How To Succeed With Your Financial Strategy
This is the next series of follow-ups to our first blog of the year about Setting Intentions for 2024. In the past few weeks, I’ve covered “Staying Alive - Keeping Your Brand Current” and “Tips on How Your Brand Impacts Growth and Longevity.” Let’s now discuss the financial planning process and offer functional tips for success.
First, let's define Financial Planning. It's the process that helps a business determine how to finance its objectives and strategic goals. The first step is always setting down your vision and objectives for the company. Next, create a plan on how to support them financially. This plan should detail all the resources and activities the company needs and expected timeframes to achieve its objectives.
Let's clarify a misnomer: companies can mistake accountants for financial analysts. Accountants are responsible for maintaining accurate records, consolidating financial information, and preparing reports. Financial analysts, often called CFOs, analyze and evaluate a company's financial activities to map out its future.
I frequently encounter smart companies that use multiple bank accounts to manage their financial operations, but we need to be strategic in doing so. It is wise to have all income and expenses go through your operating account before managing them, and it's also important to establish a savings account, which I like to call a slush fund. This is for emergencies and future investing in your company.
The misconception that companies can transfer tax money to savings accounts is false. You are not saving for taxes but for investing in the company and its future. This savings account is also helpful for those unexpected times when the unforeseen happens, i.e., the adjustments businesses had to make with the onset of COVID-19. Saving money for several months can help alleviate cash flow crises during unexpected times.
I recommend that all clients keep a tax account separate from their savings account. With both accounts set up, you're less likely to get caught short when unexpected expenses crop up. If your company is required to pay sales tax, consider opening a separate account and transferring the sales tax you collect each week into it. This is a simple process and can greatly reduce your stress levels by providing you with a sound financial system.
Generally, the financial planner’s role includes four areas:
Strategic financial management
Setting financial management objectives
Managing the planning cycle itself
Informing and connecting business teams to the financial plan
Forbes maintains a senior-level group called the Forbes Finance Council. Members of this expert panel share the practical things every responsible business should address when creating their financial plan. While this Council is set up as advisors for start-ups, their suggestions are also a great review for all businesses. [Click this link for total details.]
Build An Accounting Process
Build an accounting process adequately resourced to work across departments for accounting, planning, and fundraising, following appropriate governance guidelines.
Create a Detailed Budget and Cash Flow Projection
This will allow you to understand your financial position and make informed decisions.
Rely on a Financial Model
The financial planning process needs to be guided by a model and an understanding of the financial controls, goals, and risks for each stage of business growth.
Create a Functional Business Plan
A plan will include budgeting, forecasting, record-keeping, and monitoring, which sets a foundation for sound management.
Have Regular Review And Plan for Adjustments
Review your finances with your CFO or a strategic advisor that you are currently working with. With regular reviews, financial planning will set the stage for sustainable growth. Don’t be afraid to adjust and reiterate.
Visualize Where You Want to Be
Dream freely but with function. Figure out the steps needed to get you there.
Understand Your Cash Flow
This is critical to keep your business in operation and in profitability.
Ensure Your Team Understands the Plan
Be certain everyone on the team has a mutual understanding of core values and mission.
Know Your Numbers
Understand and manage your cash budget. The first step is knowledge. Know your numbers. Check your accounting system daily.
Some Final Thoughts
Transparency in the financial plan is essential for the team and staff. Follow a solid plan towards growth and scale. A transparent financial plan will always win the day in the right leadership hands.
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