As a business owner, the biggest mistake you can commit is not to have a solid financial plan for your company. The scope of question do you really need a financial plan is as the imperative establishment itself. Moving ahead without a budget and flying blind might seem amiable during the initial days of the business but, once it starts growing and the funds start spreading, everything will go haywire and if not rescued on time, the company might even fall flat on its face.
The biggest and the most glaring disadvantage of not having a business plan is investing in unreasonable areas with the hope that they will bear fruits in the long run. Also, it can so happen that because you have capitalized on all the funds that the business had, you are falling back on your friends, family, insurance agents and bankers to help you with the rest of the obligations. Entrepreneurs who follow this path of unruly investment end up spending a bomb in procuring services and products that are useless or at least, would not enhance the returns of the business in any way. Therefore, when you have a budget, you have a clear picture of the domains that stand as the topmost priorities and should be attended before everything else. hence, business planning chiefly accomplishes two purposes, a) you steer clear from capitulating to the unending cycle of borrowing and spending without purpose, and b) the indispensables of the business are focused on in due time.
Non-recurring expenses will soon start overshadowing
In a business, expenses like the payments of your employees, electricity bill, transport costs, and such others are classified under the category of recurring expenses as they have to be cleared at the end of every month and are intransient. Nevertheless, outlays such as paying the medical bills of an employee or reimbursements in the face of emergencies are non-recurring and don’t come with warnings. This is why these incidentals are either overlooked or not paid heed to assume that they are only one-time costs. But, the truth is, these payments are being made from the business reserve itself and if you do not have solid financial planning to track these expenses and render you with the amount left after each outgoing, soon all your assets will be stripped off thus, compromising the necessities.
There will be no clarity
Regardless of the size of your company, when there’s no rigid business clarity, you cannot expect to have clarity about its financial status. Running a business is essentially a two-way road where both the investments and returns should be at par with each other; meaning, neither of them can function without buckling support from the other. If your archives reveal that your profit margins and revenues are not broad enough to comply with the anticipations that you have from the company this year, then defying them and sponsoring your proposals might backfire only to open doors to an irrevocable financial gap.