Controllers Council recently held a discussion on Financial Planning Hurdles and how to overcome them, sponsored by Divvy.

Divvy, BILL’s spend and expense management solution, that gives small and mid-size businesses the credit they need and helps them save time and money by automating expense reports, budgets, and reimbursement processing all in one place. The free software and card combination provides real-time insight into employee spending and better fraud protection with virtual cards. Our expert panelist is Rami Essaid. Rami is the VP of Product Insights Analytics and FP&A at Bill. And this came about because he was the co-founder and CEO of a company called FinMark that was acquired by Bill in November of last year. FinMark was financial planning and analysis software for SMBs.

Rami Essaid:

In my career, I have been founder and CEO of three companies that I’ve sold and exited, COO and CEO of a number of others that I didn’t co-found. And even right out of college, my first endeavor was owning and running a kiosk in the mall as a small business owner. And both as CEO, COO, and a small business owner, I felt the pain of understanding my cashflow, understanding my metrics, my financial plan altogether.

Following are key takeaways to this discussion. If you are interested in learning more, view the full webinar archive video here.

What is financial planning?

If you think about it, your financial plan is your game plan. You wouldn’t go about building a house without first putting together blueprints. You’re not going to wing it. I just don’t understand why people try to build a business without first putting together a financial plan. Your financial plan literally should articulate what you plan to do in your business from how you get your customers to how much money you make to who you’re going to hire. Everything about your business should be articulated in numbers through your financial plan.

Why do we want to create a financial plan?

Foundationally, you want to make sure that you have a plan in place so that where you’re headed, that you can communicate where you’re headed, and sometimes that means more than just your you and your maybe co-founder or your team and maybe more than the finance team, more than talking with the accountant and the business owner. Sometimes you might have the need for a financial model to satisfy investors, to report back to stakeholders or to even communicate across the rest of the leadership of the team.

Another big reason is to make sure you don’t run out of money even. If things are going great, there could be edge cases where your DSO is slower than your DPO and then suddenly, the faster you grow, the tighter your cashflow gets, and so you run out of money just because it takes you longer to collect money than it does to pay your vendors. You want to build a financial plan to understand your cash flow, to understand the investments that you want to make and make sure that you’re well-capitalized into the future to be able to achieve those investments.

Another great reason is to make sure that you’re optimized for the future. You might be great, you might have done great last year, but maybe there’s opportunity to improve. Looking at your financial plan, especially the reporting aspect when you’re going backwards and looking at your historical performance will really unlock opportunities hopefully to set more aggressive goals into the future and improve your performance.

What is in a financial plan?

There are some foundational elements here. This is where we’re going to go oscillate between 101 and 201 level stuff. So, what is in a financial plan?

  • Budgets: Category vs Department Budget, CAPEX vs OPEX, Expenses, etc.
  • Hiring Plans: Employees, Contractors, Departments, Salaries, etc.
  • Expected Revenue: Price x Quantity
  • Cashflow: Cash Balance, Runway/Burn, Cash Conversion Cycle: AP(DPO)/AR(DSO)
  • KPI’s: General KPI’s and Industry KPI’s

What are financial planning goals?

You want to monitor the business performance. You want to figure out through the budgeting process? Where are you going to put your resources and you want to look back and say, “Were we successful, were we not?” And then you want to be able to report on what happened and collaborate and get everybody on board to what we’re doing and what happened in the past, and especially report back to key stakeholders.

To view the complete webcast, download full webinar here.

ABOUT THE SPONSOR:

Divvy, BILL’s spend and expense management solution, that gives small and mid-size businesses the credit they need and helps them save time and money by automating expense reports, budgets, and reimbursement processing all in one place. The free software and card combination provides real-time insight into employee spending and better fraud protection with virtual cards. Learn more about Divvy here.

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