As your business grows, planning and goal setting become more important to maintain your company’s financial health. Your business goals should direct your overall financial strategy, including saving, spending, and investing.
While goals are great, they should be backed with deliberate, intentional actions to make them happen. You need to take specific financial actions aligned with your goals to make them a reality.
But it’s all too easy for your financial actions to fall out of alignment with your goals. This can happen gradually, as your priorities change or as your business evolves. Or it can happen suddenly if you encounter an unexpected expense or opportunity.
A disconnect between your financial actions and your goals can put your business at risk. It can lead to overspending, missed opportunities, and even financial disaster.
Why Alignment is Important
When your financial actions are aligned with your goals, it means that every dollar you earn and spend is helping to move your business closer to its long-term objectives. This deliberate focus can help you stay on track and make better use of your resources.
As you take financial actions that are aligned with your goals, you’ll be able to measure your progress and make course corrections as needed. This feedback loop is essential for keeping your business on track.
You see, profitability is perhaps the most important goal for any business. But it’s not the only goal. Your business might also have objectives related to growth, cash flow, customer satisfaction, employee retention, or social responsibility. All of these goals are important, and your financial actions should reflect that.
For instance, does your tax plan play into your margin? Are you investing in employee training? What are the interest rates on your business loans, and how do they affect your cash flow?
Your financial actions should always take your business goals into account. When they don’t, it’s time to realign your strategy.
Why? Because if your financial actions are not aligned with your goals, it’s easy to waste money on things that don’t move your business forward. Sometimes you can get caught up in the day-to-day chaos and lose sight of the bigger picture. This can lead to financial problems down the road and make it difficult to achieve your goals.
How to Better Ensure Alignment in Business Financial Goals
1. Clearly State Business Financial Goals
Spend some time defining and writing down your business goals. Make sure they are specific, measurable, achievable, relevant, and time-bound (SMART). Once you have a clear understanding of your goals, you can develop a financial plan that will help you achieve them.
It’s important to break down each goal into smaller, more manageable pieces. This will help you better understand what financial actions you need to take to achieve your goals.
You may need to address tasks like budgeting, cash flow management, pricing, tax planning, and more. What are your Objectives and Key Results (OKRs) for each goal? What are the specific financial actions you need to take to achieve them?
2. Attach Objectives to Metrics
Metrics are your “business as usual” measures. They are the numbers you track on a regular basis to see how well your business is performing.
Some common financial metrics include revenue, profit, cash flow, expenses, margins, and return on investment (ROI). There are endless possibilities when it comes to choosing metrics, so pick the ones most relevant to your business goals.
You may be thinking: “What do metrics have to do with my business goals?”
Metrics are essential for tracking your progress and determining whether your financial actions are aligned with your goals. They provide a way to measure your success and identify areas of improvement.
For example, let’s say your goal is to increase profits by 10% over the next year. You could track your progress by looking at your margin (net income divided by revenue). If your margin increases, you know you’re on track.
But what if your margin decreases? This would be a red flag that your financial actions are not aligned with your goal. It would be time to take a closer look at your expenses, pricing, tax planning, and other business-critical factors that affect your bottom line.
Generally speaking, key performance indicators (KPIs) help you see how well you’re moving forward toward your goals. So if you want more profit, track your revenue per employee and cash flow to watch things improve (or make adjustments).
3. Regularly Review Progress
It’s not enough to set goals and track metrics. You also must regularly review your progress and ensure you are on track to achieve your objectives.
This can be done by setting up a regular meeting (weekly, bi-weekly, monthly, etc.) with your team to discuss your progress. During these meetings, you can review your financial statements, metrics, and goals.
You can also use this time to identify any areas of concern and make adjustments to your financial plan. This is important for ensuring that your financial actions are aligned with your business goals.
These iterations are key, as they allow you to course-correct and ensure you are still on track to achieve your goals. It’s all about the journey, not the destination.
Ready to Meet Your Goals?
When it comes to achieving your business goals, the most important thing is to have a clear understanding of what you want to achieve. Once you know your goals, you can develop a financial plan and take action.
But it doesn’t stop there. You also need to regularly review your progress and ensure your financial actions align with your goals.
If you need help getting started, the experts at Phillips Business Group are ready to help you plan and take action on your financial goals. We offer a wide range of services, including financial planning, budgeting, cash flow management, tax planning, and more.
We can help you develop a custom financial plan tailored to your unique business needs. Our goal is to help you achieve your goals, protect your profits and grow your business.
Contact us today to learn more about our services and how we can help you meet your financial goals.