Financial Planning Factors to Consider When Starting A New Business


A financial plan is completely different from your financial statements. Instead of looking at what has already happened, you make forecasts for the coming months, projecting earnings and expenses. Your forecasts will act as an early warning system, helping you plan for cash flow dips, recognize financing needs and identify the best timing for projects. Also it proffers you a tool for keeping an eye on your finances, letting you gauge your progress and quickly head off trouble. Listed below are a few steps to create a financial plan for your small business. 
 
Reassess your strategic plan: 

Financial planning must begin with your business strategic plan. You must think about what you wish to achieve at the beginning of a new year and inquire yourself a string of queries: 

  • Do I need to expand? 

  • Do I need more equipment? 

  • Do I need to hire more staff? 

  • Do I need other new resources? 

  • How will my plan affect my cash flow? 

  • Will I need financing? If yes, how much? 


Then, determine the financial impact in the coming twelve months, including spending on major projects.  


 Create monthly financial projections: 

Develop monthly financial projections by documenting your expected earnings based on sales projections & expected expenditures for supplies, labor, overhead, etc. If you have a very tight cash flow, you may wish to make weekly projections.  

Arrange financing: 

Make use of your financial forecasts to determine your financing requirements. Approach your financial partners before time to know about your options. Well-prepared financial projections will help assure banking institutions that your monetary management is solid.  

Plan for contingencies: 

It is a sound idea to have an emergency fund before you actually require them. So, maintain a cash reserve or keep room on your line of credit. 
 
Monitor your finances: 

Through the year, compare actual results with your projections to find out if you are on target or have to adjust. Monitoring aids you detect financial issues prior to they get out of control.  

Get help: 

If you don’t have the expertise, consider hiring professional services to help you get organized with your financial plan. Sunil Chugh is a Certified Financial Planner who works with small business owners in the GTA with financial planning. 


Disclaimer: The information in this commentary is for informational purposes only and not meant to be personalized investment advice. Please contact your investment professional for investment advice and before investing in any product. ACPI does not publish market research and Sunil Chugh is not registered as a research analyst. The content is from sources believed to be accurate and the opinions expressed are those of the author and do not necessarily represent those of ACPI

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