Managed Accounting

6 Steps Of Financial Planning For Your Business

Posted on June 4, 2024

By Beth Mickelson

June 10, 2024

In today’s fast-paced and dynamic business environment, effective financial planning is crucial for the success and sustainability of any organization. In this article we will explore the intricacies of financial planning for business, offering valuable insights and actionable tips to help you navigate the complexities of managing your finances.

Why Your Business Needs a Strong Financial Plan

The effectiveness of any financial plan for business relies heavily on the quality of its underlying data and the business’s ability to adapt to changing market conditions. A well-executed financial plan is essential for small businesses to stay focused and achieve their short-term and long-term objectives. Effective financial planning offers several key benefits:

Clear Alignment with Goals

A robust financial plan for business ensures that everyone in the company understands their roles and expected outcomes. This clear financial alignment helps all team members stay on the same page and understand key targets.

Accurate Budgets and Projections

Thorough financial planning yields realistic budgets. A realistic budget is one of the most important aspects of financial planning. It will help allocate resources effectively while accounting for future income and expenditures.

Access to External Funding

Detailed financial plans also provide potential partners, lenders, or investors with a transparent view of where their funds are going. These strong financial records also reassure external funding sources that repayment is possible.

Performance Evaluation & Flexibility

Small businesses can continuously benefit from their financial plans by monitoring performance against initial projections and making necessary adjustments as needed. So financial planning for business is not a one-time thing, but rather a long-term, continuous effort.

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Creating a Financial Plan for Business in 6 Steps

A comprehensive financial plan for business is crucial for achieving long-term financial security and success. You can create a strong financial plan in six simple steps.

1. Review Your Strategic Plan

Financial planning should commence with your organization’s strategic plan. Reflect on your objectives for the upcoming year and pose a series of questions:-

  • Is expansion necessary?
  • Do additional equipment acquisitions need to be made?
  • Is there a need to increase the workforce?
  • Are further resources required?
  • What would be the impact on cash flow from my plan?
  • Will financing be necessary? If yes, what amount will suffice?

Next, forecast the financial implications over the next 12 months, taking into account expenditures related to major projects.

2. Develop Financial Projections

To create monthly financial estimates, start by projecting your income based on sales forecasts and estimating your labor, supply, and overhead expenditures. If your business has very limited cash flow, consider generating weekly predictions instead.

Next, input the expenses for the projects specified in the previous stage. You can use basic spreadsheet software or features within your accounting program for this task. Keep in mind that sales may not immediately translate to cash; only enter them as cash if you expect payment based on previous experience.

After documenting income and expenses, prepare a forecasted income statement (profit and loss) as well as a balance sheet projection. Don’t forget to integrate multiple scenarios into your estimates to anticipate the implications of each scenario effectively.

3. Arrange Finance

With projected figures in hand, it becomes apparent whether you will need additional financing. You’ll have to taking into account factors such as cost, risk tolerance, duration, and potential dilution, etc. Finding suitable sources of funding at favorable terms is critical to ensure liquidity and avoiding unnecessary strain on cash flow.

4. Break-even Analysis

A break-even analysis is an essential tool for evaluating your company’s revenue and potential expenses. It compares fixed expenses with the profit generated from each additional unit produced and sold.

Additionally, utilizing a break-even analysis can be highly effective in establishing appropriate pricing strategies. Furthermore, this type of analysis can provide insight into the number of units that you need to sell at different price points to cover costs. When setting prices, it’s crucial to strike a balance between generating healthy profits and maintaining competitiveness within your industry.

To conduct a thorough break-even analysis, it is important to accurately outline all costs associated with production. This ensures that the analysis is precise and beneficial for decision-making.

5. Backup Plan

No matter how meticulously you do it, a sound fiscal blueprint should always include provisions for unforeseen events by their very nature impossible to predict. Being proactive in setting aside emergency funds mitigates the negative impacts of unexpected disruptions, such as economic downturns, natural disasters, lawsuits, fatal accidents and sudden loss of key personnel. A risk management approach enables businesses and individuals to weather storms without jeopardizing overall stability and progress

6. Monitoring and Supervision

Creating a solid budgetary framework is the starting point of an ongoing process that requires constant vigilance and oversight. Monitoring actual results against planned benchmarks allows timely identification of discrepancies and prompt corrective measures.

Strict internal controls reduce the likelihood of fraud errors and ensure resources are allocated efficiently. A regular review of vital updates made also reflects evolving conditions to keep pace with changing circumstances

Things to Know When Making Your Financial Plan for Business

Creating a solid financial plan involves several key considerations to ensure your financial stability and achieve your goals. Here are some important things to consider when making your financial plan for business:

  • Set Clear Goals: Define your short-term, medium-term, and long-term financial goals. These could include buying a house, saving for retirement, or starting a business.
  • Budgeting: Create a budget to manage your expenses effectively. Differentiate between essential and discretionary spending, and allocate your income accordingly.
  • Emergency Fund: Build an emergency fund to cover unexpected expenses or financial setbacks.
  • Debt Management: Develop a strategy to pay off high-interest debts efficiently. Prioritize debts with the highest interest rates while making minimum payments on others.
  • Investment Strategy: Determine your risk tolerance and investment objectives. Choose appropriate investment vehicles such as stocks, bonds, mutual funds, or real estate based on your goals and timeframe.
  • Diversification: Distribute your investments in different sectors to reduce risk. It will help protect you from significant losses if one investment performs poorly.


Implementing a thorough financial planning process is essential for the success and sustainability of any business. From establishing a budget and managing cash flow to investing wisely and regularly reviewing financial performance, each step plays a vital role. A well-executed financial plan for business can provide the framework for growth, expansion, and mitigating potential risks, positioning the business for long-term success in a competitive marketplace.

If you need expert guidance and support in creating a robust financial plan for your business, don’t hesitate to reach out to KDG’s accounting team. Our experienced professionals are here to help you navigate the complexities of financial planning, ensuring your business thrives. Contact us today to get started on securing your financial future.

Steve Solt headshot

Beth is the accounting team lead at KDG. With over 20 years of experience managing and directing accounting departments for a variety of organizations, Beth brings a wealth of expertise. Among them: a leading nonprofit organization, a $12 million restaurant franchise, and an international manufacturer.

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