How Do You Create a Financial Plan for Your Small Business?

A financial plan is an important roadmap that helps small businesses identify risks and profitability, check for compliance, such as how to register a company in Cambodia, for example, and lay the right foundation for growth and sustainability in the business. Creating one involves several processes and different factors to consider.

Why Does a Financial Plan Matters?

Business financing is one of the more complex parts of doing business, requiring the need to balance between debt and profit, while ensuring solvency. Then, there are outside factors you need protection from, including check fraud. Without a proper plan, you might make one financial mistake after another.

A financial plan gives you a clear view of where your business funds are coming from and where they’re going.
It provides you with insights into the operating costs, budgeting, and other areas of funding, helping you strategise for better cash management.
Provides you with a tool that can establish your credibility among banks, business partners, and investors. Your ability to show them realistic figures and numbers will earn you points with them.

Guide to Creating a Financial Plan

Define your goals and strategic plan

Identify what your company wants to achieve and the methods to reach your goals. Do you need more equipment or additional staff? How will your goals affect liquidity and cash flow?
Sort your goals into short-term, medium-term, and long-term to ensure your financial plan aligns with those objectives.
Create a list of business assets and expenses and their financial impact in the next 12 months. Include in the list any major projects in the pipeline.

Create financial projections

Based on anticipated expenses and income, create your monthly financial projections. Doing so will help you adjust your budgeting strategy.
Create your projections based on various potential scenarios—best-case, most likely to happen, and worst-case.
Make sure to consult or confer with your accountant once the final projections are completed.

Plan for contingencies

Even when your projection shows your business may not have to face worst-case scenarios, setting up a contingency plan will prove useful. After all, anything could happen in the business landscape.

Make sure you have a plan on what to do in case there is no cash coming in, profit is low, or when the business takes a non-expected turn.
List down all financial sources that you can rely on when troubles turn up, such as cash reserves or an accessible line of credit.
Have a strategy in place to help break even, including the sale of business assets.

Plan for taxes and compliance

If you’re a foreigner doing business in Cambodia, your taxes and legal obligations might be different from those in your home country. It’s important that you know the local rules and regulations to avoid penalties.

You need to register your business for VAT if your annual turnover exceeds KHR 250 million (~EUR 50,000).
Corporate income is taxed according to your classification—small (sole proprietorship or partnership), medium, and large. Classification is determined by annual turnover and other conditions.
Other business taxes that you may need to comply with include public lighting tax, accommodation tax, patent tax, signboard tax, property-related taxes, and transportation tax.
Cambodia’s General Department of Taxation (GDT) awards certification to tax-compliant businesses. Based on a point system, a company can have a bronze, silver, or gold certification.

Once you’ve created your business financial plan, it’s important to monitor and compare goals. Find out if your plan is working and whether there are potential problems that need to be resolved. If you plan to start a business in Cambodia, partner with Acclime Cambodia for a smooth, problem-free process.