Your dreams and goals require a solid financial position to obtain. From opening a new location to retiring to travel the world while your kids take over the company, you must manage your finances. Finance, like other industries, has its own rules, laws, and jargon. This makes it challenging for you to make all the right moves.
What Is Financial Planning?
Financial planning evaluates your current earnings and the potential of future earnings to determine a way to plan for certain events. These events can include:
- Estate planning
- Creating trusts for family members
- Payment of taxes and future deductions
Financial planning isn’t just for an individual. If you own a company, it’s always a good idea to hire a professional to help you with the financial planning of your company. Your financial advisor can help you set goals for the future of the business and monitor your progress, letting you know what is working and what isn’t.
Some common financial planning services for your business, include:
- Tax planning
- Representation in an Internal Revenue Service (IRS) audit
- Help to structure accounting records
- Billing services for invoices
- Management of accounts receivable and collections
- Management of vendor files and accounts payable
- Tax compliance and strategy to ensure proper deductions and payments
- Processing and reporting of payroll
- Financial reports
- Cash flow reports and analysis
- Help with technology solutions
- Analysis of employee benefits program
- Analysis of business processes to highlight areas for improvement
When you invest in financial planning, you gain access to an expert who can help make the financial decisions that guide you to your goals. If you’re a business owner, financial planning can help you with the day-to-day financial matters that consume too much of your time.
Financial planning provides an in-depth look at your current financial picture. With this information, a financial planner can project the path you’re on and the future of your financial picture. If you don’t like the future of your finances, you need to start making changes and improvements now. A financial planner can advise you on your next steps.
Why Is Financial Planning Important?
Financial planning is essential for both individuals and companies. But why is it important? Here are a few reasons why it’s important:
Understand Your Income
Sure, you know how much money you make, but do you understand how much you need to make to pay your taxes, pay your bills, and provide for your future? Financial planning does a deep-dive on your current earnings and the projections for future income without changes. This can help you address your future income needs now and adjust that path.
You want to pay your fair share of taxes, but not more than you need to pay. Tax planning allows individuals and businesses to determine the types of deductions they can take. In some cases, you may need to do things throughout the year to qualify for these deductions. This is where financial planning helps. It looks at your liability and normal expenses to identify ways that you can make changes to take advantage of more deductions.
Security and Savings
You may have a little or a lot of money in savings, but do you have enough to cover an emergency or extended period of closure? Financial planning helps you maximize your savings and plan for the unexpected, so you have security in times of financial slowdowns. If your business is seasonal, financial planning can help ease the hardship of the slow season.
You need to increase your cash flow so that you have the capital to make investments. For your personal needs, these investments might be in a home or stocks and bonds, while a company would want to invest in itself by expanding locations or product lines. Financial planning can help you pinpoint ways that you can make improvements to your cash flow to increase your capital. You might also need additional capital to make large purchases, such as a car or boat.
Benefits of Financial Planning
Financial planning takes time and a realistic look into your personal or business finances. This can be a daunting and rewarding time. You need to know there are benefits that make it worthwhile for you. Here are a few things to consider:
- Save money: When it comes to taxes, there are dozens of deductions and loopholes that you’ve probably never heard about. It seems like every year the IRS and the government rewrite the tax code. You need a professional to ensure that you’re taking advantage of all the deductions you meet the requirements to take. This puts money in your pocket.
- Time to do what you enjoy: You probably started your company because you had a passion for something, and it probably wasn’t accounts receivable and income statements. When you hire a professional to handle your financial planning, they can take over the accounting duties that consume so much of your time. This frees you up to do what you love and grow your company.
- Create a solid plan to retire in comfort: The dream for any business owner is to sell their business or pass it on to their business partner and/or friend and retire in style. While many business owners know this is the dream, they don’t understand it takes planning and work to make it happen. With a financial planner, you make better choices that help you realize your goal.
Hiring a certified public accountant (CPA) can take a lot of pressure off your shoulders. The professional financial advisor always has your best interest at heart and provides you with sound advice.