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For example, you might know there's going to be a short-term dry spell or that you're about to see an infusion of cash based on renewal fees for a service-oriented business.You also might anticipate the start date for a large, new client. You'll know when you’ll have funds to pay back a loan or if it's better to hold off on borrowing.After your business opens, another of the benefits of financial planning is that it gives you a basis for comparison.
"Businesses that don’t plan thoroughly are more likely to struggle." This axiom is particularly true when it comes to financial planning.
Financial planning analyzes current and future costs and income to help determine the best plan of action.
It touches every aspect of an organization, including payroll, workforce training, marketing, inventory and research and development.
Business financial planning allows companies to determine how to allocate their resources with greater confidence. Comprehensive financial planning demonstrates a company's commitment to sound business practices - an ongoing ability to meet financial obligations and spend wisely.
To create a solid financial plan, you'll need to analyze the main components of your business.
Make assumptions about cash flow – how much money you're taking in and paying out. You'll also be looking at potential changes to your workforce and at external circumstances, such as fluctuations in the economy - a recession or growth cycle - and inflation.
You’ll have a solid framework for making major business decisions and smaller ones in every area of your organization, and you'll be better equipped to set achievable milestones and goals.
As you proceed, you'll also more readily see where your missing projections alter courses quickly.
The point is to be as accurate as possible with them so you can create a reasonable budget.
You want to be able to plan several months in advance - or more.