A clear financial strategy is key to the success of any small business. It serves as a map for the future, outlining the practical steps you need to take in order to achieve your financial goals. Not to mention it gives you peace of mind that you’re on the right track. Follow these five simple steps to get started.
1: Set specific financial goals
Every small business owner has financial aspirations; it’s the specificity of these goals that sets apart the successful from the not-so-successful. There’s a big difference between “trying to make as much money as you can” and “setting out to make a specific figure by a specific date”.
Without specific goals to aim towards, you may feel overwhelmed and lack focus. Aim at nothing and hit it with incredible accuracy.
If this sounds familiar, set aside a day to brainstorm exactly what it is that you want to achieve. Is it consolidation you’re after? Debt reduction? Acquisition? Growth? Identify your ideal outcome and set a figure that will help you reach this goal.
2: Strategise with your accountant
Your accountant should be involved from the ground up. They have the expertise and experience required to take your financial strategy to the next level.
It’s your job to bring long-term financial aspirations to the table; it’s your accountant’s job to figure out what’s required to make these aspirations become a reality. Throughout the process, your accountant should be on-hand to monitor progress and provide support as needed.
3: Forecast cash flow
Now it’s time to crunch some numbers. Establish Profit & Loss and Balance Sheet projections.
These projections will provide you with a realistic snapshot of where you currently are, and what you need to do in order to get to where you want to be.
You may have to consider how you want to fund your financial strategy and look at making further investments to create wealth opportunities.
4: Start implementing your strategy
Once you have established your financial goals, consulted with your accountant and prepared the necessary projections, you can slowly begin to implement your strategy. During the early stages, it’s a good idea to schedule regular catch-ups with your accountant to ensure you’re on the right track.
5: Review as you go
Establishing a financial strategy is not a ‘set and forget’ task. Most strategies require frequent adjustment as time goes on to ensure they remain relevant. It’s recommended to review your strategy quarterly, but you may want to do this more often depending on the complexity of your goals.
As a general rule, you should also schedule in an official review if you change your goals, or if your business undergoes any major transformations (for example, you bring in a new partner or acquire a new investment).
Many people think that financial pressures or issues are isolated incidents, but they are all connected. Our Cause and Effect Navigator is an excellent tool for highlighting the interdependent nature of business and it works for all sizes of businesses – from the corner dairy to Vodafone!