Being a proprietor of a small business, you need to devise and execute an effective financial plan to ensure the smooth running of your organization in the marketplace. You may make it a point to keep track of your establishment’s revenues and expenditure. However, without such a scheme in place, you could end up incurring avoidable interest payments, find it very difficult to raise the capital you need during critical phases and even face litigation problems. Experts specializing in the field of business and finance say it is possible for you to maximize your establishment’s profit-earning capacity by utilizing certain fundamental budgeting techniques:
Patrick Lanning – What benefits can get from an effective financial plan?
These professionals point out the following advantages of executing an effective financial plan that caters to the needs your business establishment:
- Cost controls
The most important benefit of executing an effective financial plan is that it enables you to control the costs your establishment incurs while carrying out its activities. Formulating a periodical budget gives you an idea of your business expenses, identify areas where it is possible for you to reduce them and keep track of such costs. This acts as a catalyst in helping your organization achieve its goals in the marketplace. Preparing a budget may not necessarily mean an end to your business woes. However, it helps to ensure your monthly business revenues keep pace with the expenses your organization incurs in order to meet its profit projections.
- Managing your organization’s cash flow effectively
Your business organization may be capable of generating adequate sales revenue in the marketplace. However, this does not imply that your establishment has money it requires to conducts its other operations smoothly. Patrick Lanning, a qualified risk management expert and Vice President of IMA Financial Group, say financial planning also involves effectively managing your organization’s cash flow. It enables you to accurately forecasting the cash needs of your business establishment for a certain period notwithstanding the quantum of revenue it earns.
- Enhances debt management
Like most business proprietors, you may be incurring hidden costs on your credit card and loan installment payments without even knowing it. This is because financial institutions usually charge interest on the outstanding balance. An effective financial plan enables you to deal with interest payments you incur every month and include them in your monthly budget. This gives you real picture of the financial performance of your business organizations for a particular period.
- Effective tax compliance
Financial planning also includes accurately estimating the amount of tax you need to pay to the regulatory authorities. It also enables you to modify the estimates of your organization’s tax liability according to an increase or fall in your establishment’s sales revenue. When you fail to making timely tax payments on your business income, property and employees’ payroll, you could liable to pay fines that such authorities impose.
The above benefits go to show that executing an effective financial plan is essential for the smooth running of your organization in the marketplace. Patrick Lanning says such as scheme is instrumental in helping your establishment achieve its objectives in such an environment. It also gives you the exact picture of your organization’s financial performance for a particular period.