Financial Plan- Entrepreneurship

A financial plan acts as the backbone for various aspects of the business. It focuses on long–term financial growth of the business. While setting up future targets, three aspects are considered: previous performance, revenue, and business valuation. These are crucial in the preparation and prediction of financial planning. The structure of a financial plan depends on strategy and execution. The financial plan clarifies the upcoming vision for growth. It detects potential complications, offers solutions, and analyses ways to stand out from the competition.

Why is a Financial Plan Needed?

Financial plans are crucial pillars of businesses. A financial plan includes a balance sheet, cash flow, and company financial statement. All three are monitored and studied well to form a strategy for the future.  It pinpoints every up and down in the financial statement. It helps businesses get the best financial advice to face the dips in the market and cover up losses. A financial plan is an essential tool for all types of businesses with the vision to grow. 

 Objectives of a Financial Plan

• Ample of funds

Before planning financial goals, a company or firm should ensure the sourcing of funds. Prior calculation of funds delivers a figure to achieve while making a financial plan.

• Coverage to investors

There must be support for investors in the financial plan. Coverage can be achieved by balancing the risks and costs of the business. As investors contribute an amount and hold shares, they are accountable for every aspect of the financial plan.

• Adjustable plans

The nature of business is dynamic and unpredictable. No one can predict the next trend, jump or dip in businesses. The plan should be formulated keeping this point in mind. It must be flexible and reformulated or modified according to the situation. 

• Less complicated

The financial plan should be easy to understand. Fewer securities make it actionable and adjustable for both users and investors.

• Cost-effective

The plan should be a mix of equity and debt. It should not oppose load and pressure for funds or other aspects. The cost must be minimum but should fulfil the needs of the plan.

• Running an extended view

The plan formation incorporates long-term growth. Funds availability for future usage and backup is necessary. Liquidity should be monitored and be usable at the time of dips in business. 

• Ideal usage

Optimum utilisation of funds, resources, and human resources is important for healthy growth via a financial plan. Wastage of funds is harmful to business.

Characteristics of a Financial Plan

• Clear to the point

The financial plan should be clear at every point; less complex plans acquire more profit for the business. The wholesome objective of the business should be kept in mind while forming the structure. The sole target must be gaining funds and the support of investors. Along with growth and monetary profit, the plan should allocate equal focus to goodwill performance in the marketplace.

• Less outsourcing

The structure of a financial plan should be independent of restrictions and outside funds. The beginning phase may acquire outside funds for foundation building, but the business should generate passive income afterwards. Passive income can be used efficiently and effectively for businesses.

• Tentative

The formation of a financial plan should be flexible and adjustable. If any opportunities or critical situations come up, the plan should be soft and profitable at the same time. The main aim of planning is to attain profitability and stability in business. A financial plan must review short-term investments for less risk. Tentative financial plans build the capacity to face the challenges of the market. 

• Money-making

The plan should be profitable in every way. In the beginning, solely acquiring high profit may be ideal, but afterwards, the plan must reach profit goals. It must form a balance of insecurities to form a roadmap for movement towards high-profit goals.

• Financial incompetence

The maintenance of liquidity of assets is required for solvency. The plan must include solvency, which means payments must be on time, and no dues should be piled up. The books of accounts should be clear and simply understandable. The long-term and short-term investments require monitoring for goodwill and financial stability.

Conclusion 

A financial plan is not similar to a financial statement. Forming an identity with the brand is the need of the hour. When technology, software, strategies, resources and capital are used to their fullest, the outcome is expected to be fulfilled eventually. Every business in India is adopting the modern structure of the business plan. A financial plan is the first step in this plan.