The ultimate purpose of a company is to make a sustainable profit and continue its existence. This is only possible with healthy Financials. To ensure that, companies sell products or services and buy some commodities to be able to realize these sales.
Profitability wars start at that point.
Basically, if you sell more than you spend, you are considered to be profitable. You know your actual sales and costs today and calculate your operating profit easily.
But what about tomorrow, next month? Or what about next year? 5 years later?
It looks too far, doesn’t it? Unfortunately, it is not.
In this fast-growing economic environment, borders are no more an issue and companies do business all over the world. You have a company in Thailand and you can sell your products to Australia with one click. The competition is wild and you need to guess what will the economy look like in short and long term to adjust your pace.
Here comes Financial Planning to the stage.
With a healthy forecasting, you will know how much you will sell or spend in the following years. This will show you your future P&L, cash flow and let you to make analysis over your Financials. During the year you can compare your actuals with your plan and you can do adjustments to your budget to be inline with your targets.
Planning helps you to focus to the right goal, right products and right organization. Without seeing your future financials, it is impossible to see the future of your company. You also build your strategy on the figures of your Financial plan, thus it is crucial to see the long-term financials for a business owner or the management.
Financial Planning helps in reducing the uncertainties which can be a hindrance to growth of the company. This helps in ensuring stability and profitability in concern.
The Financial Plan describes each of the activities, resources, equipment and materials that are needed to achieve these objectives, as well as the timeframes involved. A financial plan creates a roadmap for your money and helps you achieve your goals.
Long story short, every company who wants to build a good strategy to be in the game in the future should have a short, mid and long-term budget and follow up during the year.
Tolga Aybars
Co-Founder
Planard
