In December 2017, 83% of Americans who set a specific financial goal felt better about their finances than at the start of that year. One study showed that even simple tasks like making a New Year’s resolution about finances might help increase an individual’s confidence in their financial situation.
Why is setting financial goals important for your business? What steps should you take to help you accomplish your financial objectives?
This article explains how you can achieve your financial goals and discusses the importance of having such targets for your organization.
If you’re running a business, having financial goals should be one of your priorities. These goals help set the direction you want your business to take.
Part of financial planning is determining essential business objectives like hiring more workers, introducing a new product, or acquiring new property. You need ways to finance these objectives, like working with a mortgage agent from My Local Broker to purchase a new building or allocating capital to pay the new employees’ salaries.
Keep reading to learn more about how you can achieve your financial goals and keep your business running smoothly.
Ways to Help Achieve Your Financial Goals
Setting financial goals helps give your business a direction and objective. If you plan to profit and grow your business, having financial objectives is one way to achieve those goals.
Among the first things you should consider to achieve your financial business goals is to evaluate your current or previous year’s objectives. Take the time to check your progress to determine what financial goals you can accomplish or revise. If there are any significant changes, you can consider setting new goals.
Determining your short-, medium-, and long-term financial goals is essential to becoming financially secure.
Short-term goals are targets you typically want to achieve in less than two months. Medium-term goals are good for two months to three years. Long-term goals can take about three years or more to accomplish.
The next step is to set your budget. Many business activities need budgeting to function smoothly and accomplish goals. Suppose you increase your R&D (research and development) department’s budget. Doing so may help reduce the time spent developing a new product or improving an existing product’s quality.
You also need a way to monitor your budget. Doing so lets you determine how much money you spend monthly and ensure you do not exceed your allocated funds.
If you’re running a small business, consider using free budgeting software to help track your spending. Having such tools can help you discover expenses you can avoid or reduce so you can plan your spending better in the future.
Part of setting your budget is breaking it down into manageable expenses. Suppose you provide a large budget to a specific department. That division should outline its costs based on that budget.
Also, ensure that your goals follow the SMART principle. SMART stands for:
- Specific: Your goals must answer specific questions like what objectives you must accomplish and who is responsible for the activity. For example, you plan to earn a $10,000 profit from your retail sales.
- Measurable: Your progress must be quantifiable to make it easy to monitor how much you’ve achieved. One way to measure your progress is through weekly or monthly reports.
- Achievable: Business objectives must be realistic enough, given your enterprise’s nature, resources, and target market. Suppose you run a small bakeshop in a small town and want to earn $10 million in one year. Ask yourself if this goal is realistic or if you need to tone down the amount.
- Relevant: Financial goals should align with the mission and purpose of your business. If your company specializes in B2B (business-to-business) commerce, most of your sales goals should come from this type of transaction.
- Time-bound: Your team should be able to finish certain tasks within a specific period. This way, you can measure how long you can accomplish your goals. For example, you may want to reduce your expenses by 10% or more by the end of the year.
Why Having Financial Goals for Your Business Is Important
A financial plan serves as your roadmap to achieving your goals. It reminds you of what financial objectives you must accomplish for the benefit of your business.
If you’re driving a car, getting to your destination is easier when you have a map or know which road you must take. Similarly, having a financial roadmap lets you know what direction to take your business. You can gain more confidence when you know you’re on track to reaching your financial destination.
Setting financial goals helps ensure that your departments can allocate sufficient resources to activities that align with your business objectives.
Financial goals can help you choose and implement specific strategies to achieve objectives and measure your progress. And when you can see progress, you can become motivated and committed to pursuing your goals.
Having financial goals can also help your business become more attractive to other investors, creditors, and bankers, especially when you need financing options to grow your enterprise. If these institutions see that you have a solid financial plan, they may be more willing to do business with you.
- Short-term, Medium-term, and Long-term Goals