In our last article, we examined end of the year review: budget vs actual as well as the importance of performing a budget versus actual comparison. Today, we will touch point on reviewing your financial plan for the year as it is the next course of action after analysing the previous years’ budget.
Starting out a new financial year entails a lot of planning and activities to ensure that the business starts out on a positive note. An easy way to go about it is to review the financial plan and its component and for most companies, planning had started before the end of the previous year.
What is a financial plan?
A financial plan is an overview of the business performance for a previous period and projections for the future. It involves gathering huge volumes of data from previous financial records as well as accessing past and current trends.
Another way to look at financial plan is by comparing it to a living road map of the business which shows its current position and direction for the future. In other words, it is essential to the success of the business.
To properly conduct a review of your business financial plan at the beginning of the year, we have highlighted some key areas to focus.
Review your business goals
The foundation of any financial plan are the goals the financial plan is meant to achieve at the end of any given period. The types of goals set by the company depends on its size and structure. However, some questions to consider when reviewing your financial plan at the beginning of the year include:
Were last year’s goals achieved?
If no, what were the reasons for failing to meet these goals?
How can we do better?
Once the business is able to answer the above questions, it will be easier to set new action plans for the new year.
Review your budget for the year
A budget simply refers to a list of planned revenue and expenditure for a given period. Whether the budget for the year has not been prepared or it is yet to be completed, it is important to cross check the assumptions made for each item on the budget and strategically make adjustments on some expenditures in line with the current trends. Doing this helps to create future plans and projections for the new year.
Gather financial records from the previous year
It is necessary to gather and review financial records from the previous year, as well as tax returns from the previous year. This is a perquisite for preparing the previous year’s financial accounts.
The sales and marketing activities for the year depend on the companies’ financial plan. Review the marketing plan for the previous and take note of things like the key market initiatives for the previous year, what strategies would be taken into consideration when planning this current year marketing plan, current trends in the market as well as risk mitigation measures.
In summary, reviewing a financial plan for the year is necessary as it serves as a guide for measuring performance at any given period. Business owners should endeavour to monitor and update it periodically to ensure it remains relevant.
We, at the OVAC group can help your business review its a financial plan for the year 2021 and 2022. Please email us at email@example.com for a free consultation.