We know we don’t need to convince you to make financial goals. We’ve all heard the: “don’t spend more than you make,” and “keep overhead low” advice. But those are a little obvious. These five approaches to goal-setting are actually attainable and will help you scale.
Setting Financial Goals for your Business in 5 Steps
1). Know Your Business Cash Flow
Review your cash flow statements regularly. If you have seasonal fluxes of cash, prepare accordingly. Don’t blindly spend while you have money coming in, only to be strapped for cash later during your slow season. Part of this means having accurate financials on-hand to really understand your free cash flow. Any predictable income is vital when setting financial goals for your business.
2). Have a Back-Up Plan
Every budget should include a cash cushion. Maybe you will have an unexpectedly large tax bill or an operational emergency. What would you do if your landlord suddenly sold your space? Do you have a safety net to find a new space to buy or lease for potentially more than you are paying now?
We’ve seen businesses find themselves in hot water when their industry peers suddenly dropped prices and they weren’t prepared to keep up with the change in market price. When building your contingency budget, also remember to take into consideration any previous expenses that had large variances.
3). Arm Yourself with a Team of Experts
Save yourself the time (time = money, remember?), and look to hire a CFO or outsource your accounting. Yes, you could consider this a self-plug, but if you’re not an accountant, why take up ample amounts of your time trying to right the balance sheet and trying to rework statements. Your financial expert should even be able to create your contingency budget and monitor the ebb and flow of your cash to ensure you can always meet your financial goals.
4). Set One Specific Financial Goal Each Fiscal Year
Having sales targets is great, but crafting one definitive goal for each year will set yourself up for an ambitious year. Every year. Maybe it is to increase your safety net we mentioned above. Or maybe this is the year you are going to pay off your business loan completely – or a portion of it. It is never a bad idea to define your investment objectives. Remember when Amazon had unimpressive profits but were reinvesting a TON in growth and acquisitions? And now have been reporting net income over $10 billion since 2019? That said, the goals don’t have to be huge. They just need to exist.
5). Curate a Culture for Growth
Remember to loop your team in on the financial goals each year. Better yet, include them in the planning by providing them with a road map and updating them quarterly. Your staff will be more likely to buy into that vision, which creates a common purpose and a growth culture. If you offer incentives, remember to connect them directly to your fiscal objectives.
Whatever you and your accounting team determine to be your financial goals for the year, remember that keeping overhead low is just one small piece to helping your business scale. Sounds like a lot? Start at step one with our outsourced controller services and get your accurate monthly cash flow statements with a faster turnaround.