Why Small Businesses Should Pursue Financial Planning
As a small business owner, you understand the challenges and time it takes to maintain both your personal and business accounting and financial statements. However, maintaining accurate financials is vital to your business’s success. There are several reasons you should pursue small business financial planning.
Tracks Your Progress
As a small business owner, you probably work much longer than you ever thought possible. You also face challenges you never could have imagined. You may feel overwhelmed and wonder if your actions are even moving you toward your goals. Accurate financials tell you whether you are moving toward your company vision and whether you have the money to reinvest and grow your business. Your documents give you hard evidence of your growth or lack thereof. They can identify areas where you should make strategic changes to improve your revenues and realign your company to its mission and vision.
Every business should seek to manage its expenses. This means getting the best interest rates and finding ways to reduce your fixed and variable expenses. It also requires prioritizing future expenditures, such as purchasing equipment and expanding buildings. Even hiring staff should be prioritized. For example, you may be able to outsource some of your nonessential duties until your company’s revenues increase and you can hire inhouse help.
Avoid Common Mistakes
Business owners without a financial plan often make the same mistakes. First, they frequently take a salary that is too high. Taking a lower salary keeps more money in the business during the year. At the end of the year, if you have higher profits than you thought, you may consider taking an additional profit distribution. A financial plan will also prevent you from mixing your personal and business expenses. Your corporate structure and interest rates may also be affected by lack of planning. Retirement planning and proper financial assistance, such as a reputable bookkeeper or accountant, may be delayed. Finally, you may not understand the insurances your company should purchase to protect your assets and revenues.
Don’t wait to pursue business financial planning. Consider working with a reputable financial advisor to help you get started.