5 Steps To Build A Financial Corporate Plan
Developing an excellent financial corporate plan is crucial to monitor your organization’s progress over a particular period. It also gives you a reference point for your daily, weekly, and monthly results. You can identify your financing needs and revenue and expenditure variances from a financial plan.
Your previous financial reports can be your first source to help you develop a robust financial plan. However, it would be best to consider other factors like market trends and industry regulations. Doing so allows your corporate financial plan to factor in past performances and future expectations. It also ensures that your financial plan is more realistic and within achievable brackets. With that said, the steps below can provide a guideline for an excellent financial planning process.
Gather All Relevant Data
A comprehensive financial plan relies on accurate and detailed data. Therefore, it would be best to ensure you have all the necessary information to help you achieve this. Gathering all relevant data can help you have a reference point from your past performances. In addition, historical data provides a basis to develop target points for future versions.
For instance, periodical financial reports show data such as revenue and expenditure for a particular period. They can also show your current financial position. Thus, you can use this data to formulate your strategic financial plans. Having information on existing and upcoming contracts would also be best.
Other data you should collect include your business’s past, present, and expected statutory deductions. There can be upcoming regulations that may affect the financial situation of your business. Checking if any government policies can financially affect your business would be beneficial.
Identify Your Financial Goals And Objectives
Once you have the necessary data, it’s time to determine what you want to accomplish over a particular period. Your financial goals and objectives should give you a target focus. However, these goals should be realistic, achievable, and measurable. There should also be a timeline for these goals. Otherwise, it may become frustrating to have financial goals that are unattainable and insignificant to your business’s development process.
Some vital points to indicate in your financial objectives include revenue and expenditure targets. You can show these as percentage increases or decreases to make a more realistic comparison with past performances. For instance, you can say you want to target a 10% increase in revenue for your next financial year.
Your goals should show both short-term and long-term targets. This way, you can have room to adjust if necessary. From here, your next step would be to analyze the numbers for a clearer picture.
Critically Analyze Your Numbers
Numbers play a crucial role in your financial plan. Therefore, it wouldn’t be complete without going through all the figures. Your financial reports can play an essential role in your analysis. For instance, your balance sheet can show your current asset and liabilities information. Your income statement can also have the profit or loss of the last financial year.
Therefore, you can use such information to determine your risk percentage when you need to take a business loan or seek other additional investment avenues. Similarly, analyzing your numbers can also help assess your growth and expansion prospects. It ensures you don’t undertake a project that might stall or fail midway through.
Formulate A Strategy And A Budget
Create a financial strategy with both short and long-term objectives in mind. After that, formulate a budget around this strategy and create provisions for unforeseen future changes. For instance, expenses can increase due to market inflation or currency fluctuations. Your plan should withstand such unexpected financial challenges, thus, making your organization look more financially healthy.
Compare your current budget with your previous one and see that it aligns with your target objectives and goals. Review your strategy and budget to ensure there’s no critical data missing. Tax obligations, asset devaluation, and minor revenue sources can easily escape through all the numbers. Thus, it would help to scrutinize your budget before implementing it.
Implement, Monitor, Review, And Adjust
Depending on how thorough you did the previous steps, you can either be skeptical or enthusiastic about the implementation stage. However, policies and procedures can help you stay focused on your goals. They can also help provide checks and balances along the way, thus, preventing deviations that can result in wrong or inaccurate reports.
One policy you can enforce is regular reporting from the operation levels. These reports should include financial and statistical data to help you build a detailed database for continuous monitoring. The reporting frequency can depend on your business’s operations or size. Develop a monitoring system for your financial plan. Know when to review it, and if there’re deviations, adjust if necessary.
An excellent financial plan can help you attract investors and lenders. But to achieve a sound and comprehensive plan, you must have a thorough planning process. Following the above steps can help you get your organization’s ideal financial plan.