5 Reasons To Plan Your Company Finances For At Least a Year
A business can grow without a plan, which is why inexperienced owners find financial planning a waste of time. However, financiers have different opinions. If you are having financial difficulties, you can always rely on Payday Depot and be sure that you will receive help at any moment. So, why planning income and expenses in advance is not an empty chore, and how exactly it will make life easier?
Business Navigator
Running a business is often compared to driving a car: you can drive a car without a navigator, but it is more convenient with it and you can always see how far you are from your goal. In business, this function is performed by the financial plan. The plan-fact analysis is a method of assessing the situation in business, in which two values of indicators are compared: what was planned according to the plan and what happened in fact. When the plan does not agree with the fact, this is not always a tragedy, but an occasion to reflect.
Means of motivation
In order for the plans to be fulfilled, and not just thought, it is necessary to describe the person responsible for each indicator. So the owner understands who to encourage when the plan is achieved, and who to ask if this did not happen. The financial model allows you to see which indicators change the profit increases or decreases and which of the employees affect these indicators.
When the owner ties the payment system to the implementation of the plan, it makes life easier not only for himself but also for employees. In this case, they focus on the result, and not just sit through working hours in the office. A useful tool is a daily reporting system with visualization. Thanks to her, the employee sees what needs to be done to fulfill the plan, and how his salary changes in this case.
Spending limiter
A classic example of a cost constraint is a marketing budget. The marketer does not directly affect sales and revenue. It only attracts leads - applications from potential customers that go to sales managers. Therefore, it makes no sense to motivate him on sales volume, revenue, or profit. But the cost of attracting leads depends on the marketer. The marketing spending limit is a red line that it cannot cross. It is possible and necessary to motivate him to stay within these limits.
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Personal plan limiter
Planning business finances allows you to correlate personal plans with them. When the owner makes plans according to the possibilities, he avoids problems both in business and with loved ones, to whom he does not promise too much.
Source of confidence
When there is no plan, only optimism saves. But believing in a bright future is one thing, but knowing exactly how bright it will turn out is quite another. High accuracy is considered when the plan converges with the fact by at least 80%. Learning this is real, although not everyone succeeds the first time. When the owner in January knows 80% of what he will come to in December, he feels much more confident than when there is no such understanding.
