Small businesses can benefit greatly from taking the time to do a financial plan at least annually. The plan helps a small business owner to better manage cash flow by preparing for situations that could result in cash shortages, such as seasonal fluctuations in revenues. The financial plan is normally prepared as part of an overall business planning process, during which goals are set and strategies are chosen to help the business grow in the upcoming year.
However, the financial plan is a self-supporting document intended to support and direct the actions of the business.
It explains what your business can afford, how it can afford to do it and what the expected profits will be. For a small business, a well-written business plan can be the difference between you carrying the business or the business carrying you.
Statements Your small business financial plan should include four standard forms that attached documents support. The standard financial forms include the personal financial statement, the balance sheet, the income statement and the cash flow statement.
These forms provide a well-rounded financial view of your business, from your personal finances to the business finances. The forms explain how your business generates income, how it spends the income and whether it can support itself.
Supporting Documents The supporting documents of the financial plan are those that place merit into your financial figures.
Depending on the information provided in your statements, these documents can include stock documents, life insurance policies, real estate deeds, tax statements, bank statements and register receipts and accounting ledgers.
Ratios You can easily go wrong with your financial plan if you simply pull out your documents and fill in the numbers. Institutions and financial specialists use an array of ratios to identify the information they seek about your business.
Some of the most common financial ratios include the liquidity ratios, such as the working capital and acid test, as well as the asset management ratios, such as the debt management ratios like the accounts payable turnover and leverage tests. Formulas The break-even formula is one of the most important aspects of the small business financial plan.
This formula uses the information within the income statement to determine the point at which your company begins to generate a profit. As a result, your financial plan will eventually become outdated and require revisions.
Periodic reviews of your financial plan will not only assist you in keeping your small business on track, but it also will help you to identify the areas where you need restrictions and expansions.
MasterCard International explains that the quarterly review of the financial plan is an effective schedule that will help to keep you ahead of unexpected financial developments.Starting Your Own Business - Online Course.
A business plan is also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road. The time you spend making your business plan thorough and. Write a one-page business plan. The key to a successful small business, especially in the startup phase, is to keep things simple and costs low. A business plan is all conceptual until you start filling in the numbers and terms. The sections about your marketing plan and strategy are interesting to read, but they don't mean a thing if you.
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In this Article: Article Summary Preparing To Write Your Business Plan Writing Your Business Plan Finalizing Your Business Plan Community Q&A A business plan refers to a written document that comprehensively outlines what your business is, where it is going, and how it will get there.
Is Starting a Small Business for Me?
In short – yes. The small business community is a diverse and eclectic collection of mom-and-pops, multi-generational businesses, one-stop shops, trendy boutiques, food trucks, lemonade stands, wine stores, bicycle stores masquerading as bars, and more.
This Small Business Plan Sample will help you write your business plan in the correct manner. You will get to see what a business plan really looks like. And also see how it can help you.