Taking the time to construct a financial plan is a valuable process for business owners. Your business’s financial plan, or budget, helps you with day-to-day decision-making. Having a tool to help compare the forecast numbers and results for your business provides crucial information to the business’s overall financial health and the efficiency/effectiveness of your business plan. Regardless of the size of your business, a financial plan is necessary business tool.

Here is a breakdown of the reasons a financial plan will benefit your business:

• Cash management tool. If your business is seasonal or has monthly ebbs and flows in revenue, tracking your cash is crucial to success. When working with your accountant, share the fluctuations in cash flow. Keeping close track of expenses during low cash flow times is necessary to keep your business from experiencing a negative consequence of cash shortages. Consider the need to make payroll regardless of the cash flow into the business for that particular week or month. The financial plan should be structured to keep a cushion of cash for expenses.
• Success measurement tool. In the early stages of your business endeavors, know whether your efforts are paying off. Without a financial plan, it can be difficult to gauge if the hours spent for the business are reaping financial benefits. A financial plan that shows a steady growth in revenue can help spur you forward and provide continued motivation on your path to success.
• Long-range planning tool. Entrepreneurs sometimes have such a focused approach to their daily operations that they cannot see a crisis or cash issue looming in the future. Being focused on short-term goals or cash issues may leave the business owner unprepared for investments necessary to prepare for the future viability of the business.
• Trend-spotting tool. Well-informed business owners understand that the course of a business month may not be sufficient to determine whether specific business strategies or marketing plans worked. In the preparation of a financial plan, your accountant can work with you to implement measurable targets to compare with actual results. This will help the business owner determine whether a marketing push resulted in anticipated revenues.
• Expense planning tool. Knowing where and when to invest in your business is crucial to long-term success. While conserving financial resources is an element of business success, a financial planning tool can help the entrepreneur spot various expenditures. Certain expenditures can bring immediate market penetration, influx of income, or increases in productivity versus expenditures that can be put on hold until cash flow is more prevalent.

Even businesses that have cash during the start up phase need to take time to develop a financial plan as a way to stay on course and continue to achieve financial success in the long-term. No business owner wants to play a “what if” game when it comes to spending money or making investments in the business. A financial plan takes away the “what-ifs” and puts your business on a solid foundation and path to success.