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The process of financial planning in business is designed to forecast future financial results and determine how best to use the company’s financial resources in pursuit of the organization’s short- and long-range objectives.
The accuracy of the financial plan depends on the quality of information used in the assumptions for the financial models.
Creating realistic assumptions for key variables such as projected unit sales and pricing is critical.
Their efforts must be coordinated with those of the financial staff in charge of preparing the financial plan.
Financial planning in business requires proficiency in using spreadsheet software.
There are many resources to help finance your business.
You may also choose to seek advice from a finance professional such as an accountant or bookkeeper.Companies that make a concerted effort at financial planning can grow their revenues at a more accelerated pace than organizations that have an inefficient planning process.Financial planning provides the numerical logic for decision making.Each month, actual financial results are compared to the numbers in the forecast, and efforts are made to identify and analyze significant variances.These variances may require an adjustment in strategy to get the enterprise back on track toward its revenue and profit goals.A financial plan is a forecast of future performance for a business, usually prepared using spreadsheet software.Small businesses can benefit greatly from taking the time to do a financial plan at least annually.Consumer behavior is especially hard to predict -- how well customers will respond to both the company’s products and the price being charged.Changes in cost factors can also cause significant variances.A strategy might be to advertise in local newspapers or sponsor charity events to increase customer awareness. Calculate month-by-month revenue projections using the assumptions.Build formulas into the spreadsheet that allow you to change the variables, doing “what-if scenarios” until the revenue forecast reflects what you believe is realistically attainable. Use your historical cost of goods sold percentage as a guide and modify it based on any changes you anticipate in the cost of materials, finished goods, or production costs. Project your expected facilities costs, such as rent, utilities, insurance, or recurring legal expenses.