Skip to main content

Importance of financial plan in business


Financial plan is a very important part of your business plan. In this section you need to present the three main financial documents, income statement, cash flow projections and balance sheet. The point of financial plan is to determine is your business viable and this is the part that most investors will examine when deciding to invest in your business. Financial planing is more of a process  than a product. In order to create good financial plan you need to establish business goals. Monitoring the financial plan on a regular basis is essential to make necessary changes and achieve your business goals.

When starting a business you will have two kinds of business costs, start-up and operating expenses. Start-up cost will get your business up and running while the operating costs are going to keep your business running. In order to make a good business plan you need to gather and analyze data. There are three main financial documents that will help you. Income statement shows your revenues  and expenses for particular period and it will show whether your business is profitable or not. Usually businesses produce income statement at the end of each fiscal quarter. Cash flow projection show how you are anticipating that cash will go in and out of business in specified period in the future. It will determine your credit risk. Balance sheet shows net worth of your business at a particular point. It summarizes all financial data about assets, liabilities and equity.

 In the analysis of the financial statements you will be able to see growth of your company and present condition of your business so you can have a better understanding and make necessary improvements. The best monitoring of assets and liabilities you will achieve trough financial planning. In that way you will know how many expended, earned and remaining asset you have and the same goes for you liabilities. You will have a better perspective about your current liabilities, long term debt and owners equity so you can make financial plans accordingly. Also you can track income and profit loss and determine what is profitable for business and what needs improvement.

The main benefits of financial planning is that provides your business with structure and help to manage flow of cash. Financial plan is necessary for business to function and be financially stable. It helps you to think ahead, prepare and plan your business moves in advance. You will be able to allocate funds in the best possible way and prioritize you expenditures and purchases in order to achieve your business goals and financial success. 
Labels:
Location: West Palm Beach, FL, USA

Comments

Post a Comment

Popular posts from this blog

How to use accounts receivables to finance your business?

Inventory financing is a type of asset-based financing where working capital is provided to a company through accounts receivable, inventory, machinery, equipment as a collateral. Accounts receivable financing or factoring use outstanding accounts receivable as a means of financing. Both methods are usually used as a quick access to a working capital, money you use for daily operations. This can be alternative to a bank loan especially if you own a start-up company. There are other financing companies that can offer you factoring services and really help you manage a positive cash flow. Pledging accounts receivable means that you use your accounts receivable that are not paid yet as a collateral to obtain a loan but you are still responsible for collecting a loan as a business owner. Lender picks accounts receivable they want to accept as a collateral. Accounts receivable that are overdue or ones in which you extended the credit for too long are very likely to be refused by the...
Post a Comment
Read more

Credit report and credit score - what you need to know

Credit score is generated by an algorthm using your credit report. Its main purpose is to help lenders to decide whther to approve loan application and determine the terms of that loan. In other words they are determining risk, how likely is that you will repay your loan. Credit report and credit score is not the same but they are connected. There are three major credit report agencies also known as credit bureaus Equifax, Experian and TransUnion that collect information about you and sell it to other companies. Credit reports show what bureaus knowa bout you. They gather information from many sources. Part of their information they get from lenders. Lenders report loans you took to one or all theree agencies. This also means that your credit report might be different in each agency depending where lender reported it. Some lenders don't do reporting so it is important to work with ones that do if you are trying to build your credit. Other part of information comes from publ...
Post a Comment
Read more

How can you check your credit

Your credit score is an important part of your life. Good credit score can help you greatly to achieve your goals. Banks and other financial institutions will review you credit report in order to decide whether to give you a line of credit or a loan. When you are taking out a mortgage, a car loan your credit report has a huge influence on the outcome.  Even potential employer can check your credit score before hiring you.  To be sure that your credit is looking good you should check it periodically. Credit reports sometimes have mistakes in them. Some experts estimate that there are errors in 10 to 33% of credit files. It is better to check it on time and avoid potential problems that can emerge from false credit report. You can check your credit by ordering a copy of your credit report and your score. Some of the reports are free and for others you have to pay. On AnnualCreditReport.com you can get free credit report from nationwide consumer credit reporting compani...
Post a Comment
Read more