intelligent

I AM CONSTANTLY REMINDING THE SMES I WORK WITH THAT , WHILE THERE ARE A

MILLION OTHER PRIORITIES TO

BE SEEN TO ,

FINANCIAL PLANNING IS CRUCIAL AND SHOULDN ’ T BE OVERLOOKED .

Gareth Anderson , Head of Business

Management , Allica Bank

So , the first step toward good financial planning is to develop a clear appraisal of where your business is now , where you want to head to and financially speaking what you ’ ll need to help you get there . Every other decision down the line – whether investing in staff or marketing or cutting back on overheads – will need to reflect this reality .

Financial foundations

So , with that in mind , we can now recognise that financial planning forms an integral part of business and scenario planning .

With a clear sense of where a business is financially , SME owners can then begin to develop a wider business plan and allocate budget and spending toward that plan . One of the biggest flaws I see in business planning is owners and entrepreneurs letting their imaginations run away from them and developing business plans which aren ’ t anchored in the current financial reality and simply can ’ t be delivered . So , good financial planning will ensure your business plan and strategy are realistic , grounded in sound assumptions , with forecasts based on robust scenario planning .

Having a clear grasp of company finances however , and a clear objective of where you ’ d like them to be in half a year , a year and beyond , allows for smarter financial decisionmaking which will support business growth and financial health .

For example , if you find the need to invest is undermined by strained finances , a clear understanding of current spending will allow you to see where – if anywhere – cutbacks could be made to support investment . That way , an intelligent business decision can be aligned with broader business priorities . construction companies in recent years have seen the prices of materials rising , putting pressure on margins . Alternatively , it might be good news ; new investment or a significant client win .

All of these events mean that , no matter how meticulous your financial planning was in January , by February you could be looking at a completely different picture .

By leaving some stretch in your budget , however , some means of absorbing shock and steadying the ship when things get difficult , your business will have a much better chance of dealing with life ’ s twists and turns than it might otherwise . Good financial planning is therefore essential risk management and a good financial plan will anticipate what risks it can and set up strategies to mitigate and manage those risks .

Sustainable growth

Another area where some detailed financial planning will benefit your SME is in supporting sustainable growth .

Growing SMEs will often require finance to help them achieve their goals . Whether it ’ s short-term finance to get through a tricky month , or longer-term finance and funding for a significant investment , borrowing is a key part of the journey .

It ’ s crucial however that borrowing is both sustainable and affordable , and financial planning can help here . A clear financial plan

Smoothing out the bumps in the road

Another area where financial planning is key is in helping a business navigate the bumps in the road that will inevitably come .

As mentioned earlier , there are many financial and business events which we can ’ t plan for . A travel business might be impacted by extreme weather in one of its destinations . Many