How To Build A Financial Plan For Your Small Business?

Friday, 20 May 2022

The financial plan is an indelible part of business planning. It helps to understand if the entity will stay afloat and determines its viability according to the estimates made for incomings and outgoings.

Professional Bookkeepers Melbourne are assigned the task of preparing the plan to create a blueprint for the financial management of the business. It allows the entrepreneur to become aware of potential challenges that can lead to financial distress, such as a shortage of capital or debts.

A financial plan is also needed to pitch the business idea to financial institutions and investors. Thus, business owners in Melbourne should be aware of the steps of creating a financial plan for their business. Let us help you understand this in detail. 

What is a Financial Plan?

A financial plan is a document prepared by the bookkeeper that allows the business owner to set the financial objectives for both the long-term and short-term. It also lays down the strategies for achieving these objectives.

It requires a professional to create the document because it needs meticulous analysis of the financial condition of the business in Melbourne and estimating its future income and expenses based on historical data.

If the plan is prepared for a start-up, the bookkeeper uses the available funding and projections to develop the plan and present it to investors. The financial plan helps the entrepreneur make informed decisions related to allocating funds to various business processes.

It makes them restrict unnecessary spending and helps them to stick to the budget. The plan gives a direction to the company about what they wish to achieve and how they can do it. Thus, every employee gets a target and knows the revenue goals of the business.  

How to Build a Financial Plan?   

A well-defined financial plan prepared by a professional bookkeeping company consists of the following financial statements and documents:

  • Income Statement

The income statement is the profit and loss statement that gives the details of the income made from the sales and the expenses during a quarter or a year. The bookkeeper estimates the revenue generated and the cost of producing the goods in Melbourne. It requires calculating the net profit and loss in a defined period to understand incomings and outgoings. 

  • Cash Flow Statement

Forecasting cash flow is essential to identify the actual financial health of the business in Melbourne. Sometimes the receivables can get delayed even though you have sold all the goods and have made profits on paper without receiving the money in the account.

Thus, it is vital to make cash flow projections that will help the business owner determine whether the business will be sustainable or not. The bookkeeper can easily figure out the shortfall in the future and manage the capital in a wiser manner. They initiate cash flow management strategies that ensure that there is no deficit.  

  • Balance Sheet

The balance sheet provides a list of the assets and liabilities and when this statement is combined with the other two documents mentioned above, the business owner can quickly gauge the bottom line of the business. 

Bookkeepers use the sum of the cost of all the liabilities and deduct it from the total value of the assets to get the net worth of the business. It gives an insight into the current position of the company in Melbourne by understanding how much you own and how much you owe to others. 

  • Business Ratios

The bookkeeper is not merely looking at the numbers superficially. They dig deeper to identify how each business function is performing, such as profit margin, accounts payable turnover, debt to equity ratio, etc. They use the financial statements to determine the gross margin, return on sales, return on investment, current ratio, etc.  

  • Personnel Plan 

The personnel plan is a part of the financial plan as it envisages the roles and responsibilities of different staff members in the organisation as it grows. The plan helps in determining the staffing needs of the business based on its work commitments and requirements. 

The bookkeeper uses this information to help the business owner in Melbourne understand how many people need to be hired and whether they should be recruited on a contractual basis or as full-time employees. They take into consideration the cost to the company and ensure whether the expense can be justified with the value offered by the recruit.   

  • Break-even Analysis 

The bookkeeper creates a plan for reaching the break-even point. It helps the entrepreneur to realise the volume of sales required to cover the costs of all the expenses and move towards revenue generation. 

  • Assets and Liabilities 

Financial planning requires keeping the assets and liabilities of the business in mind while generating the financial reports. Although the assets and liabilities are part of the balance sheet, they need to be identified and tracked by the bookkeeper separately.

The list of assets includes both current assets that can be turned into cash quickly and long-term assets are items that are bought for long-term use, such as real estate, vehicles, etc.   

  • Sales Forecast 

Calculating the sales for the next quarter and fiscal year is yet another essential part of bookkeeping. It helps the business owner in Melbourne to understand how much money can be generated by the business and how it will perform. It will be prepared considering the income forecasting to keep a check on the financial health of the entity.     


Small businesses often fail because they ignore financial planning and ideal utilisation of capital based on analysis and forecasting. Thus, the business owner must hire bookkeepers in Melbourne to keep things on track and succeed.

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