Financial planning is important, let's start there. However, for non-financial planners (and sometimes financial planners) it can be a source of crippling trauma coupled with a feeling of comprehensive mental breakdown. Or worse.
Worry not, here's some antidote for you i.e. some of the best practices that pretty much apply for both businesses and individuals.
1. Focus on the narrative behind the numbers -
We are expecting a 20% sales increase; you are expecting a 5% raise at work etc. All of that is the easy bit to incorporate in your financial plan. The difficult/important bit is - WHY are you expecting it? The reason, research, story behind the number is critical for any decent business plan.
2. Get buy-in -
A financial plan is useless on its own. The acceptance of the people affected by it is unbelievably important. The members of the family in case of an individual and senior executives in case of businesses are stakeholders whose involvement and acceptance determines the ultimate success of the financial plan.
3. Reduce reliance on yourself and your memory -
One of the most common advice that applies perfectly to financial planning is - automate and eliminate processes. Use online tools that automate your bank transactions, email financial statements to you/your customer automatically are some simple solutions that automate important tasks and frees you and your memory to focus on other important things (such as playing soccer).
4. Monitor and adapt -
If a financial plan is made every year or quarter and not adapted when circumstances change, it is pretty obvious how hollow the effectiveness is going to be.
A financial plan is more of a process than a final outcome. You have to always adapt and improve.
5. Include the how -
To improve the effectiveness of your financial plan - include details of how you plan to get there. Of course, you won't know everything but some details can form a great starting point. An increase in wages is forecasted - include the expected headcount; for an increase in revenue - add a note on new target markets etc.
6. Make it visual -
I know, I know - financial plans aren't the most visual things on our planet. However, some graphs and charts of critical items such as revenue growth, profit margins, customer acquisition etc. can be shown visually to increase impact because human beings are visual creatures. Also, a bit of colour in the usually black and white financial plans (without making it look like the festival of colours) will not be out of place.
Worry not, here's some antidote for you i.e. some of the best practices that pretty much apply for both businesses and individuals.
1. Focus on the narrative behind the numbers -
We are expecting a 20% sales increase; you are expecting a 5% raise at work etc. All of that is the easy bit to incorporate in your financial plan. The difficult/important bit is - WHY are you expecting it? The reason, research, story behind the number is critical for any decent business plan.
2. Get buy-in -
3. Reduce reliance on yourself and your memory -
One of the most common advice that applies perfectly to financial planning is - automate and eliminate processes. Use online tools that automate your bank transactions, email financial statements to you/your customer automatically are some simple solutions that automate important tasks and frees you and your memory to focus on other important things (such as playing soccer).
4. Monitor and adapt -
If a financial plan is made every year or quarter and not adapted when circumstances change, it is pretty obvious how hollow the effectiveness is going to be.
A financial plan is more of a process than a final outcome. You have to always adapt and improve.
5. Include the how -
6. Make it visual -
I know, I know - financial plans aren't the most visual things on our planet. However, some graphs and charts of critical items such as revenue growth, profit margins, customer acquisition etc. can be shown visually to increase impact because human beings are visual creatures. Also, a bit of colour in the usually black and white financial plans (without making it look like the festival of colours) will not be out of place.
