Financial management applies general management principles to plan, organize, direct and control all financial activities in a business. A critically important aspect of a business is to manage its financial activities so that funds are properly procured and utilized. A successful business ensures adequate supply and optimum utilization of funds, safety on investment and a sound capital structure.
A financial plan will make projections for the future and will help you forecast income and cash flow dips. It is also helpful for startup fundraising and valuation purposes. Here are a few tips on creating a healthy financial plan for your business:
Review Your Strategic Plan
Financial planning starts with a strategic business plan. At the start of the year what does a business want to accomplish? To expand will it need more employees, equipment, space, new resources, cash flow, or financing? This will give a picture of financial impact for the rest of the year. It will also be reviewed by investors when you seek venture capital investments.
Develop Financial Projections
Financial Projections are developed by recording your anticipated income versus anticipated expenses. Businesses on a tight budget can make weekly projections. Accounting Software can help you create projections for profit and loss (income) and a balance sheet. Enabling you to anticipate the good and bad scenarios in the business. Be sure to discuss and seek advice from a proficient accountant.
Determine Financing Needs and Arrangements
When making projections you will know if financing is required. A solid projection prepared in advance reassures bankers and financial unions giving you a better edge in qualifying for a loan.
Planning For Contingencies
A business should always have an emergency plan in place. There should be cash reserves or some sort of financial source to tap into when things go down the wrong way.
Exerting financial controls is the key to financial planning. It is important to exercise controls over finances using techniques such as cost and profit control and ratio analysis.
Practice Good Book keeping
Good bookkeeping practices keep a business out of a lot of trouble. It provides transparency of transactions that take place in the company, and allows venture capital firms and investors to get a clear picture of your business health. Never underestimate the importance of good bookkeeping practices for a successful business.
Compare and Monitor Projections
It is important to tally your projections with actual data or numbers. This will give an idea if you are meeting targets or the need for adjustment. It is better to anticipate problems and change your line of action ahead of time.
Seek Professional Help
For most business owners professional planning is daunting and it does help to seek professional help. It can help your business evade pitfalls and help you tide over adverse situations.
A Healthy Financial Management Plan for Your Pakistani Business
Here at Vixperts, we specialize in virtual CFO, financial modelling, valuation, accounting & taxation, investor due diligence, and policy control design. We can help you perfect your financial management plan and adopt the best accounting, bookkeeping, and financial practices. Contact us now!