9 Financial Planning Tips for Small Businesses
Financial planning is something that doesn’t always come easily. But for business owners, it’s an essential part of running your business. Making sure that your financial performance is on track to meet your goals and allowing you to still operate in profit is all part and parcel, but many business owners don’t include financial planning in their wider business plans. Today we bring together our top 9 financial planning tips for small businesses to help you achieve successful financial and business planning, growth and increased profits.
Why Invest in Financial Planning?
Financial planning is one of those things that is often seen as a luxury – something to look into once you’ve got a nice sum of money in the bank. But in reality, it’s much more essential to your business early on.
There are 4 key areas that make business financial planning essential:
- Outlining the scope of your business
- Identifying potential funding problems
- Setting out your financial goals
- Measuring success
Without identifying and exploring each of these areas, you may find it difficult to secure investment or funding in the future. And while that might not be on your radar now, you may feel very different a few months or years down the line.
Our Top Tips
So, what are some of our best tips for small business financial planning?
Have a Plan: We’ve talked about this before, but it’s worth mentioning again. Having a clear understanding of what you want your business to achieve is the most important step to achieving it.
Business Goals vs Personal Goals: Separating out your business and personal goals can be a challenge; especially if they are at odds with each other. For example, growth and expansion in your business may mean borrowing more, which might be going against your personal goal of saving. Finding a balance between the two is tough, but important.
Stay in Control of Costs: Don’t hide your head in the sand about how much you’re spending, or how much you’re bringing in. If you’re aware of income and outgoings, you can ensure you’re well positioned to make a profit and can make changes quickly if needed.
Monitor Cash Flow: This goes alongside our previous point. Without cash flow a business can’t stay healthy. You can’t pay your suppliers or employees, or manage your overheads. Keeping an eye on your accounts payable and closely monitoring creditors and debts means you can ensure your cash flow stays under control and healthy.
Look into Borrowing Options: You might not right now, but at some point you’re going to need capital or investment in order to grow. So look at your options (like secured/unsecured loans, business loans, start-up finance, invoice finance, private equity funding etc) and decide what will be best for your business. Factor these into your strategy, so you know if and when you need it, what your next steps are.
Pensions: If you employ more than just yourself, then by law you will need to provide a workplace pension. This means being registered, meeting the regulations of the workplace pension scheme, and having the cash flow to provide it.
Exit Planning: Again, this might seem a long way in the future, but you need to start your exit planning a long way before you actually want to exit. So, take some time to worm out what happens to your business if you decide not to be a part of it anymore. A robust plan for your exit means you can secure the future of the business and those in it.
Your Financial Safety net: Just like your personal finances, businesses should have a financial safety net in place in case of hard times. Many businesses are currently finding out the hard way how important this is, with Covid-19 ravaging business cash flow. As a business owner, you may have personal assets tied into the business, which can also have an impact if something were to go wrong. So separating out assets and creating a safety net for your business is crucial.
Keep an eye on tax: This is one of the most painful financial planning tips, but if you don’t understand and engage with your tax liabilities, you may find yourself on the receiving end of a big bill from HMRC. So make sure your accountant is aware of your business activities, seek their advice, and start putting away some money for the corporation tax bill in advance.
At Chilvester Financial, we aim to provide just the financial advice you need, when you need it. Our advisers are always on hand to help you understand your business finances, create financial goals for your business and build a solid financial roadmap to help you achieve them. If you’d like to know more about financial planning for your business, just get in touch with us today to book a consultation with one of our advisers.