Corporate finance isn’t just a function unconnected to the real operations of a company. Virtually all decisions made in a business entail financial implications, and any decision that involves money is a corporate financial decision. Corporate finance is simply how to best raise money and utilize it. Corporate finance is comprised of managing the necessary finances and its sources.
Evaluate your strategic plan
Financial needs to start with your company’s strategic plan. You must think about what you plan to accomplish at the start of a new year and get answers to these series of questions:
- Do I need to expand?
- How will this plan affect cash flow?
- Do I need updated resources?
- Do I need more equipment?
- Do I need to hire more staff?
- Will I need financing? If yes, how much?
Next is to assess the financial impact in your next 12 months of operation, including expenditures on major projects.
Create financial projections. Develop monthly financial projections via records of your expected income based on sales forecasts and anticipated expenses for labor, overhead, supplies, and others. Businesses with tight cash flow may consider weekly projections. Next is to plug in the costs for the projects identified in the previous step.
For this, you can use basic spreadsheet software or tools an accounting software. You can’t assume that sales will convert to cash right away. Enter them as cash when you expect to get paid, depending on prior experience.
Prepare a projected income statement as well and a balance sheet projection. You can also add various scenarios balancing being optimistic and pessimistic for your projections to assist you in anticipating the impacts of each one.
It’s also wise to get guidance from your accountant when creating your financial projections. Go over the plan together since you will be personally seeking financing and defending the plan to your banker and investor.
Plan for unseen circumstances. Things happen whether we like it or not. What would happen if your finances suddenly depreciated? It’s always a wise idea to have emergency money sources before you actually need them. Possibilities include keeping lots of room on your line of credit or maintaining a cash reserve.
Monitor changes. Compare actual results through the year with your projections to assess if you’re on target or need a couple of adjustments. Monitoring will allow you to spot financial problems before they arise or get out of hand.
Get financing. In this step, it’s time to use your financial projections to see your financing requirements. Approach your preferred corporate finance provider to discuss your options. Well-prepared projections will aid in reassuring bankers that your financial management is solid.
If you lack expertise or need more research, consider checking out a loan provider’s website to get corporate finance expert help for putting together your financial plan.
Banks with demonstrated expertise in corporate finance can help you reorganize your business goals through various financial products and solutions. For instance, they can support you with how best to finance your next project or suggest loans to meet your financing needs.