How to Create a Business Financial Plan

Growing a successful business is all about planning ahead. A business financial plan is a tool for decision-makers, potential partners, investors, and lenders, that combines sales projections, cash flow analysis, costs, and key financial figures. Whether you've just started your trade business, or looking to grow, creating a solid financial plan that spells out short-term and long-term financial goals is the first step to reaching your business goals. 

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1. Set your goals 
2. Check your finances
3. Arrange financing
4. Plan for emergencies
5. How Tradify can help

1. Set your goals

What is your financial dream? Trying to achieve financial freedom requires a different plan than aiming to hit break-even. There’s no rule for when to set your financial goals, although the end of the financial year is a solid place to take stock and look at the year ahead. Do you have plans to purchase more equipment, hire additional staff, or change premises? These goals need to be factored into your long-term business financial plan. 

2. Check your finances

Get ready for a very angry accountant or a visit by the taxman if you don’t keep an accurate account of your business expenses. Before you can complete creating a business financial plan, you’ll have to take stock of your current finances and use this data to make some educated guesses about what your finances will look like in the upcoming year. A job management system, like Tradify, allows you to track your finances from the initial quote to the final invoice.

Tradify has a range of tools to help trade businesses monitor their financial health and help prepare for the future, including integration with the following accounting software: 

• Xero
• MYOB 
• Quickbooks
• Sage 

Expenses

Understanding where your money is going is the first step. Tracking your fixed costs and one-off expenses helps paint a complete picture of your financial health and helps spot areas that need attention and form the basis of your ongoing costs. 

These may include:

• Staff salaries
• Accountant fees
• Tool purchases
• Rent
• Insurance

Sales forecasting 

Forecasting your finances should be a tad more accurate than guessing the weekend's weather. Keeping an accurate account of your expenses and average workload month-by-month, as well as regularly assessing your charge-out-rate and profit margin, allows you to prepare your projected income statement and balance sheet. These should consider a mix of scenarios, from most likely, to optimistic and pessimistic and should include costs for identified projects. 

Looking to implement a proper sales process in your small business? Try our easy one-page Sales Process Template

Cash flow projection

A cash flow projection forecasts your upcoming financial health over a chosen period. While a cash flow projection is an estimate, you're not exactly plucking numbers out of thin air. The goal is to ground estimates in data rather than speculation. Tradify’s Cash Flow Template for Tradespeople is designed to streamline this process and provide a clearer financial outlook. 

Is it time to charge more? Try our free Charge Out Rate Calculator 

2. Arrange financing

How will you finance your goals? If your cash flow projections are coming up short,  will you need to borrow money, rely on personal savings or try for a business loan? Otherwise, certain goals may need to be postponed. 

An alternative solution could be to see if your trade business is eligible for Government financing. 

 Here are some links to get you started:

• 🇺🇸 USA - SBA provides limited grant funding to eligible businesses.
• 🇬🇧 UK - Start-Up Loans of £500 to £25,000 are available to start or grow your business.
• 🇦🇺 AU - Check if you’re eligible for a range of grants that vary between states.
• 🇳🇿 NZ - Government grants, advice and mentoring are available, depending on your business.

3. Plan for emergencies

Using historical data and clear projections is the best way to accurately predict your future finances. Except, life has a funny way of messing with your best-laid plans. Giving yourself a clear margin of error means you'll be better prepared should tragedy strike, a global event occur, or machinery break down! Establishing an emergency fund or securing a flexible line of credit means your business is better prepared should the worst occur. 

For additional support, check out our guides for business insurance for the trades: 

• Business insurance guide for tradespeople 
• What is business interruption insurance?

4. Monitor

What is the point of a plan if there's no follow-through? Regularly referring back to your goals and budget throughout the year will allow you to identify any outliers and your your finances on track should they start to skew. External factors, like inflation, may impact these plans. Keeping on track with your business's financial play throughout the year will involve comparing actual financial outcomes with projections to identify discrepancies and adjust plans accordingly. 

5. How Tradify can help

Tradify makes tracking your business expenses easier by allowing you to seamlessly record all your financial information from quotes, staff, material costs and invoices. You can track predicted costs in your Quotes to actual costs incurred on a Job. Tradify also offers powerful tools to keep track of time worked. You can easily add time worked on jobs with manual timesheet entries or use our live timer. Additionally, you can add different billing rates to differentiate between your types of work or experience levels.

Get your admin sorted and start experiencing the benefits of an organised business. Sign up for a 14-day free trial with Tradify. No credit card required. No commitment. Or pop over to one of our live demo webinars to see Tradify in action.

This article is not intended as financial advice. Always check with your accountant before making any changes to your business expenses or financial plans.