Financial Planning

Most small businesses do not go under because they are not profitable - rather, they lack capital and have poor cash management... They don't plan to fail, they just fail to plan.

Accounting and financial planning issues tend to be unpopular among entrepreneurs. This is somewhat strange, since money is so important to most entrepreneurs that they are often obsessed with it. They struggle to raise it, they save it, they borrow it and they spend it. Some find the subject of the financial planning issues behind money to be tedious. Others find it intimidating. As a result, many entrepreneurs do nothing about the issues. Financial planning in many businesses become the state of the checkbook each morning. If there's cash, the business is still around and if there's no cash, the business has major problems.

To be successful, businesses MUST attend to numbers - including the most important number of all, PROFIT - closely, diligently and professionally. In order to be successful, we must sell our goods at a profit and satisfy our customers.

You have financial planning problems if:

• You haven't spoken to your banker in a week.
• You don't know how much money is in your business account.
• You don't have last month's P&L report on your desk.
• You have ANY accounts that are past due.
• Your sales are lower (OR flat) compared to last year.
• You only see your accountant when they are filing your quarterly tax returns. (90% of accountants limit their participation to tax filing; 10% are actually involved in management control accounting)

There is one simple reason to understand and observe financial planning in your business: to avoid failure.

Eight of ten new businesses fail primarily because they lack good financial planning.

Financial planning affects how and on what terms you will be able to attract the funding required to establish, maintain, and expand your business. Financial planning determines the raw materials you can afford to buy, the products you will be able to produce, and whether or not you will be able to market your products and business efficiently. It affects the human and physical resources you will be able to acquire to operate your business. It is a major determinant of whether or not you will be able to make your hard work profitable.

A clearly-conceived and well-documented financial planning, the establishment of goals, and inclusion of budgets to ensure control will demonstrate not only that you know what you want to do, but that you know how to do it.