Businesses that have neglected financial forecasting processes have missed out on several benefits and potential opportunities to expand and further develop their operations. By not having a clear and realistic picture of what their finances will look like three, six and even 12 months down the line, SMBs will have an extremely difficult time attempting to plan expenses and expected revenue. Small companies that are crafting their first business budgets have a chance to build and follow sound financial planning practices that they can then use for years to come. Below are three tips to help first-time budgeters craft an encompassing and effective financial strategy.

Understand and articulate your financial planning goals

The main focus of nearly every business is to try and generate the most revenue as possible. But business owners need to be realistic with their goals. Startups don't turn into Apple or Microsoft overnight. It takes time, dedication and careful and meticulous planning. Setting milestones and objectives are key to your business, but they can also be useful during the budgeting process. When crafting their first budget, SMBs should develop a list of short-term goals – monthly goal markers – as well as long-term goals like getting out of debt or going public. Including these objectives into the budget may enable businesses to accomplish their goals faster and more efficiently. It can be hard for companies to reach established business goals if these objectives are not in the books and are not documented and properly resourced. 

Build a sustainable process, revisit it regularly

Businesses that are wasteful with their resources will be the first to say they need to refine their business model. It will take a while, but the payoff is worth the effort and energy. After revising their business strategy and crafting a detailed budget to follow, companies need to be regularly reviewing their financial plans. Too many businesses spend days developing a sustainable business model and budget, only to go months without revisiting them! To effectively stay on budget and practice sustainable processes, business leaders need to make sure they're giving their strategic plans the time they deserve.

Identify key business drivers

Turning a profit is important to all of business owners, and one of the best ways to do that is to understand what events drive revenue creation. For instance we all know that making a sale brings cash in the door, but what are the events that led up to that sale? These events are some of your core business drivers. After a firm has been around for a while, business owners must adjust their financial plan to cater to its key business drivers and focus on them. Managers who understand the relationship between business drivers and sales typically get better results than those who focus on sales alone. Understanding this correlation requires careful planning and evaluation.

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