Gurbaksh Chahal on why every business needs financial management.

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Gurbaksh Chahal on why every business needs financial management.

Finance is the lifeboat that holds your business balanced. Without suitable finances, you cannot track your business successfully.

Finance is the lifeboat that keeps your business floating. Without appropriate finances, you cannot run your business effectively. Thus, you should deal with your business finances so that your business objectives are met without compromising any essential business functions. That is why every business requires financial management.

Gurbaksh Chahal says that the advantages of having a strong financial management system for your business are never-ending. However, the most prominent ones comprise:

• Maintain cash flows:

Cash flow is an important factor of business finance that guarantees regular inflow of cash and the outflow of money is in the correct direction. Financial management deals with all the features of cash flow, including credit management and taking care of exceptional payments.

• Helps you stay stable during lean periods:

Money is vital and limited for every business, particularly during the initial stages. Most companies work with restricted capital and hope to make it to the breakthrough point and gain income to think about further development. At this stage, appropriate financial management is essential to have an appropriate plan to manage every feature and have emergency backups.

• Assists in decision making:

One of the advantages of having a correct financial and credit management system is having an obvious picture of your finances. It allows you to make more well-versed decisions for the future. You can study your past errors and also predict the future better.

• Accurate financial reporting:

Gurbaksh Chahal states that every business needs to maintain its financial records: balance sheet, cash flow statement, and journals, to have a clear picture of its finances. Appropriate financial management enables you to keep your books up to date at all times.

While running a business is often enormously gratifying, it is always vastly challenging. With numerous demands on owners and urgent tasks taking precedence, it is not always easy to think about the larger picture and to find the time to put a correct financial plan in place. But, if you want to put the right building blocks in place to make a successful business, then it is financial management that is the cornerstone to building a business with expansive horizons.

Things to include in a business financial plan

Expenses and budgets: Most significant here are costs - separated into variable and fixed expenses.

• Sales projections: Project your predictable sales growth for the near future, and the cost of sales. You can break these down in diverse products, pricing groups, and other significant factors.

• Assets and liabilities: These will typically be separated from your P&L statement, and will definitely include startup costs and assets for new businesses.

• Profit and loss statement: You can create a cash flow statement, which attains a similar outcome. You essentially want to project money in and money out over the next three years.

• Hiring and team structure: This one is not necessary, but it makes sense to add as part of your business plan.

• Break-even analysis: Preferably, you will be able to recognize your break-even point within the coming years.

The financial section of a business plan is the most essential components, as you will need it if you have any anticipation of winning over investors or obtaining a bank loan. Even if you do not need financing, you should accumulate a financial forecast to simply be successful in steering your business.