Financial Planning: Expert Tips to Help Keep Your Business on Track

Have you let your financial planning go unexamined in recent months? Now’s the time to assess your company’s financial plan. Is it time to make some adjustments?

There’s no time like the present to take a close look at your business’s finances and make any necessary changes. Solid financial planning can help provide direction and healthy business growth.

“Financial planning is crucial to successful business,” says Ed O’Brien, CEO of eMoney Advisor, a wealth management platform that provides financial planning software to advisors, firms and enterprises.

“Like most other elements of a business,” O’Brien continues, “it’s important to have a strategy in place for your company finances.”

You can’t manage what you can’t measure, agrees Ben Gold, president of small-business loan provider QuickBridge.

Financial planning allows you to better manage your cash flow. A plan enables you to strategize and plan for current and future financial expenses so you avoid cash-flow problems.
—Ben Gold, president, QuickBridge

“Having a solid financial plan gives you a baseline to measure against and continue to build upon,” Gold says. “A financial plan dictates the day-to-day decision making of the business.”

Benefits of Business Financial Planning

“Financial planning can provide a road map of your business goals,” says O’Brien. “It helps you prioritize expenditures and efficiently assess the areas of the business where it would be a good idea to concentrate resources.

“A solid financial plan also helps you make accurate forecasts that can guide your business through periods of growth or change,” he adds.

A well-devised financial plan can help keep your company going in the right direction, agrees Christopher Dixon. (Dixon is a managing partner with Oxford Advisory Group and a financial consultant specializing in retirement strategies.)

“Such a plan provides a destination, direction and map of how to reach your business goals,” Dixon says.

Solid Financial Plans, Positive Cash Flow

A crucial byproduct of a sound business financial plan is positive cash flow.

“Financial planning allows you to better manage your cash flow,” says Gold. “A plan enables you to strategize and plan for current and future financial expenses so you avoid cash-flow problems.”

Managing cash flow can also help keep your company from entering a continual cycle of expensive and potentially debilitating debt, adds Dr. Michael Tantillo, founder of Clareo Centers For Aesthetic Surgery.

Tantillo has founded and co-founded four successful surgery and med-spa practices and has experienced first-hand the need for solid financial planning.

“While debt is an important component of sound financial planning, business owners don’t always understand the difference between net profit and free cash flow and end up getting stuck in a cycle of perpetual revolving debt,” says Tantillo. “This can adversely impact expansion plans and dampen the appetite of potential equity partners or acquirers.”

Elements of Effective Business Financial Planning

Sound financial planning is an important part of hitting your long- and short-term goals for your business. A plan also keeps finances in check so that your company can remain stable and profitable.

The elements of a financial plan encompass all the ways that money flows in and out of your company. Here are the basic components:

Profit and loss statement: Informally known as the P&L, this document is your company’s income statement. The P&L shows whether your business made a profit or loss within a given period of time, which is usually three months to a year. Totals included in this document include revenue and cost of goods sold.

Statement of cash flow: The cash-flow statement shows how much money has flowed into your business, how much has gone out and how much is left at the end of the month.

Balance sheet: The balance sheet gives a quick view of the financial situation of your company. This includes your assets, liabilities and equity. It’s called a balance sheet, because when everything is entered correctly, the assets equal the liabilities and equity.

Sales forecast: As its name suggests, this report includes sales projections for the coming year to three years. Knowing projected earnings helps with business financial planning across the board.

“Comparing forecasted developments in your business to actual results also helps determine the overall financial health of your business,” says Gold.

Break-even analysis: This report gives a clear indication of how much income you must bring in to at least break even on the cost of goods sold. If you aren’t breaking even, the company is losing money and at risk of going under.

Tax planning: Many financial plans cover tax-planning strategies.

“Such strategies could include retirement plans for yourself and your employees,” says Kathy Longo, author of Flourish Financially and president and founder of Flourish Wealth Management.

“If you haven’t already, consider looking into the benefits of creating a 401(k) plan or similar retirement savings vehicle, so you can build an investment portfolio that also provides tax benefits,” she says.

Budget. A clear, workable budget is a vital aspect of your company financial plan.

“A budget allows you to effectively address expenses and immediate needs,” says O’Brien.

“An expense budget also helps you avoid taking on more debt than necessary further down the line,” he says. “It’s a good idea to revisit your budget frequently, especially if your company is seasonal.

Getting Financial Planning Assistance

When you do your business financial planning, it’s a good idea to seek the input of company advisors, such as a CPA, attorney and financial planner, suggests investment advisor David Brooks, Sr., founder and president of Retire SMART.

“That way the financial decision making will be consistent and coordinated,” he says.

Consulting with a strong team of advisors is a great idea, agrees Longo.

“Outside perspective is so important,” she says. “For instance, the financial planner could emphasize the long-term goals of the company over short-term business needs.”


By Julie Bawden-Davis
© 2018 American Express

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