As an owner of a small or mid-size business, you may struggle to find adequate time and even resources to invest in strategic planning. In order to build a healthy company that is financially stable, there are some aspects of analysis, forecasting and goal-setting that are critical.
Take a look at four of the most important steps to prioritize in your strategic planning:
Cash Flow:
It’s important to have a deep understanding of your business cycle and how cash is handled during high and low points during that cycle. A cash flow shortage can significantly affect your business, preventing you from completing payroll or paying your suppliers on time.
Implementing a good cash flow forecasting process will help you monitor cash flow, eliminate unnecessary costs and determine whether you are prepared for an unplanned crisis or growth opportunity.
Reporting:
Failing to produce financial reports in a timely manner can have wide-reaching consequences. Investors and lenders may lose trust in your leadership or you may compromise your regulatory compliance. You may limit future growth opportunities and access to capital from potential investors. It can also lead to hefty fines.
Capital Mobilization:
There are several good reasons to include capital mobilization in your strategic planning:
Slowing Growth:Â Without ample capital, you may miss out on opportunities for growth or expansion.
Operational Challenges: If you don’t have enough liquidity through access to capital, you could negatively impact your day-to-day operations.
Reputational Damage: The inability to make payroll and pay suppliers or lenders can create an image of financial instability.
Increased Borrowing Costs:Â You may be pushed to bridge a financial gap using credit that comes with a higher interest rate.
Vulnerability to Crisis: In the case of a security breach, natural disaster or other unexpected situation, you won’t have reserves to address emergency needs.
Financial Planning:
No matter how small or large your business is, financial planning is a critical part of your strategy. Financial planning enables to you to correctly allocate funds in a way that aligns with your business initiatives. Failure to prioritize this step can have a number of negative consequences, including insufficient liquidity, difficulty covering standard operating costs and a loss of trust with investors and lenders, as well as other stakeholders.
It’s easy to get overwhelmed by strategic planning, particularly if you sense that you’ve gotten a bit behind with any of these important areas. But that’s why we’re here. At The Power CFO, we don’t just handle the technical aspects of your strategic planning. We give you peace of mind so that you can enjoy running your business. Contact us to get started!Â
Comments