By far we have learned major parts of preparing a perfect business plan. Till now we have decided a goal, commanded a business model, done with the research and prepared a report on market analysis, made a marketing strategy and also selected the right technology for your business but now comes the fundamental part, how are you going to handle finances out of all this?
Rocking question! How to manage profit and how to fathom losses. Budgeting and cash flows are of grate significance and these are principle factors for financial planning. Finance planning provide a lot of benefits for your business in future times. Let us have a look at some essential components of business planning,
Expenses: Give a broad thinking to your expenses, try to calculate a turn around costs including fix expenses that are going to take place for sure like webhost, rentals, domain charges, payroll, bills and others similar ones along with variable expenses like marketing fees, maintenance charges and advertising fees. You can not be prices but you can put a nearby estimate. Also include all kind of taxes and interest rates that you are bearing.
Revenue Prediction: Prepare a future plan that must have how much revenue you are going to generate? How much product or services you want to sell? How much profit you want to earn? Keep time frames also in mind, like month, quarter, annual and three years. This will keep acknowledge you time to time and will let you know that are you proceeding in a right way or not as well as you business goal are achievable or you are playing too high bets.
Cash flow: This is a similar kind of statement to your income statement but it differs in creating entries as it takes collected revenue at first and afterwards it enter the expenses that you have committed. This document witness the input and output flow of cash. When you collect the revenue and have a in-flow of cash, it is more than the out-flow of cash, it is a positive sign and the difference will show you profit numbers but when the same situation goes quite the inverse, you are in loss. So this is why it become important for you to monitor cash flow.
Regular analysis- Do ascertain that your sales must be exceeding the number of the expenses that you are committing. It is important if you want to run your business longer as you will be getting an idea that how good your are going and where you should make changes and improvements. These regular analysis reports will also help you to attract investors for your business and in other future prospects.
Benefits of Financial Planning
- Financial planing helps you in deciding your financial goal and let you set a figure that how much profits you want to earn from your business.
- It will make you realize where you are making more than necessary expenses and where you need to cut down your budget. It also tell you that from where you can get more sales and where you should work hard in that section.
- If your goals and castles in the air, financial planning will introduce to reality and it will provide you a practical data which will be close to reality that what you can achieve and what you can not with available resources.
- Tracking your cash flow guides you not to go for negative cash flow and prevents you from getting losses. You will be informed with what you are earning and what you are expending, so you can balance the digits accordingly.
- Financial planning keep addressing you to your performance and your progress from time to time. Your graphs will keep motivating you to go for much higher and higher revenue earnings. It also assist you in tracking your growth in terms of finances and remain in touch with your goals.
- Planning finances prevents your business form falling to a null and becoming insolvent. It helps you in designing finances for future and prevent your business from failure and bankruptcy. Whenever you will be facing any decline in your business, it will keep alerting you on right timings.
- Your future plans will always be in your mind if you are spending your energy on financial planning. Planning for future plans will be easy as you will get a better idea of expenses and earnings with this kind of planning and you can also get investors for your business easily with this.
So this is it with financial planning to help you with your eCommerce business planning. If you have any question regarding financial planning, our eCommerce Business Consultants are always there to help you, contact us.
In case if you were unable to read our previous chapters of eCommerce business planning, you can read them right from here and plan your eCommerce business.