Question

We all strive or should strive for financial security and we need navigational tools to guide us. Financial plans, financial statements and budgets provide direction by helping us work toward specific financial goals. What tools do you use to plan, monitor and control your financial status? Provide specific details as to how these certain tools are helping you achieve the financial status you are seeking.

If you do not incorporate tools, list 3 tools that would help you achieve a better financial status and explain how each tool would help.

Answer 1

Planning the finances of a business allows the owners to navigate the different stages of their business. Planning and managing requires key tools acquired through continual self-education. Sound financial planning allows business owners to anticipate opportunities and prepare for contingencies. It provides better choices when life's inevitable events occur.

BUSINESS PLAN

A solid business plan is the first tool that should be used in financial planning. Business plans list every critical aspect of a company. The plan begins with a short overview of the entire plan and a history of the company. The second part of the plan analyzes the market. It provides an industry description, identifies the target market and all strengths, weaknesses, threats and opportunities. The remaining areas of the business plan describe the company and how it will be managed. They include information regarding marketing strategies, what products or services are offered, and how the company's expenses will be financed.

BUDGET AND COST PROJECTION

One key tool for financial planning is to prepare a budget and project costs. To prepare a budget, you need to formulate a reasonable sales projection, factoring in peak and off-seasons. The budget will determine how much cash is available to the business. New businesses will include funding obtained through personal financing, bank loans, investments and other sources. Once money forecast is available, business owners can look at the different categories of expenses and determine how much to spend in each category. Most budgets are works in progress and are continually revised.

BREAK-EVEN ANALYSIS

A break-even analysis is an essential tool for financial planning. It predicts what gross sales volume the business must achieve to cover its expenses. All sales beyond this point are profits. For new businesses, owners should assess their early predictions and determine how accurate they were. Adjustments might be needed for the next financial period. Mature businesses benefit from this tool as well because they can check their current break-even point and look for ways to lower it and increase profits.

panning is to done on the basis of past data which the past Financial statements contain including information about the company's assets, liabilities, profits and losses. Understanding and preparing accurate financial statements is important to the success of a business. The balance sheet lists assets, liabilities and equity. The income statement lists revenues and expenses. Revenues minus expenses equals net income. Analyzing the relationship between the balance sheet and the income statement can pinpoint strengths, weaknesses and opportunities.