Financial planning can be overwhelming as an SMB owner. If you’ve just finished registering your business, you might already have quite a bit to deal with to run your business, and company finances can be quite complex to handle initially.
But always keep in mind that financial planning is one of the most critical aspects of scaling your small business.
It doesn’t just give you a bird’ eye view of your financial health but also helps you figure out how you can scale and grow in the most efficient ways possible.
To help you out, we’ve crafted this article to elaborate on everything you’d need to know about financial planning for an SMB for 2022. So, let’s get started!
What is SMB Financial Planning?
Simply put, SMB financial planning is a summary of your business’s financial health.
It involves a thorough review of the following: revenue, assets, turnover, capital, inventory, and anything else that would concern your financial affairs. A detailed review of all this information helps you understand the financial health of your business.
What’s more? The process will also help you clearly outline your financial objectives for the future.
So Why is SMB Financial Planning Important?
- Knowing your financial situation: SMBs need to have a clear overview of their finances. With this data, they can determine where money is spent, if it is worth it or if it needs optimization.
- Identifying potential regions for growth: Financial planning shows you how to improve your business while also identifying better ways to spend your money. As an SMB owner, you need to ensure that you spend your money as systematically as possible.
- Planning long term: It enables you to prepare for the long-term growth of your business. You can map out the process from where you are to where you’d want to be.
Four Ways SMBs can Improve Their Financial Planning for 2022
Assess Your Operating Costs
As an SMB, staying right on top of your business expenses is vital for sustenance. This information is critical for financial planning, which also helps you determine your net profit. It will also let you see how much cash will remain once all your business expenses have been accounted for and paid for.
For an SMB owner, knowing your net revenue will be crucial to success. Without this information, you will not know how much cash you have at hand, which may cause you to overspend.
If all this feels a bit overwhelming, to begin with, don’t worry, there are plenty of expense management software that can do all the work for you with no additional effort.
By automating your entire pre-accounting process, expense report software eliminates paper trails, streamlines your entire expense tracking mechanism, and reduces effort by letting you have complete visibility of company-wide expenses and usage of financial resources.
Clearly Define Your Business Goals
Knowing your business goals will give your financial planning a clear direction. When clear goals are in place, you can easily craft a financial plan to achieve the same.
For example, if your company’s goal for the next year is to increase its annual turnover by 20%, your financial plan can outline how you could save on production costs to sell your product at a lower price. In addition, you may want to consider cost-saving measures as well. For instance, investing in high-quality webinar software can reduce the costs of your traveling sales staff by allowing meetings to occur remotely.
If you are clear of your business goals, it will let you create a financial plan that perfectly aligns with your goals; thereby, giving you a higher chance of achieving them.
Consider More Funding Opportunities
Take a look at the U.S Small Business Administration to understand the loans, grants, and other funding opportunities you may be eligible for. Remember, you have nothing to lose by applying for them, so take a shot and go for it!
Procuring funding can assist you in reinvesting your capital to grow your company and boost your financial health. You’d be surprised at how many funding options exist for SMBs.
Building a Suitable Credit Score
Remember that if you are going to approach people for further funding or investment, a poor credit score will hinder your chances of obtaining it. Investors aren’t going to invest in an organization that has a bad credit score. Additionally, this would cause significant issues with business transactions as time progresses.
How can you improve your credit score? Pretty straightforward, pay all your dues on time. Never miss credit payments and do not accept loans whose interest rates you can’t afford.
This will pretty much ensure that your credit rating is on acceptable levels.
By now, you have a good idea of how you can improve your financial planning, so wait for no further to put these ideas into practice.
While the entire economy hangs in the balance of this new normal, having a solid financial plan can ensure your business is perfectly stable to take on any number of normals that might appear in due time.