Travel advisors have the same question running through their heads: do they need a financial plan? Yes! Each person needs to be aware of their financial plans. Financial planning can help you figure out problems in a far more effective way, whether you’re managing a family, corporation or home-based business.
It can better prepare you to deal with scenarios and circumstances that may necessitate immediate financial assistance. It creates a mini-roadmap for you to follow as you go through the procedure. Below are five reasons to have a financial plan.
Internal reasons pertaining to the running of the business itself include:
1. Efficient decision making. With better financial information, you can develop better business plans. Knowing employee productivity and product line profitability can lead to improved efficiencies and better sales.
In down times, knowing your business at this level of detail can help you avoid unprofitable activities and costly miscalculations. You must gather information and prepare contingency plans when things are going well so you can weather the difficult times.
2. Cost savings. A company that has good financial information and good control over its finances can save money in accounting and legal fees. An agency also can improve the efficiency of the office by having data easily accessible.
3. Financial control. With the large volume of money processed by most travel businesses, it is essential that you be able to account for every dollar. Some aspects of your overall business strategy can facilitate financial control.
External reasons pertaining to business dealings with outside entities, such as tax authorities and lending agencies, include:
4. Tax issues. Because all businesses must file tax returns with state and federal governments, you must keep accurate accounting records to fill out those returns and to provide any other requested information. In case of an audit, your accounting information, systems, and controls will be your defense.
5. Sources of capital. If your business seeks additional financing, your accounting information will be the basis for a lender’s decision. If you want to sell the business, your financial statements will be the starting point for setting a price. Also, a well-constructed accounting system and financial plan will indicate to a lender or a buyer that your business is well-run and well-managed.
The financial plan is just that—a plan. It is a guideline and a benchmark, not a concrete, fixed, or unchanging document. Deviations from the plan are to be expected, and their presence signals that attention is needed. Not all deviations are bad; your projections may have been too conservative or something may have changed in the market (such as a competitor going out of business or a pandemic).
Other deviations may indicate that the market is changing and that you must alter your business, marketing, and financial strategies to accommodate those changes. Too often, business owners expect downturns to end by themselves, or owners wrongly attribute true changes in the market to the normal business cycle.
A good financial plan can alert you to the presence of those changes so you can adjust your strategies accordingly.
