You’re ready to start your own business. Your idea had turned into a plan, and you have done your research. Do you have questions like will I have to borrow money? How much interest will I have to pay for the funding of my business? Below are seven factors that you should include in your financial plan. Following them will help steer you away from costly decisions down the road.
Some items that you’ll have to consider when planning for your business’s financial future. Those things include the following: Profit, and loss, cash flow statement, balance sheet, sales forecast, minimize taxes, rate of growth and personnel plan, funding for your plans for the business. There are more but these are the most vital ones.
Seven Tips For Your Financial Strategy
Profit and Loss.
Profit and Loss statements are documents that show how much money your business makes against how much debt it has. Profit and Loss statements are important for your business. You need one if you want to borrow money from a bank because the bank will want to see things like debit and profit. Profit and loss documents can be simple or complicated.
A few things you will need such as net income. Knowing your net income will help you get familiar with how much net worth you’re taking into the business. When borrowing money, banks look at your net income, and if expenses are more than the net. You will probably have a hard time getting a bank to lend you the money. Operating income is another vital term you need to get to know. Operating income deals with the income you receive from your business.
Cash Flow statement.
Simply put, it’s a statement showing how much cash your business brought in, and how much it paid out and how much was your balance. Even if you’re just getting started, this is an important step. You must know how much cash goes in and out and keeping a cash flow statement will save you lots of headaches in the future. Cash flow statement templates can be created by Microsoft Excel, Google Sheet or Quick Books
Balance Sheets.
Balance sheets are statements showing the health of your business at a given time. The balance sheet will include the amount of cash in your bank account, how much customers owe, your assets and any equity. In other words, your balance sheet carries your net worth. The balance sheet is handy when it comes to meeting your financial obligation. They play a part in helping you discern how to use credit for your business. Balance Sheets are vital for your company because they’re used to show the health of your business from the beginning to right at the moment you seek funding.
Where To Find The Money
Need for funding from an outside source. The funding pays for a business license, equipment, insurance, hiring other people. Without money, you can’t move your business forward. So how do you get the funding that you need for your business? One way is if you have stock. You may have to sell some shares, but if that’s not an option, then another would be banks. Banks will give you credit especially if you have maintained a good credit record. Another option would be finance companies. Finance companies will provide short term loans using invoice discounting.
Make sure you know how much money you need. The third way is to find investors. Seek out those who would be interested in your business. Crowdfunding is another source. Crowdfunding gives you the ability to raise money from many individuals. Crowdfunding has become a popular way of getting a business started. With Crowdfunding, you have lower risk, and you don’t have to pay back. Other sources include SBA guaranteed loans, credit cards, borrowing from friends.
Sales Forecast.
Sales forecast gives a prediction on what you or someone working for you will earn weekly, monthly, quarterly or even annually. A sales forecast can play a key role in your company’s health as well. A spreadsheet that includes blocks, and inside those blocks, you will need items such as sales, pricing, cost, etc. The sales forecast is important and according to Pinson, you should think of it as a guide to running your business.
Minimize Taxes.
Minimize taxes because nobody likes to deal with taxes, but it’s an important step to keeping your business growing. Not minimize taxes could give you a poor earning because of paying too much taxes. You need to start early and incorporate how to minimize your taxes into your business plan. A financial advisor can show you the best way to get the minimize tax bracket. The investment firm Morningstar agrees that you should add taxes to your financial planning.
Rate of Growth and personnel plan.
Rate of Growth is essential at the very beginning of your business. You must get to explore possibilities of growth because without growth you cannot be profitable, and your company won’t expand. Create a personnel plan and keep details on what each person, the product brings to your business.
All this may seem like a great deal of trouble if you’re just starting, but it’s worth the effort in the long term.
