The financial plan that every entrepreneur should handle

Control of your finances is important for your future and that of your venture, so we tell you how to manage it and what you should keep in mind to manage your money successfully. Could it be that the vast majority of millionaires are interested in being entrepreneurs to manage their time and be their own boss? The answer for sure we don’t have, however, is the perspective that many people have today about young people. And not just as an example of entrepreneurship and independence, but rather as a figure of rebellion, of laziness, who like easy things, who do not care about their future, much less the administration of their finances.

Anyway, there are many points of view and great debate, the truth is that they are the main public of world trade, some studies as Sage, a business management software company, and estimate that in 2020 they will be 50% of the workers of the world.

Young people have a different expectation and that is perhaps what drives them to act many times taken in the face of the possibilities that are presented to them and with the decisions they make. It’s okay to be risky but it’s also good to be organized and strategically raise what you want to do and where you want to go. Because when we go out on an uncertain road without knowing anything, we can crash.

Now, to make an effective financial plan and that is consistent with your business idea you must take into account the basic concepts that we will present below presented by allfinancedirectory.com:

1. Determine the viability of your company: here you have to take account; basically it is to make an economic analysis with calculations that allow you to measure the profitability of your business. To do this you must consider three things:

The necessary funds are the contributions that are in the capital, then you must take into account, if the contributions are own or from third parties and how much is.

  • Calculate the expected benefits: that is, determine what the results would be in terms of profit.
  • Learn how the company is: here you must take stock, look at the financial statement.

After this, identify if your project is viable as follows:

  • The investment budget (the resources to start up a company) must be covered by the financial budget (the economic funds that finance these investments).
  • The sufficient benefits are obtained, after the exercise Income – Expenses
  • Liquidity, that your business or small business has the capacity to meet your immediate payment commitments. To determine this you must do the following operation: opening balance + collections – payments = final balance

2.  Necessary financing: you have to determine how much money you need for the activities you have in mind to develop. Make the list and then determine how you can cover this need for resources if you require loans or investment from any third party.

3. Collections: are the entries that occur in the treasury of the company, that is, income from customers or suppliers.

4. Payments: are the outflows of money, that is, the resources used by the company or the employer to cancel purchases, suppliers, expenses and credit cancellations.

5. Expenses: refers to the acquisition of goods and services for production, that is, the purchase of machinery, raw materials, technology, energy, etc.

6. Revenue: results from the sale of products or provision of services.

7. Establish the costs of what you sell: it is important that you know three concepts: variable costs, fixed costs, and break-even point. It is assumed that at this moment you already know what you want to sell and you also have an idea of ​​the price you want to put, then, knowing your costs and the price, you could know how many units of your product or service you have to sell to not lose money and start To receive profits.

  • The variable costs:   these are those directly associated with sales and the elements that are incorporated into the production process.
  • The fixed costs: they are the ones that you already know that you have to pay at certain times, for example, rent or salaries.
  • The equilibrium point: it is the intermediate one, as its name indicates is the point at which neither profits are obtained nor losses are generated. The point is when total revenues and total costs (variable costs and fixed costs) are equalized.

8. Initial investment plan: these are expenses that are not consumed in a single production process but over time. For example, machinery, industrial equipment, facilities among others.

9. Cash flow: this is the ability of the company or business to generate funds in a given period. Said cash flow comes out of the difference between income and expenses.

10. Investment recovery period: make counting; here it is about discovering how long you will recover the investment you made at the beginning of the business. Remember that time depends on the sum of the cash flows that have been generated over time. It is important to keep in mind that the shorter the time, the greater the liquidity of the project or business.

11. Economic profitability: this is the benefit, that is, the results (profits and earnings) before taxes and total assets. Follow these because these concepts will help you to have effective, complete and organized accounting and finance for the good results in the growth of your projects or businesses.

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