Most of the small business owner takes a lot of risks compared to the other business organizations to run their business. As they often start their business with their personal capital.
A primary reason why small businesses fail is a lack of funding or working capital.Investopedia
That is why they need a proper financial plan to manage the financial activity of their business. Today, we’d like to share some important tips on small business financial planning so that you can create a better financial plan.
Before that let’s understand why it’s very essential for your business.
Why Financial Planning is Essential for Small Business
Financial planning is a process that helps to draw a complete picture of your business’s financial policies. It’s vital for not only the big businesses but also for small businesses. With a financial plan, you are able to monitor your cash flow, tax liability, find new funding opportunities, secure future business, and so on.
Below, we have covered some of the important aspects of why financial planning is essential for a small business.
- Helps to monitor business risks and financial issues
- Set a clear map between personal and business goals
- Can focus on the future journey of business
- Manage expenditures and conserve ready cash
- Help to develop a better tax strategy
8 Financial Planning Tips For Small Business
One of the important elements of a business is financial planning. To set a perfect plan, you need to follow some techniques.
Let’s talk about some of the important strategies that could help you make a proper small business financial plan.
1. Personal Goal vs Business Goal
Your personal goal might be different from your business goal. It’s like the two sides of a coin. As a person, you think to save more money for your family or personal usage. But when you focus on the business, you always try to add more money to grow your business. It’s hard to have a balance between your business and personal goal. But the fact is to realize the needs of your business as well as personal. And always try to create a clear roadmap of personal goal vs business goal.
2. Look For New Funding Options
While running your business, you need to invest. And it’s necessary to look for new funding options. It could be business loans, invoice finance, private equity funding, start-up finance, personal savings, etc. It will help to manage the financial plan accordingly of your business. If you have personal funds, go for it. But if you need to take other external funds, be sure of their terms and policy and how much will they cost you.
3. Control Over Your Costs
If you care about your costs, sales, product demand, you are in a good position and you can definitely generate profit. It is important to create a picture of your revenue against your costs. This can help in your business development. Or, if you lose money, it will be easy for you to take the necessary steps to prevent or overcome the issue.
4. Focus on Tax Liability
This one right here is quite a painful part of your financial planning strategies point of view. If you don’t understand your business tax liability, it could very well be very costly to your business. You have to be aware of your VAT, PAYE, corporation tax, income tax and monitor them properly. Moreover, you also need to take care of when you need to pay and how much it costs.
5. Monitor Cash Flow
Monitoring the cash flow is another important part of your financial planning. Without it, you might not be able to get with your business too far. Even you can’t pay your employees, suppliers, and others without it. You have to manage your debtors and creditors closely so that you can control your cash flow and keep it ongoing.
6. Plan For Retirement
When creating a financial plan, you must plan for your retirement. By doing this, you can determine how much funds you will take after retirement or your second career dream. Make sure you have a clear exit plan so that your future is secured even after you retire.
7. Manage Risk
Managing the risk of your business is really essential when it comes to your financial planning. You have to take proper steps to protect the family members and your employees with full financial support. In this regard, you can go for all kinds of company insurance that can safeguard your survival in the case of an emergency or accident.
8. Hear From a Financial Advisor
Most business owners would like to take advice or guidance from a financial advisor. Not only does it help to protect your business’s financial security, but it also helps to make more profit. Before listening to other people, you need to take their experience into account, and then you should decide whether to take their advice or not. Remember you should not wholly depend on your financial advisor on everything, but follow their guidance that can benefit your business. And finally, make the best use of their advice.
Some More Tips
Here are some more tips regarding financial planning that can also prove to be effective for your business.
- Have a clear business plan
- Measure your financial position
- Make sure customers pay you on time
- Know your daily expenses
- Keep up-to-date accounting records
- Monitor your stock
- Get the right funding
- Overcome problems when they are raised
Try WP ERP Accounting to Reform Your Business Financial Functions
In this modern-day business world, most business organizations use automated accounting software to manage their financial operations. Using accounts software like WP ERP Accounting, you can easily reduce a lot of your invaluable working time and save a lot of money. Moreover, you can monitor the entire accounting tasks of your business with great ease.
Here we are highlighting some of the major features of WP ERP Accounting that could essentially help you to understand much better about this accounting software.
- Open Source & Self-hosted
- Easy Payments for You & Your Customers
- Generate Invoice & Receive Payments
- Manage Tax and VAT
- Track Expense Transactions
- Monitor Inventory to Store up Products
If you want to add more features to your WP ERP Accounting software, you can simply do it by using its powerful extension. Here is the list of Accounting Extension of WP ERP.
As it is already quite clear by now that without proper financing, you cannot run a business. And so in order to run the business, you need a proper financial plan so that you can understand the full capabilities of your business.
In this blog, we have tried to showcase some of the important tips and tricks on small business financial planning. We hope following the above strategies, you will be able to better manage all the financial aspects of your business.