Financial plans are essentially guides that enable business owners to get an idea of what their future financial results might be over some time interval.  Creating a realistic and detailed strategic plan removes some of the uncertainty that hovers around a business, and enables management to better understand the causal relationship between decisions and results-both in the past and the present. Without knowing and understanding the events and decisions that got them where they are, it can be hard for business leaders to have an objective view of where they're going.

"Managing your financial goals means being alert to trends in your industry and making sure you’re adapting to those trends," said Linda Pinson, author of Keeping the Books: Basic Recordkeeping and Accounting for Small Business.

Here are some pieces of advice small businesses can use when they are revising their financial plan.

Use business insights: budget vs actual comparison

Setting expectations is important, but to glean real insight about their processes, businesses need to compare their projections with realized financial results by making a budget vs. actual comparison. Thus, to properly identify financial problem areas within their operations, small businesses need to first have a financial plan that gives a realistic 12-month scenario, and then they need to keep track of their actual revenue and expenses. It can be extremely difficult to pinpoint an issue, if a business doesn't have a baseline for comparison.

Expect to see differences

Very few small business owners will see that their budgeted results and actuals are always the same, and this is to be expected. This information can be used to see the reasons for the variances in the actual budget to what was expected. The real goal for small business owners is to test their understanding of the relationship between business drivers. There are several trends that will take place throughout the year that will allow small business owners to see why their budget changed, which will help them build a strong budget in the future.

Embrace the review process

After understanding the budget vs. actual comparison, small business owners can make the necessary changes to their budgets. The conclusions drawn from the review phase will allow them to refine future expectations. Throughout the years, this process will help small business owners further understand budgeting, which will  hopefully lead to more informed decisions and expectations.

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