Is financial planning a waste of time?

We would never consider financial planning a waste of time. But your business can actually skip it if one of the following applies to your company:

1. Your company has large cash reserves

If your company has cash reserves equal to 6-12 months of expenses, then indeed skipping financial planning will not do much damage.

In this case you can focus on analyzing actual results and making required adjustments based on them. Cash reserves will allow you to pay everyone on time even if your business experiences a few tough months.

If your company does not have large cash reserves, the only other reason not to bother about financial planning is:

2. You don’t care about your company’s reputation

Most companies consider it essential to maintain a good reputation among their employees, clients, suppliers and other partners. Making sure your company pays its bills on time is an important part of that.

However if you believe being late with your payment obligations will not do much damage, then the choice to skip financial planning is understandable.

But why so many skip it anyway?

If neither of the above applies to your company, doing financial planning is highly advisable. It helps you identify any potential problems while there is still enough time to prevent them from materializing.

And yet our observations suggest that close to 50% of owners of small and medium companies either don’t do planning at all or do it for a very short period (say next couple of weeks).

We’ve done 200+ interviews with different entrepreneurs lately and most of those who don’t plan say “it takes way too much time”. That’s because a spreadsheet is the only tool they know and it can indeed take several hours per week to be in control.

That’s why we built tailwindapp.eu – a financial planning tool for small and medium services firms. Tailwind will create your initial forecast for you, it will update itself every time you log in, is visualized and offers very convenient “drag and drop” modelling. It takes just 5-10 minutes per week to be in control with Tailwind. But it can take a lot of time to explain your team why their salaries were not paid on time….