Financing Strategies in a Business Plan

A large part of the business plan for any small business is the financial section of the plan. The financial section includes the income statement, cash flow statement and balance sheet. For new businesses, these financial statements will be projections, whereas for an existing the business the section will contain several years of history as well as projections. In addition to statements, the plan should include the financial strategies of the business in how finances will be handled.

Financial strategies are a core element for any business and they ultimately form the backbone of the business structure. Managing finances and pursuing and securing revenue is critical to the success of any business.

Cash Flow Management

The income statement and balance sheet of a business may look great on paper, but if the cash is not properly managed, the small business can quickly go under. Part of the financial strategy of the business plan will detail how cash will be used in the business. This includes identifying an amount that will always be in reserves as well as how major expenses will be paid. By laying out the financial cash strategy ahead of time, it will make financial decisions easier about when to write a check and when to access a line of credit during normal business practice.

Planning for Purchases

Any purchases made through the business, particularly large purchases, should have detailed guidelines in the business plan. This will determine which purchases will be made with cash, a line of credit and with a credit card. This strategy will also outline taking advantage of the terms of suppliers.

Pursuing Outstanding Bills

If the business is not properly managing it's own receivable, it can be devastating to the financial health of the business. The financial strategy should detail the collections plan. This may include dedicating in-house staff to following up with overdue customers or turning them over to an outside agency. It will also specify late fees and if deposits are due before products and services are delivered for new customers.

Investments for growth

Although a specific investment strategy may not be able to be detailed in a written plan, general guidelines should be given to management. This includes a percentage of money invested in high-risk portfolios vs. lower-risk portfolios.

The investment section of the plan will also include guidelines of when approval is needed to make changes to current investments or to liquidate investments to cover business necessities.

Big Picture Considerations

The financial strategy of a business plan should be a general guide. While some specifics, such as approval authorities can be outlined, it will be difficult to account for every possible financial scenario that may arise in the business. 

However, the financial strategy should be enough of a guideline to direct the basic staff of the business in conducting the financial aspects of the business from paying for purchases to making payroll.