Essential Financial Planning & Management for Business Success #3 Financial Management

Brysen Packer
May 1, 2024

Financial Planning for Businesses

Financial planning for businesses is like making a detailed shopping list before you go to the store.

It helps you know what you need and what you can afford, and it prevents you from spending money on unnecessary things.

Businesses can make better decisions and save up for significant expenses when planning their finances well.

This means they’re less likely to run into trouble because they’ve thought ahead about how to earn, spend, and save their money.

Profit First System Implementation

Implementing the Profit First system is a smart way for businesses to handle their money.

Instead of using whatever is left after expenses for profit, businesses using this system take their profit out first.

This helps them focus on making intelligent spending decisions with what’s left. It’s like saving a piece of cake for yourself before offering the rest at a party.

This method ensures that the business has money set aside for itself first.

I recommend reading Profit First” by Mike Michalowicz. It provides a great outline of how your business can and should operate.

“Profit First” introduces a unique accounting system where you prioritize profits instead of treating them as an afterthought.

By allocating profit as soon as income is received, businesses can ensure financial health and stability.

  • Practical Steps for Implementation: The book provides a clear, step-by-step guide on implementing this system in any business, big or small. It includes setting up multiple bank accounts for different purposes to manage cash flow more effectively.
  • Behavioral Approach to Finance: Michalowicz uses principles from behavioral economics to help business owners overcome natural biases that typically hinder financial success. This method encourages more disciplined and proactive financial management.

Behavioral Economics in Finance

Behavioral economics in finance helps us understand why people make their financial choices.

It’s like figuring out why someone might choose an apple over a cookie when both are available.

By understanding these reasons, businesses can better plan their finances and avoid common mistakes, like spending too much without thinking or being too afraid to invest in new ideas.

Financial Management Importance

The importance of financial management can’t be overstated.

It’s essential for a business to keep track of all its money, just like in school, where you must keep track of your homework and grades.

Sound financial management helps a business stay strong and grow by ensuring it doesn’t spend more than it should and saves enough for plans.

“Do not save what is left after spending, but spend what is left after saving.” — Warren Buffett.

For a bank, I recommend for three reasons.

  1. Cost-Effective International Transactions: Offers a transparent and highly cost-effective solution for international money transfers. This makes it an excellent choice for businesses dealing with overseas suppliers, customers, or partners, as it minimizes fees and avoids the high exchange rates typically charged by traditional banks.
  2. Multi-Currency Account Benefits: A multi-currency account is very helpful for businesses working with other countries. It lets them keep money in different currencies without changing it into their home currency. This saves money and makes it easier to pay for things and get paid by others in various countries. It’s like having multiple wallets for different types of cash, making managing it more straightforward.
  3. Cost-Effective Banking for Business: It helps businesses save money on their banking needs. This includes lower transaction fees, better interest rates, and services that help manage money without costing too much. It’s like finding a bank that doesn’t charge you a lot to hold onto your money or help you move it where it needs to go.
Team of professionals in a boardroom working collaboratively on laptops, focused on creating and analyzing financial statements, emphasizing teamwork in financial management and planning.
Photo by Campaign Creators on Unsplash

Effective Cash Flow Management

Managing cash flow effectively is crucial for keeping a business running smoothly.

Think of it like keeping enough water flowing through a garden hose — too little, and your garden dries up.

Too much, and it can flood.

Businesses need to ensure they have enough money coming in to cover the money going out.

This balance helps them pay bills on time, buy new supplies, and invest in growth opportunities without running out of cash.

“A budget tells us what we can’t afford but doesn’t keep us from buying it.”
— William Feather
Person holding a smartphone displaying financial statements alongside an open calculator app, emphasizing hands-on budget creation and effective personal financial management.
Photo by Kelly Sikkema on Unsplash

Creating and Managing a Budget

Learn to plan your business’s finances by allocating funds to various activities and monitoring these against actual expenses to keep your operations profitable.

This is tough. Spending money is far more fun than creating a budget. I recommend starting with a simple Excel budget. Then, move to software like Quickbooks, FreshBooks, or Wave. Quickbooks and Wave connect easily to your Wise account and can follow the “Profit First” method.

“Budgeting isn’t about limiting yourself — it’s about making the things that excite you possible.” — Elizabeth Warren

Understanding Financial Statements

Build and create cash flow statements, income statements, and balance sheets.

These documents are vital for tracking your business’s financial health and making informed decisions.

“Profit is the applause you get for taking care of your customers and creating a motivating environment for your people.” — Ken Blanchard

A cash Flow Statement is a financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Financial Forecasting helps predict future revenues, expenses, and capital needs. Use historical data and market analysis to set realistic financial goals. Forecasting is not about predicting the future but minimizing the surprise.

Vintage typewriter with a sheet of paper featuring the word ‘GOALS’ in bold, symbolizing the importance of setting clear financial goals for business planning and success.
Photo by Markus Winkler on Unsplash

Setting Financial Goals

Set clear, achievable financial goals to guide your business strategy and help measure your success.

“Setting goals is the first step in turning the invisible into the visible.”
— Anthony Robbins

We’ve covered essential financial strategies such as the Profit First system, effective cash flow management, and multi-currency accounts for global operations.

We also discussed the importance of behavioral economics in finance and the use of detailed budgets through tools like Excel and QuickBooks.

I recommend Business-in-a-Box to simplify the creation of financial documents.

This tool provides numerous templates for financial statements and budgets, helping businesses manage their finances efficiently.

Below is an infographic detailing the benefits of Business-in-a-Box, accompanied by an affiliate link for easy access.

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Focusing on these aspects of financial planning and management can ensure that your business remains stable and prepared to face whatever challenges and opportunities the future holds.

This strategic financial approach helps maintain a healthy cash flow and achieves business growth and profitability.


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However, if you use and purchase them, these companies may give me a small commission, which allows me to keep the lights on for writing and creating.

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