For a business to flourish it needs to run a really tight ship from a financial perspective and if you have a strategy in place that allows you to know where your finances stand at any point and there is a development plan that has been properly calculated that can make all the difference.
There are ways of measuring the effectiveness of the financial strategy you have in place for your business that includes using SOC 2 services as a way of providing the sort of transparency that inspires confidence amongst stakeholders.
Here is an overview of the fundamentals behind a successful financial strategy.
The five trust service principles
It is useful to have a framework that you can use to create a robust financial and a system developed by the American Institute of CPA’s known as SOC 2 provides that for your business.
The aim of SOC 2 is to define a criteria that can be applied to managing your customer data and is centered around five main trust service principles, namely availability, confidentiality, privacy, processing integrity, and security.
By addressing these key issues as part of SOC 2 compliance it should result in your business developing an effective financial strategy.
The cornerstone of any financial plan
One of the most fundamental and critical aspects of your financial planning strategy is to produce an income statement.
This is the information that shows you how you have arrived at a profit or loss over a defined period of time.
Being able to interpret and interrogate this data will give you guidance on where the business is heading and how it is doing from a financial perspective.
Cash flow matters
Of equal importance to your financial strategy is the matter of cash flow.
A cash statement should be prepared on a monthly basis and it will allow you to see exactly how much cash is flowing into the business and how much of that money is going out.
You can’t expect a business to survive and prosper without cash to keep it going and that is why a cash statement is so important as part of your financial planning strategy.
A summary of your financial strength
If you have plans to expand the business and want to approach a lender for some funding, for instance, you are going to need to have an updated balance sheet to show them.
A balance sheet is an informative summary of the financial situation of your business and it is a core indicator of how much financial strength you have and whether your assets and liabilities are in the right proportion.
Using these key indicators will help you to see whether the business is making money, how profitable it is and whether there are any aspects of your finances that need to be addressed in order for the company to continue to trade successfully.
A sound financial strategy is a must for any business that wants to build a strong trading future and having all of this key information at your fingertips will put you in control as well as reassure stakeholders.