Getting your financial plan for the year done the smart way
Inefficient financial planning is one of the fastest ways to sabotage a business. A clear and comprehensive financial plan allows you to visualise the financial future of your business, and to take into account your projected cash flow and projected fluctuations in revenue.
Businesses can start their financial year whenever they want to. While some choose to stick to the calendar year, most businesses (especially South African businesses) prefer to align their financial years with the tax year of assessment. This makes March the ideal time to get a financial plan in place. And just because we’re already a week into it, doesn’t mean it’s too late to reassess yours. Here are some tips to give your business a head start with a smart financial plan.
Evaluate your business’ financial shape
There’s no moving forward with a new financial plan if you haven’t appraised the previous year’s plan and assessed the state of your business. Here are some pointers:
- Learn from last year. If last year’s plan went off without a hitch, great. But if it didn’t, you need to figure out why. So many unpredictable factors can influence whether or not you make your targets, especially in the retail market that is vulnerable to economic, political and even environmental forces. However, as unpredictable as they may be, there are lessons to be learned.
- Reassess your business goals and objectives. Your business goals are unlikely to change significantly from year to year, especially if you have a five-year plan in place. But it’s always healthy to check if your business goals still hold up in the current market.
Strategise and budget
Once you have a clear picture of where your business stands, the real work begins. Your final annual budget is the roadmap to guide your financial decisions throughout the year. And, if proper care is taken, you effectively remove the guesswork from running your business.
- Create a revenue model. A revenue model allows you to project for key variables such as the number of customers you expect on a monthly basis, the demand for products during certain periods, and unit sales.
- Forecast for all costs and expenses. Any and every expense that affects your business should be forecasted. Include all operational costs like the cost of goods sold, staff expenses, administrative costs and maintenance expenses.
- Compile a detailed budget. Once the above have been properly mapped out, compiling a budget becomes a balance of the two. You need to have enough regular revenue coming in to offset your expenses and make a profit.
Implement and stay proactive
Most of the success of your financial plan will rest on how well you implement it. Things will change during the year and your financial plan needs to be agile in response to those changes. A financial plan that’s too tight will confine how well your business responds to unexpected external factors, but one that’s too loose will be impractical from the outset. If there’s one rule to remember, it’s to ask for advice from a professional financial planner if you feel overwhelmed handling it on your own.
Don’t forget to use the tools and resources available to you. There are countless finance and accounting software providers that can save you time while helping you to keep track of your money. Some of them are Quickbooks, TrackMySPEND, Sage One and Xero. Also ensure that the payment solutions you have in place can supply you with the metrics you need in order to track and monitor the effectiveness of your financial plan. Your POS (point-of-sale) system, for example, should be able to feed you metrics that you can plug into any accounting software to gain transactions insight and visibility.
ZipZap is one such POS system. It’s completely mobile, easy to use and available to buy, rent or use for free if your monthly card transactions exceed R25 000. To find out more, download the informational brochure below.