How to Create a Financial Plan for a Business? [5 Easy Steps]
By Maricel Sailalam, Finance Director
The year 2020 has been challenging as businesses around the world have had to rapidly shift their business models to ensure continued relevance in a time of crisis. Companies need to pivot to a new approach to financial planning and performance management—one that informs rapid realignment of plans and actions, and ensures organizational resilience. This is to protect both the business and its people.
Financial planning has never been a particularly easy task, but the spread of this novel coronavirus has made it even more difficult. Clearly, companies’ existing plans and assumptions have been revised, revisited, and recalibrated in light of the rapidly changing global health situation, which has economic effects across all industries.
TeamAsia is continuously adjusting to the new business landscape through careful planning, and pivoting our business model. Not only did we shift to a work-from-home arrangement for the majority of our workforce, but we’ve also launched new offerings to showcase that we are the leaders in next-level experiences. While planning for the future can be daunting, companies can make smarter business decisions and have a resilient continuity plan by looking into the following steps to pivot plans and operations:
1. Get a Clear View of the Company’s Starting Position
You need to assess the financial performance of the company. How many of your targets have you reached? How much more do you need to reach your goals? Which of the prospective clients/pitches can still come in given that they are also in the same situation? All businesses have been affected by the pandemic, and you need to look at the bigger picture.
2. Build a Fact Base of the Company’s Standing, and Use it to Develop a Range of Scenarios
The future is uncertain, but it’s important that companies analyze the possible scenarios moving forward. Take a look at your pipeline and the probability of bringing in projects. You also need to take into account overhead expenses such as office space rent, utilities, taxes, and the salary of your workforce. Given your manpower and areas of expertise, are there any new services your business can offer? Given the current landscape, your company may have to recalibrate its goals.
Seeing the significant impact of the pandemic on our business, especially our finances, we explored different ways to pivot and create new revenue streams to ensure TeamAsia’s continuity and sustainability. As such, we recently launched our trademark Integrated Marketing Experience (IME) approach along with a roster of new projects to better support our continued growth despite the pandemic.
3. Align on a Financial Plan
Based on your analysis, the company needs to make projections ranging from worst-case scenarios to more realistic ones. How much do you need to be able to keep the business going? Do you need to recalibrate your targets given the current business landscape? One should remain hopeful, of course, but it’s important to be pragmatic and make room for contingency plans. Given that quarantine guidelines in the country change every 15 days, your company’s financial plan should be agile enough to adjust accordingly. While the pandemic is still ongoing, our finance teams regularly review finance reports and cash flows and ensure the company is ready for all possible scenarios. Our recommendation: pick a date (week, month, year) and plan towards that. As you inch closer, then extend that time frame until we can all breathe easily.
4. Determine the Best Actions and Moves
This is the difficult part, but you just have to bite the bullet. Based on your current standing, you need to make hard decisions for the sustainability of the company. If there are measures that can be taken to cut operational costs, do so. The last thing you’d want to do is to rightsize, but there are instances where this is necessary to keep the business afloat. People over brick. We’ve all had to make tough calls — bring down operational costs, cost of sale, and repurposing budget allocations while expanding revenue streams. Our tip: Don’t get lost in the numbers. Look at it like a chess board, strategize, and make your move.
5. Identify the “Trigger Points” that will Prompt the Business to Adjust and Adapt Forecasts and Financial Plans
Have a risk assessment plan where trigger points are identified, and plans are readily available when they happen. Monitor both your company’s liquidity and earnings performance. Your company should have a plan A to Z given the unpredictability of today’s business climate. That is why TeamAsia formed its own Internal Risk Assessment Task Force to monitor everything, and make recommendations to our management moving forward.
Do you Need Help Creating a Financial Plan for your Business?
The COVID-19 pandemic is a global public health crisis with devastating consequences, but it should not end there. We need to make adjustments and keep moving on. Finance executives have a clear role in helping their companies through the pandemic both with determination and will to succeed. As experts of next-level experiences, we at TeamAsia apply our expertise in all aspects of our company, and that includes financial management amid a crisis. In these uncertain times, we need to make smarter decisions to keep our businesses afloat and come out of this crisis stronger than before.
