By Adam Caplan, Partner

If you have read any advice on what to do when you are starting a business, you will have probably heard talk of writing a good business plan.

For those of you who are years into running your business, those days of creating a plan and outlining all the ways you imagined your business growing might seem like a distant dream.

If you have not forgotten the art of business planning over time, you may have adopted a more streamlined approach as your company grows.

However, by not effectively keeping business plans updated, you might be missing out on cash flow that is essential to your future growth.

Financial forecasting

Have you considered where your money is going to come from in the future?

This is a question that becomes increasingly challenging to answer as the economic state of the world is in a state of constant flux, but it is a valuable question to ask.

Academics Siming Liu and Len Skerratt have analysed how effective business planning can open up new pathways for cash flow.

By forcing yourself to sit down and craft a business plan, you can assess your financial needs and consider when the time has come to seek new financial pathways.

The issue comes in the lack of reporting standards for private companies, which allows a more ad hoc approach to finances to be adopted.

Even if your business is not under constant scrutiny, acting like it is might give you the push needed to keep a workable, realistic business plan that lets you gauge your future financial health.

Growing out of cash flow management

One of the other big determinants in the quality of business plans and cash flow accessibility found by Liu and Skerratt was the size of the business.

Smaller businesses are still in the habit of crafting business plans, a holdover from their establishment.

This means that they are more aware of the resources available to them and thus can maximise their financial agility and reduce their forecast errors.

Medium and large private companies were found to have double the prediction errors compared to public companies, thus restricting the usefulness of their financial forecasting.

In the same way that you would not plan for a picnic without checking the weather forecast, poor financial planning will leave you out in the cold when it comes to growing your business.

As your business grows, do not let the success go to your head.

Remember the importance of the basics and keep a dynamic business plan on hand.

Minimising your forecast errors will allow you to realistically gauge your cash flow and open up new expansion opportunities.

For advice on crafting the business plan that will maximise your cash flow, speak to our team today.