financial plan for a business with profit and loss statements, sales forecasts, and cash flow management.
A financial plan is an outline or summary of business growth and finances for small and medium businesses. It is a document with insights into business health and future expectation. Moreover, investors, stakeholders, and clients can see the current monetary situation of a business.
What Does Financial Plan Include?
To write a financial plan, you must have financial goals and objectives. When you know where you expect your company to head, the planning process will become easy and accurate. But, there are a lot of components that make up financial planning. In writing the sections, you have to conduct research and gather statistics. Moreover, you have to analyze market trends, prepare a break-even analysis, and predict your company's future position. Your financial plan must include these elements:
· Profit and loss statement
· Cash flow statement
· Balance sheet
· Sales forecast
· Personnel plan
· Business ratio and break-even analysis
Steps to Write a Financial Plan for Your Business
Here are steps to create effective financial planning:
1. Create Strategic Plan
Your company's strategic plan is the right place to start writing a financial plan. The strategic plan will include time-bound goals that will determine what you want to achieve in a certain time. Ask yourself these questions:
· Should I hire more employees?
· Should Iadd new resources?
· Should I expand my business?
· Should I get an investor?
Answering these types of questions will help you determine your expectations and goals.
2. Create Financial Projections
By recording anticipated income, you can create financial projections. The anticipated income includes a prediction of expenses, sales forecast, and anticipated overhead. You can make weekly or monthly projections to evaluate the progress. Accounting software and The Career Mompreneur business financial coaching software called MoneyPro can help you record financial projections.
An accountant can develop financial projections according to your business. Also, you should make a projected income statement and balance sheet and include financial projections. With these tools, you can predict the impacts of projects.
3. Arrange Financing
You can determine your financial needs by using financial projections. Contact your investors and financial partners and discuss what you expect from the business. Discuss all the options you have for business growth. You can convince investors to invest in your business with well-prepared projections and solid financial management.
4. Write Contingency Plan
Financial contingency plans help to identify worst-case scenarios and plan responses. You have to collect and analyze data and brainstorm strategies with managers. If you have a contingency plan, your employees will know how to handle the situation when things go south.
5. Evaluate the Results
Progress evaluation and monitoring will help you understand where you stand at a point in the financial year. With proper evaluation, you can generate insights to measure the improvement. Moreover, you can adjust your target if your progress is not according to your financial plan.
Conclusion
A financial plan outlines a business that acts as a company's growth strategy. It includes a cash flow statement, expense budget, and sales forecast. To write a financial plan, follow the above steps and determine the factors influencing your business revenue. Besides, if you need help with writing a financial plan for your business, we can help. Sign up for our platinum business financial coaching program today.
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