How to Make Lots of Money

The Benefits Of Financial Planning For Small And Medium Enterprises

27 May 2021

Renee Edwards

Financial planning is a critical aspect of running your small business. It allows you to manage your cash flow and make your business profitable. Below is an extract detailing the benefits of financial planning for small and medium enterprises. 

Financial Planning Increases The Clarity Of Business Goals

Each financial plan is backed up by a set of goals or objectives that you intend to achieve. Typically, each of the goals contains a timeline and plan for how they will be achieved. For example, if you run a restaurant, a short-term goal could be to remodel the restaurant to increase the number of people you can seat at once. On the other hand, your long-term goal could be to open another branch. The primary advantage of these objectives is that they are based on your profits. Therefore, they tend to be more realistic. 

Financial Planning Streamlines Your Cash Flow Management

A major problem faced by most, if not all, small business owners is that they are unable to manage their cash flow. More often than not, they mix personal and business finances, which means they cannot tell the business income or profits from their own personal money. A financial plan details how you will manage your business cash flow. For example, it would be wise to open a separate business account to deposit your daily collections. Additionally, document your cash flow and expenses. Rather than taking a few dollars from your business every few days, it would be reasonable to pay yourself a weekly or monthly salary, for example. 

Financial Planning Can Increase Your Business Savings

Since the financial plan details how you manage every dollar your business earns, it becomes easier to make savings. Savings allow your business to navigate through the low seasons when there is reduced cash flow. Alternatively, you could use the savings to grow the business. 

Financial Planning Can Help Minimise Business Risks

When creating a financial plan, you will need to conduct a SWOT analysis of your business. When analysing business threats, you need to identify external and internal factors that could affect the functionality and profitability of your business. At this stage, you are likely to examine unforeseen events such as fires and employee injuries. These risks can be managed by taking insurance covers. You will also develop strategies to protect your business from the competition. For example, you could patent your products to ensure competitors do not sell similar products. 

The secret to creating a financial plan is working with accredited, experienced, and licenced financial planners. The professionals will guide you through the process and help you review your operations to ensure you are compliant with the financial plan. Contact a financial planner in your area to learn more.

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