Financial plans are essential in determining the success or failure of any business. It also helps get you well organized in your finances, and it will save you from making huge mistakes with finances. A financial plan covers all aspects of your finances including expenditure, financial projections,savings, profits, income and budgeting.
Getting a financial plan is a useful exercise. The process of making projections and leaving room for contingencies will help you be prepared and help you avoid making any mistakes. The following tips will help you get started with making a financial plan.
Identifying all expenses incurred both by variable and fixed assets will help you understand your financial trends better. It is always wiser to project expenses higher and revenue lower than you think will have. It is important that you buffer yourself in case things fail to turn out as expected or planned.
Try and project for spending less that you earn. It is an important decision, fr you to make but it is an important aspect when starting up your financial plan. It will help you stay focused and will also cushion you against unnecessary spending.
For businesses, projection of revenues is crucial. but it is also the most challenging and subjective part of financial projections before it can be difficult to forecast demand accurately. Having a business chat with potential buyers or joining associations and consulting with people already in that business will help you get an overall picture of entire business.
Setting up of financial statements in an spreadsheet program like Microsoft Excel will help you get started. You should have different financial statements such as, sales forecast, income,cash flow and the balance sheet. Each statement should be on a different worksheet within the same spreadsheet for easy linking of the cells.
Using the first line in the monthly income statement, you can link from the bottom line of the sales forecast. The main part of the financial statement is for expenses. Listing expenses by group will help you organize the statement. You can group human resources together with payroll, commissions, bonuses and benefits. Afterwards, you should sub total the expenses in each group and then total up all the subtotals of the different expense groups, to come up with the final monthly expenses.To calculate the net income, you should subtract expenses from the revenue.
Your financial plan, should include assets, liabilities, contingency fund inventory, unpaid debts, monies owed, expenses, income, savings and profits. It should be able to give you a clearer financial picture. You should get assistance from a qualified financial expert like an accountant or anyone well versed with finances and their dynamics. By the end of it all, the financial plan should act as a financial guide for you.