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Financial Management: How To Make a Go Of Your Business 1 - Financial planningIntroductionThis booklet was designed to equip instructors of the National Small Business Training Network course "Financial Management: How to Make a Go of Your Business" with the information required to acquaint the small business owner/manager with the basic tools of sound financial management. It supplements the course guide materials; it is not intended to replace their use by the instructor. The booklet may also be used by anyone interested in learning the concepts of financial management. I. The Necessity of Financial PlanningThere is one simple reason to understand and observe financial planning in your business--to avoid failure. Eight of ten new businesses fail primarily because of the lack of good financial planning. Financial planning affects how and on what terms you will be able to attract the funding required to establish, maintain, and expand your business. Financial planning determines the raw materials you can afford to buy, the products you will be able to produce, and whether or not you will be able to market them efficiently. It affects the human and physical resources you will be able to acquire to operate your business. It will be a major determinant of whether or not you will be able to make your hard work profitable. This manual provides an overview of the essential components of financial planning and management. Used wisely, it will make the reader--the small business owner/manager--familiar enough with the fundamentals to have a fighting chance of success in today's highly competitive business environment. A clearly conceived, well documented financial plan, establishing goals and including the use of Pro Forma Statements and Budgets to ensure financial control, will demonstrate not only that you know what you want to do, but that you know how to accomplish it. This demonstration is essential to attract the capital required by your business from creditors and investors. What Is Financial Management?Very simply stated, financial management is the use of financial statements that reflect the financial condition of a business to identify its relative strengths and weaknesses. It enables you to plan, using projections, future financial performance for capital, asset, and personnel requirements to maximize the return on shareholders' investment. Tools of Financial Planning This manual introduces the tools required to prepare a financial plan for your business's development, including the following:
The business owner/manager who understands these concepts and uses them effectively to control the evolution of the business is practicing sound financial management thereby increasing the likelihood of success. |