Five secrets to getting your financial planning right

Financial planning for your company can be a virtual minefield to navigate. If you are importing goods, the fluctuations in the exchange rate and the volatility of the Rand can make you feel like you are on a constant roller coaster ride. Changes in employee taxation legislation or something as simple as petrol price increases and e tolls can have the power to change a successful business to one that is left scrambling at the end of every month to honour financial commitments that the business has, not to mention paying their staff. Here are five secrets to get your financial planning right.

1. Consult an experienced financial expert to get your financial planning right

Most entrepreneurs know how to create a profit and loss statement and put a  balance sheet together. It seems simple enough; money comes in and money goes out for a variety of reason. But has the business done a budget (a realistic budget) that takes into the account all the necessary fluctuations that can occur, that impact the company’s financial status and wellbeing? Entrepreneurs are salesmen (or women) by nature. You started your business because you saw an opportunity where you could provide products and services that would service the market. Bearing this in mind, entrepreneurs need to consult financial experts, such as experienced financial managers or financial directors, to help guide, manage and grow the financial wellbeing of the business. Employing a full time financial manager or financial director may not be financially viable for the business currently. In cases like these many companies are turning to part time financial managers or part time financial directors to help guide them through the quagmire that is financial planning for the business. These financial experts are engaged on a part time basis (three days a week for example) to oversee, create systems and manage the financial planning for the business. These part time experts have the highest qualifications and have had years of experience successfully guiding companies with their financial planning. Companies such as The Finance Team outsource financial experts for this exact purpose.

2. Know how taxation legislation affects your business

Knowing and understanding how the current SARS legislation affects your business is critical. As much as tax is a swear word in most entrepreneurs vocabulary, knowing and understanding how the legislation can help your business is vitally important. There might be tax incentives that SARS offers to companies that you might not even know about. Go and consult with SARS to see where and how the legislation can help you. While this sounds like a great idea, most entrepreneurs and company CEO’s don’t have the time to spend days at the SARS office, this is where engaging a part time or interim resource could be most beneficial.

3. Accurate Cash flow forecast

Your cash flow forecast is the lifeblood of your business. Cash flow is the movement of money in and out of your business. It could be described as the process by which your business uses cash to generate goods or services for the sale to your customers , collects the cash from the sales and then completes this cycle all over again. When developing your cash flow forecast it is critical to take the following into consideration:

• How much cash does my business have
• How much cash does my business need to operate, and when is it needed?
• Where does my business get and spend its cash?
• How does my income and expenses affect the amount of cash I need to expand my business?

Again all these questions can be answered by your own or by an outsourced financial expert.

4. Stay on top of invoicing

With all that small business owners have to do in their daily lives, making sure that they get properly compensated may seem like a foregone conclusion, but you would be surprised how many business owners fall behind on invoicing their clients. A few mistimed invoices and some missed payments here and there can add up to thousands of Rands in both income and penalty interest,  that will have a negative influence on the business. Make sure you stay on top of invoicing your customers and do not hesitate to send out reminder notices should they not pay up by the invoice due dates. Remember, those who shout the loudest get heard.

5. Be frugal and budget properly

When the business is doing well it is very easy to spend money on unnecessary items. Yes, a Nescafe coffee machine may seem like a fabulous idea at the time, but a kettle and coffee granules can do just as well (remember it is not just the machine that costs, the coffee pods, electricity and servicing are costs that are incurred over and above the initial cost of the machine). The same goes for expensive office space, furniture and related costs, these may seem very affordable currently but will you be able to afford these if the company has a bad six months? Once you are tied into lease agreements you may only be able to make changes after 12 months (If you are lucky). What seems affordable now may very well not be in six months’ time.

Considering all these items listed above my biggest secret is to get the right advice and guidance to get your financial planning right. You wouldn’t  consult a plumber when you need a tooth extraction, the same goes for your business – always ALWAYS consult a financial expert with the appropriate knowledge and experience as early as possible if your feel you are in need of help.

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