Sound financial planning can make or break a business. It can also give insight to a business’ financial wellbeing through identifying potential problem areas that could impact its survival.
By developing a strong financial plan, SMEs are also better positioned to attract investors, creditors and retain customers. A financial plan helps SMEs improve their cashflow, identify spending trends and measure business successes.
“A financial plan is an important tool to help SME’s build and future-proof their business. By planning and setting goals, business owners can be equally prepared to take advantage of valuable opportunities, and to remain prepared in a crisis,” says Tom Stuart, Chief Marketing Officer at Lulalend.
Better Cashflow Management
Income for SMEs can be inconsistent. Financial planning can make provision for periods where income is strained or lost, helping SMEs avoid a financial crisis. A plan for saving money from income is an effective way to ensure that an SME can weather a storm when it inevitably faces one.
“Tax planning, careful cash flow management and budgeting are all factors that make a financial plan work effectively. Through incorporating this approach carefully and diligently, SMEs can ensure they are equipped to survive difficult business periods without shutting their doors,” adds Stuart.
Identifying Good and Bad Spending Trends
Reviewing spend can reveal healthy and unhealthy spending habits, as well as unveil strengths and opportunities and threats and weaknesses alike. This can allow SME owners to have a clearer idea of where to allocate spend to continue improving their business and where to cut back.
This also helps business owners prioritise expenditure. Conserving resources is essential for a business’ financial health, and a financial plan is a useful tool to help guide decisions on areas that need the most urgent solutions.
Measuring Business Growth
A financial plan is also useful to enable and measure an SMEs growth over a financial year. It allows financial managers to analyze how successful a season might have been, and which steps were effective in reaching business goals. Financial data can help businesses identify their operational strengths and help them plan for growth.
“By consistently monitoring an SME’s financial health using a financial plan, a small business owner can take informed steps to keep their business thriving for years to come,” concludes Stuart