There is one
simple reason to understand and observe
business financial planning in your business - to avoid
failure. Eight of ten new businesses fail primarily because of the lack of good financial
planning.
Business financial planning
affects how and on what terms you will be able to attract the
funding required to establish, maintain, and expand your business. Financial planning
determines the raw materials you can afford to buy, the products you will be able to
produce, and whether or not you will be able to market them efficiently. It affects the
human and physical resources you will be able to acquire to operate your business. It will
be a major determinant of whether or not you will be able to make your hard work
profitable.
This section provides an overview of the essential components of financial planning and
management. Used wisely, it will make the reader - the small business owner/manager -
familiar enough with the fundamentals to have a fighting chance of success in today's
highly competitive business environment.
A clearly conceived, well documented financial plan, establishing goals and including
the use of Pro Forma Statements and Budgets to ensure financial control, will demonstrate
not only that you know what you want to do, but that you know how to accomplish it. This
demonstration is essential to attract the capital required by your business from creditors
and investors.
