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The 6 Steps of the Financial Planning Process: Your Business in the Digital Age

Business Consulting 101

Most business leaders and customers are familiar with the age-old steps to financial planning. Though the 6 steps of the financial planning process haven’t changed in terms of their purpose, their applications in today’s world have certainly evolved in order to be relevant today. Any business or individuals looking at entrepreneurship as a way to plan for their future need to understand the importance of looking at the basics of financial planning, but from a new, innovative lens.

That’s because financial planning has taken on a new dimension. So much so, that any business that wants to be viable and profitable needs to understand how to adapt its products and solutions — as well as their strategies — to the fast-paced and digitally connected world we live in. Family businesses and small business leaders must leverage modern tools, resources, and strategies to navigate the ever-changing landscape and secure their financial future, while leaders of large businesses need to stay profitable in order to stay in business.

In this comprehensive guide, we will explore the new-and-improved six steps of financial planning. By sticking to these actionable steps whenever you set on a new endeavor — you’ll be well-equipped to achieve your financial goals. We’ll cover:

What Are the Areas of Financial Planning?

A Black man smiling while doing financial planning on a laptop Financial planning is a strategic process that helps both individuals and businesses organize their finances, set goals, and develop a road-map for financial stability and success. Though it may look slightly different for each person, ultimately, it involves creating a budget to manage income and expenses, as well as saving and investing for short-term and long-term goals, ranging from education and retirement, to emergencies and buying a home. From estate planning and taxes, to managing savings accounts and a nest egg, financial goal setting helps to identify and outline these objectives. And, though it can be done on your own, consulting a qualified financial planner or advisor can provide expert guidance in navigating these interconnected areas of financial planning, whether you’re a business or an individual.

The Importance of Redefining Financial Planning for Businesses

Financial planning is of paramount importance for businesses, including family enterprises, and those seeking strategic advising or business consulting. Most businesses therefore look to the 6 steps of financial planning to serve as an outline for this process.

  • Goal alignment: Financial planning ensures that a business’s financial goals align with its broader objectives. By mapping out financial strategies that align with your goals, businesses can effectively allocate resources, support growth initiatives, and secure long-term sustainability.
  • Budget and cash flow management: Efficient cash flow management is vital for business success. Through financial planning, businesses can budget this income and expenses, optimize working capital, and make informed decisions on investments and expenditures. This enables effective liquidity management and safeguards against cash flow challenges.
  • Risk mitigation: The financial planning process helps businesses identify and mitigate risks. By conducting risk assessments and developing contingency plans, businesses can proactively manage uncertainties, adapt to market fluctuations, and navigate industry-specific challenges.
  • Capital allocation: Effective financial planning empowers businesses to make informed decisions regarding capital allocation. It facilitates the evaluation of investment opportunities, identifies growth avenues, and optimizes the utilization of financial resources. This fosters efficient resource allocation and enhances overall financial performance.
  • Business expansion and succession planning: Financial planning is instrumental in guiding business expansion strategies and succession planning, particularly for family businesses. It aids in smooth ownership transitions, facilitates wealth transfer, and provides a framework for future growth and development.

All this considered, it’s important to keep in mind that while the foundations of financial planning have more or less remained the same, the digital age has changed the way most of us think about financial planning. For instance, while many young people may have been buying their first home in their early twenties, this has shifted, and many people are buying homes later. People have also taken advantage of remote work in order to create a lifestyle that may look a lot different than what it was in the past; the type of lifestyle that the 6 steps of financial planning was initially built around. 

Not only this, but the adaptation of digital tools, apps, and online platforms brought customization, automation, and real-time monitoring to the financial planning process. Before, advisors may have used a pen, paper, and a calculator to offer some valuable insights to their client. But, nowadays, the integration of artificial intelligence (AI) and machine learning enhanced financial planning by analyzing vast amounts of data, offering personalized recommendations, and simulating scenarios for informed decision-making.

At the end of the day, financial planning basics remain essential for businesses, but their implementation has evolved. By leveraging the benefits of financial planning and adapting to the digital era, businesses can make informed decisions, optimize financial performance, and achieve sustainable growth in a dynamic business environment. But, more on that in a bit.

The 6 Steps to Financial Planning: The Basics

Traditionally, the 6 steps to financial planning have always been…:

  1. Establish Goals: Clearly define the business overall goals — including financial goals —such as retirement planning, education funding, debt management, or business expansion.
  2. Gather Financial Information: Collect relevant financial data, including income, expenses, assets, liabilities, and investment portfolios.
  3. Analyze and Evaluate: Assess the financial information gathered, evaluate current financial status, and identify strengths, weaknesses, opportunities, and threats.
  4. Develop a Financial Plan: Formulate a comprehensive financial plan tailored to the individual or business, addressing areas such as budgeting, investment strategies, risk management, tax planning, and estate planning.
  5. Implement the Plan: Put the financial plan into action by executing strategies, making investment decisions, and implementing recommended changes.
  6. Monitor and Review: Regularly review and monitor the financial plan’s progress, track performance, adapt to changing circumstances, and make necessary adjustments to ensure alignment with goals. It is recommended to review your actuals vs. budget on a monthly basis, so that you can address any issues in a timely manner.

These steps — although not attributed to one person — have been established through the contributions of professional organizations and associations like the Certified Financial Planner Board of Standards (CFP Board) and the Financial Planning Association (FPA). These entities have helped establish industry standards, best practices, and ethical guidelines for financial planners, benefiting both professionals and the general public.

Most financial professionals and businesses are aware of the 6 steps to the financial planning process, but many may have trouble seeing how to adapt that to the digital era. So, let’s see what that looks like.

The 6 Steps to Financial Planning in the Digital Age

Sometimes, age-old methods have stuck around through the generations for a reason. But, whether you’re a business looking to review your own financial goals, or an individual looking to see what’s possible for the future, it’s important to understand that financial planning is not one-size-fits-all solution, nor is it one that has a roadmap set in stone. With people creating new jobs and pathways for themselves, the changing economy, and just a lot more options than there were in the past, the 6 steps to financial planning need to be tweaked just a bit!

1. Establish Realistic, Attainable Goals

For both businesses and individuals, it’s important to Identify what truly matters to you and align your financial goals and business objectives accordingly. Whether it’s being able to automate your operations to make passive income, or making decisions now that will lead to early “retirement”, getting clarity on your life goals — and, most importantly, understanding what’s realistic in today’s competitive landscape — will help drive your financial decisions going forward.

2. Assess Your Current Financial Health

In today’s terms, assessing your current financial health could be anything from knowing your credit score to creating a spreadsheet of your debt-to-income ratio. Essentially, how much money do you have, including assets, and what does your debt situation look like (if any?). This is important for businesses as well, especially those just getting started. Remember, with the digital era comes a lot of digital tools to help you look at this in a while new way.

3. Build a “Rainy Day” Fund

In the digital age, an emergency fund is more critical than ever, providing a safety net in uncertain times. The general advice is to have at least six months’ worth of living expenses in your savings. But, for many hard-working young people as well as new businesses may not be quite at that point. See where you can cut expenses or lower your fixed costs. And, if you have more cash at your disposal, consider using high-yield savings accounts or short-term investment options to maximize the growth potential of your emergency fund while ensuring liquidity.

4. Plan for the (Near) Future

The concept of retirement is drastically different today than it once was. With changes in the economy, college costs, job market, housing market, inflation, etc., “retirement” may as well be changed to “long-term financial security”. Many people don’t have traditional jobs where they may get an employer-matched 401(K), while others are actively working towards new retirement concepts like FIRE. So, whether this is setting up a retirement account, investing in real estate, or working hard now to start a business, both individuals and businesses need to have a plan for themselves and think about their employees’ perspective on this to avoid turnover.

5. Manage Debt Strategically

There are many strategies that can help you mitigate debt. Rank your debts based on interest rates and focus on paying off high-interest debt first. You can also use strategies like consolidating or refinancing debt. This goes for individuals and businesses. And, if you are a business, engaging with a strategic advisor and/or business consultant can help you stay on top of your financial strategy, tackling debt — including business loans — in the process.

6. Monitor and Adjust Your Financial Plan

Whether you’re an individual or a business, scheduling periodic reviews of your financial goals, investment performance, and a business continuity plan to ensure they remain aligned with your evolving circumstances. Also, keep up with the latest financial news, trends, and regulations that may impact your financial plan. Subscribe to finance podcasts, newsletters, or online communities to stay informed and learn about digital tools that can help you stay on track. Again, a financial advisor and/or business consultant can be a great support here.

Tools for Modern Financial Planning: Leveraging AI and Digital Solutions

Despite the fact that the 6 steps of financial planning may a bit more challenging to align your business with than in the earlier days, there’s another component that has made financial planning easier in many ways than before. In the digital age, financial planning no longer requires analog calculators, clipboards, charts, calling on the landline, and visiting banks to establish your plan.

Nowadays, there are tools that can assist individuals and businesses in navigating the “new” six steps of financial planning. By incorporating artificial intelligence (AI) and digital solutions, financial planning can be optimized for better decision-making and improved outcomes.

Here are some specific apps and programs that can help you with each step:

  • Digits: Digits is a savings app that helps small businesses analyze pending patterns using AI for real-time analysis and insights, in order see where spending is going and use that information make smart financial planning decisions going forward.
  • You Need a Budget (YNAB): YNAB is a budgeting app that helps you create and stick to a budget. It provides real-time updates on your spending and offers guidance for saving and debt reduction.
  • Acorns: Acorns is a micro-investing app that rounds up your everyday purchases and invests the spare change. It also offers an option to set up recurring investments to grow your emergency fund over time.
  • Quickbooks: Quickbooks helps small businesses do easy accounting, where you can track expenses, customize invoices, and run reports all in one place.
  • TurboTax: TurboTax is a tax preparation software that helps you navigate the complexities of filing taxes. It offers guidance on retirement contributions, deductions, and tax-efficient strategies.
  • Collective: For self-employed businesses, Collective helps you do everything from forming an S Corp, to managing your bookkeeping, accounting, and tax filing.
  • Debt Payoff Planner: Debt Payoff Planner is an app that creates a personalized debt payoff plan based on your financial situation. It helps you visualize your progress and prioritize debt repayment strategies.

These tools are just a few examples of the wide range of AI-driven apps and programs available to assist with financial planning in the digital age, whether you’re a business, an individual, or an individual looking to start a business as part of your financial future. By leveraging these tools, you can navigate the complexities of modern financial planning more effectively and achieve your financial goals with greater confidence.

Keep in mind though, that in today’s ever-changing digital landscape, the best financial planning support you can get for your business will be from a business consultant who leverages these tools in their practice.

The Role of Business Consultants in Financial Planning

While some newer business leaders may hesitate to seek professional guidance as they go through the 6 steps of financial planning process, it’s important to recognize that business consultants are well-equipped to address these concerns and provide valuable insights.

Here’s why:

  • Expertise in evolving business environments: Business consultants are well-versed in the modern business landscape and stay updated on the latest trends, technologies, and regulations. They possess the knowledge and experience to guide small business leaders through the complexities of financial planning in the digital age.
  • Tailored guidance for individual circumstances: A skilled business consultant can adapt financial planning strategies to suit the specific needs and goals of each small business leader. They take into account factors such as industry dynamics, market conditions, and personal circumstances to provide customized recommendations.
  • Access to a network of resources: Business consultants often have extensive networks of professionals, including accountants, lawyers, and financial advisors. This allows them to connect small business leaders with the right experts who can provide specialized assistance in areas like tax planning, investment management, or legal compliance.
  • Objective perspective and strategic insights: Business consultants bring an external and objective viewpoint to financial planning. They can identify blind spots, uncover hidden opportunities, and provide strategic insights that may not be apparent to business leaders caught up in day-to-day operations.
  • Adaptability to changing business environments: Just as the business world has evolved, so have business consultants. They have honed their skills in adapting to new technologies, digital transformation, and changing consumer behavior as part of financial planning. They can help business leaders by knowing how to utilize the various new tools and resources that are at their disposal.

The Bottom Line

In the digital age, financial planning is an essential aspect of achieving financial success for business leaders. By understanding how the 6 steps of financial planning in today’s world apply to you, you can create a solid financial plan that aligns with your goals, maximizes your resources, and adapts to the evolving financial climate.

But, to do this effectively — and, without taking valuable time and resources away from your business — book a call with NYC Advisors today. We understand how rapidly the business world is changing, and we’re here to ensure your finances stay healthy in the process.


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