Budgeting For The Big Picture
Still need convincing? Here are 5 reasons why you should be planning your finances in a structured manner.
I can’t stress enough how important it is to manage the flow of your finances – in and out. If you’re giving out more than you’re getting in you’ll run at a loss. Anyone who has been in this situation can relate how difficult it is to get out of this cycle once in it.
Additionally, there are times of feast and famine in all businesses. If you haven’t experienced that TELL US IN THE COMMENTS WHAT YOU DO SO WE CAN DO THAT TOO! But seriously – taking into account the cycles of plenty vs shortage enables you to keep a tight rein on expenditures during those lean months and helps you sleep better at night knowing you’ve got this.
Having a ‘cash cushion’ also enables you to take advantage of any opportunities that arise (like purchasing temporarily discounted stock from a supplier).
The bigger picture.
How are you going to grow your business in the long-term? If you’re stuck focusing on the daily crises and issues, you’re never going to be able to implement the necessary changes to necessary to keep your company growing and staying ahead of your competitors.
“The financial plan is the roadmap for continual improvement in the company’s performance”
Not wanting to grow much anyway? A proper financial plan also takes into account your personal circumstances, objectives and needs. It acts as a guide, helping you choose the right investments and insurance coverage which provide security for yourself and your family. What happens if your family’s breadwinner is no longer able to work? Are you the breadwinner? What happens when you’re ill and not able to provide?
The long-term financial view also takes into account savings, tax planning and overall monthly expenditures. Savings can come in many forms, like investments with high liquidity – they can be used in emergencies or even to keep your CE hours on track.
By keeping an organised budget and financial plan, you’re able to quickly tell which financial decisions (like boosting a post or running a giveaway) resulted in success, and which crashed and burned. Or simply didn’t work.
Did that giveaway lead to the increased number of clients you were hoping for? Did that newly introduced treatment boost profits or is it a supply-drain? Which products are flying off the shelves and which are gathering dust?
Which expenditures are the most important? Which need to be dealt with now and which can wait a while? Conserving financial resources is a critical element of success for a small business. Yes, you have to give to get, but is that particular hydraulic plinth necessary now, or can it wait a while until your income is more plentiful?
What expenditures are necessary for efficiency, market penetration and productivity? Compare the costs and benefits of each proposed expenditure before you start throwing away money which may take a while to return to you.
Remember that investing in assets is great, but many come with liabilities attached – which makes determining the value of the asset even more important. Ensure that you aren’t building assets which may turn into future burdens.
When you can see that your results are better than those forecast, you gain some encouragement. Owning your own business results in looooong hours and numerous challenges, which can be disheartening if you’re not keeping track of the successes along the way.
A great motivating factor can come in the form of a steadily rising revenue chart. The hard data helps the savvy spapreneur see that their business is on its way to success. Comparing forecast numbers to actual results provides important information about your businesses’ overall health and efficiency.
Financial planning doesn’t have to be scary and overwhelming, and the reasons to do it far outweigh the scary-factor anyway.
If you’re looking for the ultimate finance planner for your business, be sure to have a look at this bad boy.
Go kick butt. You’ve got this.
I’d definitely advise meeting with a financial advisor to ensure all your money legalities are in order. They will help you assess your financial situation and help you with a plan moving forward.
What additional reasons would you add to this?