You may get to know that not giving a good direction for your financial planning now could jeopardize the future of your business. After all, planning actions with your activities already underway is the same as trying to fix a car while riding. There’s little chance of it working out, right?

Thinking of helping you, we have organized this article further with several tips on how to structure a good financial planning. We’ll talk about setting goals, developing a situational diagnosis, projecting scenarios and much more.

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Set achievable goals

When we think of financial planning, it is natural that the word “goals” comes to mind. Goals that are a kind of north for actions that we think of implementing. And when setting these goals, it is more than necessary to keep your feet on the ground and choose something that is reasonable, doable.

After all, there is no point in putting things like “leading the market”, “earning 5x more in the next” or even “launching x new products/solutions in the first half of the year” at the top of your priorities if no element gives reality points to the possibility of realizing its objectives.

Therefore, stick to what is on the “spectrum of the possible”. As an example, we can cite goals such as:

  • close the year in blue;
  • pay all overdue employer obligations;
  • increase the profit margin by x% on a given operation;
  • retain x% of its customers responsible for a significant part of its revenue.

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Recognize the moment of your business

For your financial planning to really work, you need to know how to recognize the current situation of your business. That is, what do you see by analyzing the accounts? What actions were well succeeded in the last year? What didn’t work?

Your financial statement for the year, for example, will be very important to verify what the conditions are for promoting investments in the next year and maintaining enough working capital to guarantee your operation for the next few months.

It’s also a good idea to take the time to bring together the most strategic members of your team to assess what worked and what didn’t. This type of evaluation must be carried out by sector, with each area taking a position on what has been done.

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Create your own methodology for monitoring results

Creating your own methodology for your financial planning is very important, as it is not enough to replicate formulas from other organizations, given that your company has its own business model and several specificities.

However, there are some elements that cannot be disregarded by any type of financial planning.

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Check out what they are:

Cash flow

Even if it’s just projections, estimate your income and expenses month by month. Based on financial statements from previous years, you can have some predictability of what to expect.

This type of forecast will be important to predict the best periods to make important investments, pay suppliers and even carry out promotional campaigns to boost your sales.

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Working capital

Combined with cash flow, you also need to estimate how much working capital you need to honor all your commitments throughout the year. Some factors such as an increase in the volume of inventory, a large percentage of its revenues in credit sales and high default rates will require a more robust reserve.

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Variable costs

Variable costs are the main villains of any financial planning, as they are expenses that are difficult to estimate. Still, you can’t shirk the effort of making a good forecast.

One way to deal with so much unpredictability is to follow the evolution of the proportion of this type of cost over your billing. If you notice that the percentage keeps growing, evaluate the need to make structural changes in your operations so that the expense that currently represents a variable expense can become ordinary.

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Default rate calculation

Default has been putting the operation of several businesses at risk, especially in the commerce sector in the country. A survey by SPC Brazil shows that 61 million Brazilians have restrictions with credit protection agencies.

In such an unfavorable scenario, it is necessary to make a real task force for the recovery of debtors, in an attempt to mitigate the impacts of default. For this, it is advisable to include in your planning the organization of the collection sector in your company, in case this structure does not exist. Or, still, evaluate the viability of outsourcing the collection activity.

For this reason, in addition to measuring the default rate, it is necessary to foresee actions in order to recover revenues that will make all the difference to close the next year in blue.

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Design different scenarios when doing your financial planning

When it comes to financial planning, you cannot do without establishing different scenarios. This is because it is not possible to accurately predict the behavior of the market in which you operate, with the possibility of positive and negative events for your business.

In this way, it is always necessary to think of a planning starting from a positive scenario and another with a view to a negative scenario. As a result, over the course of the year you will have the option of adopting a range of different actions, depending on whether certain situations are confirmed or not.

After reading more of this post on our blog, we hope you will feel more confident about your financial planning. As already discussed here, do not postpone this work until the beginning of next year, as it is essential to start January with everything that needs to be done well delimited.

If you want to rely on experienced advice, capable of providing the best strategies for your company to improve financial performance, get to know CLM Controller’s solutions now.

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