What was your incentive for first starting up a business? Was it passion, natural skills, a desire to make a change, or money? For many business owners, money is one of the strongest driving forces for their success, but it can also cause the most headaches.
Thinking about financial budgets and monitoring your finance model should be done on a regular basis. This is especially true for startups or small businesses going through a growth phase. More established companies can consider updating their finance model quarterly or twice-annually.
Here’s why you’ll benefit from maintaining a current finance model.
Measure Performance Accurately
Finances are a key indicator about the health of your business. Your finance model can offer insights on performance, so you can compare your expectations with actual outcomes. Thus, you can celebrate small wins, or tweak your model to try to improve outcomes.
To track performance in any business aspect, you can rely on quantitative data. Keeping your finance data up-to-date, you can observe trends and make informed decisions. Emotionally-driven decisions and blind guesses can make for an unstable future.
Make your Money work Harder
It’s important to be able to highlight strengths and weaknesses, so you can adjust as needed. While a solid finance model is needed to satisfy investors, it’s also a way to make sure you’re getting the most out of every dollar.
You’ll have access to all profits and expenses, both historical and forecasted. That way, you can control costs by cutting out any unnecessary expenditure. Figuring out how your company generates the most profit can help you improve revenue and tweak your business plan.
Plan for the Future
A finance model can help you see the bigger picture. It provides a way to bring together costs, revenue, profit, loss and cash-flow summaries. You can only make money when you understand where your money comes from now, and what steps you need to make to become cashflow positive.
Make projections for the future by studying your yearly growth so far. These are the figures that you as a business owner and possible stakeholders will want to see to predict future successes.
We recommend you don’t abandon your finance model for any longer than 12 months, as an absolute maximum. If you think it’s time to update your financial budgets and make a plan, call us on 1300 054 552 and we can offer financial advice to make a better future for your company.