This being a small business comes with its fair share of pros and cons or one could call it rough end of the tunnel. One of the most crucial factors that ought to be managed properly with regards to the managerial activities of a small business is the financial planning. Budgeting helps you to plan for your business’ future, make relevant decisions, mitigate risks in relation to its financial position and deliver on its financial objectives. Below is the detailed guide to personal and business financial planning for the small business owners.

1. Set Clear Financial Goals

The initial process in the financial decision-making process is to adopt specific, realistic targets on the firms’ finances. These goals should meet the criteria of specific, measurable, attainable, relevant, and time-bound and should be set in multiple levels. No matter it is to raise the revenue by x percent or to decrease the expenses or to launch a business in a new segment, having specific targets is beneficial as they give the purpose and aim.

2. Make Sure You Understand Your Business Strategy

The nature of any coherent financial strategy for the future is highly dependent on the proper business plan. The business plan should define your business strategy, overview of the marketplace, structure of your enterprise, and the economic forecasting. Prospective information should also entail parasite information such as profit and loss accounts, cash flow accounts, and balance sheets. This strategic plan will provide a blue print for your business activities together with your financial strategies.

3. Budgeting

Budget is actually a plan on how financially one has to act throughout a certain period. Prepares clear and outlined work plan including the projected income and expenditure. This will enable you track your financial status in relation to the activities done in the business and make amendments where necessary. Always review your production cost and compare it with the budget so that you can take the necessary corrective action.

4. Manage Cash Flow

Managing cash at the business is essential to the existence and expansion of the business. Make sure you have a tracking mechanism in relating to the collection of your cash and the expenditure that you are making. Make sure that in terms of managing your cash flow you are closely keeping an eye on your accounts receivables and accounts payable. Some of the factors that may arise include; it is recommended to have cash in reserve so as to be prepared when there is any unpredictable costs or reduction in business.

5. Control Costs 

 Cost control is vital for the company’s financial viability since it determines the changes to be made to the price. Always cross-check and do a comparison of expenditures to determine where expenses could be reduced to the least extent possible while providing the customer with quality goods and/or services. Bargain better contracts in the supply chain and look in to outsourcing options that are cheaper but do not form the core competency of the business. 

 6. Monitor Your Financial Health 

 Maintenance of one’s financial state is of significant importance. Learn the efficiency of your enterprise by analysing the financial ratios and key performance indicators. Such ratios include; Current ratio, Quick ratio, Gross profit margin and Net profit margin. These performance measures enable users to establish financial reliability and profitability levels of a business. 

 7. Invest in Technology 

 The application of technology in your company can help accelerate the strategies used in financial management. Businesses should incorporate the us of accounting software for the bookkeeping, preparation of bills, invoices, and payments. With financial management tools being hosted in the cloud, you can easily have an overview of how your financial performances are on real-time. 

8. Plan for Taxes 

It should be noted that tax planning is one of the key components of the financial planning process. Comprehend the tax requirements and make certain that you have saved adequate capital to cater for your taxes. Adopt any existing tax deductions and credits to reduce the tax you are to pay as much as possible. It would be wise to speak with a tax advisor to assist you with typical business taxes. 

9. Manage Debt Wisely 

On the use of debt financing, it should be recognized that this instrument is effective when applied in the right manner. Do not over borrow with a view to getting yourself into a situation where your sources of cash flow are compromised. Always ensure to pay your bills at the right time to keep your credit score high and consider seeking for a lower interest rate thru debt refinancing or debt consolidation. 

10. Plan for Growth 

Scaling your company requires scaling your financial plan as well so if you are a growing business, you will notice this. Fund for future growth by putting aside money for expansion, to invest on new equipment or to tap on new markets. Develop the growth plan that states the growth targets and the amount of money that will be required to finance the goals.