Four Ways to Create More Effective Financial Projections for Your Business
As a local Southfield bankruptcy attorney, we are there helping client after client as they face bankruptcy and work towards rebuilding their business. We have seen a variety of businesses come to us for help and as such we understand the predictors to bankruptcy. One of these indicators is the state of your business’s finances. Your finances will make or break your business, for obvious reasons. Using financial projections is the best way to forecast how your business will do in the future, and whether you need to make changes in the present to guarantee a better tomorrow.
Four Tips for Finances
Here are four ways to use financial planning to help your business succeed, and keep you out of bankruptcy court.
- Cash Flow
How and when cash flows into your business is critical. You need to have money in the bank, working capital, to keep your business afloat and allow you to make payroll and pay your bills. Depending on your type of business, cash flow can be cyclical, where you go months without any incoming cash, which can severely compromise your business. Proper financial planning requires you to focus on cash flow and plan for both flush months as well as the months where income just trickles in.
- Sales Projections
Don’t rely on guesswork when it comes to your sales projections. Use current sales data to forecast for the upcoming year, taking into account trends in your market and industry. Knowing how many sales you can expect allows you to project your income, which is information that you need to know.
- Operating Expenses
Operating expenses are the bills that keep your business running, such as rent, utilities, and payroll. These expenses must be paid, regardless of whether your company has incoming cash that month or not. You must find ways to plan for operating expenses, while also maintaining an emergency fund for the surprise expenses that just pop up when least expected. One costly emergency could put you out of business, so be certain you are financially prepared for one.
- Keep It Current
Financial projections shouldn’t be just an annual event. Financial planning should be done at least quarterly, and in some cases, monthly or even more frequently. You will be better able to spot trends and any potential problems if you plan your finances thoroughly and as early as possible. Plan for mistakes and incorrect projections. Things will go wrong and you will probably have to adjust expectations from time to time. This is okay, especially if you are on top of your company’s finances.
Financial planning for your business is key to staying in business. A little work up front will pay in spades down the line. Please contact us today if you’d like to learn more! We are here to assist you with legal advice and aid for your business needs.