Investing time in a money plan can really pay off

HANDLING money is an inevitable part of running a business, whether you’re an established business owner or a blossoming entrepreneur.

Having a money plan will help you to define what you want to achieve and how you are going to make it happen. It will bring an essential focus to your financial resources.

Investing your time in creating a money plan will allow you to make exceptional business decisions that will literally pay off. Here’s how to do it:

1. Define your strategic ambitions

What are the aims for your business? What do you want it to look like in three to five years’ time? Is it increasing profits, expanding your product range or improving the scalability of your operations?

This will help you to get a clear idea about your end goal and focus your resources on attaining it.

2. Focus on one year at a time

Having decided on your strategic ambitions, you can focus on what you need to do in the next 12 months to move your business in that direction.

To expand your product range or increase your profitability, do you need to purchase new equipment or invest in waste-saving initiatives?

Knowing your end goal and what you are going to focus on in the first year is essential in creating a money plan that will drive your business forward.

3. Plan your income and expenses

Having established your focus for the next 12 months, you can begin to forecast your income and expenses for that period. Start with fixed costs including rent, utilities and insurance. Then plan your variable costs like petrol, postage and raw materials. Consider what drives these costs and what level of business activity you are expecting.

Estimate your income as realistically and conservatively as possible. Finally, calculate the difference between your income and expenses.

Recognise that if you are investing in new equipment to increase your product range, a surplus may not be possible.

Consider ways to adjust your variable costs and remove unnecessary expenses.

4. Plan your cash flow Cash flow is a crucial part of your money plan. This will help you to establish when money flows in and out of your business in the coming 12 months, enabling you to plan for shortfalls and surpluses.

Now that you know how a money plan can bring focus to your financial resources by assisting you in aligning your short-term business decisions with your strategic ambitions, you simply cannot afford not to have one.

HAVING A MONEY PLAN WILL HELP YOU TO DEFINE WHAT YOU WANT TO ACHIEVE AND HOW YOU ARE GOING TO MAKE IT HAPPEN