When to Review and Update Your Financial Plan (2024)

Financial plans are used by individuals and businesses to create benchmarks along the pathway to achieving a specific financial outcome, such as saving for college, expanding to a new location, or retirement. A financial plan includes budget and cash flow projections; debt management; and short-, medium-, and long-term goals that are usually stated in terms of profit.

Most business owners revisit their financial plans annually, with some exceptions. Here are some key moments when you should consider reviewing your financial plan to stay on track.

Annually: Review your goals and projections

Most experts recommend revisiting your long-term goals and financial projections once a year. This gives you enough time to spot patterns in sales or spending in addition to determining whether your financial goals are still relevant.

“If you're still using the financial plan you created two or three years ago, it may not align with your current goals or needs. Financial pictures change rapidly, so it's important to take an in-depth look each year,” wrote The Ascent.

Once a year, compare your business’s financial statements, such as your balance sheet, income statement, and cash flow statement, with your budgets and forecasts. Evaluate why your projections might be different than your actual financial results, and revise your forecast and strategy as necessary.

[Read more: Business Plan Financials: 3 Statements to Include]

Revisiting your projections too often can be misleading. By waiting until you have a full year of data, you can better account for seasonal highs or lows in sales, big purchases that may cause short-term spending spikes, or macroeconomic changes (such as supply chain delays).

Quarterly: Review your financial forecast and industry benchmarks

That’s not to say you shouldn’t keep an eye on your financial performance throughout the year. Benchmarking helps determine whether your business results are normal or if there are deeper problems you need to diagnose — and it’s worth keeping an eye on these figures quarterly.

“Benchmarks display data about similar companies to help you compare your business with what’s considered normal for your market. It’s a useful way to look at projections and add credibility to your plan, but it’s always important to remember that there’s no business out there exactly like yours,” wrote The Savvy Bookkeeper.

Consider benchmarking against your historical performance, too, to see if any movement you’re seeing in sales or spending is in line with seasonal or market trends. Revisit your financial forecast with this information to determine whether you should ramp up or cut back spending.

[Read more: CO— Roadmap for Rebuilding: Mapping Your Financial Future]

Monthly: Review your budget

Check your budget every month to make sure there are no surprises at the end of the year. Review your spending to keep your finances under control, and make sure you’re aware of any cash flow issues before they become bigger problems.

The No. 1 reason why small businesses fail is cash flow. Getting in the weeds of your financial statements can help you stay afloat and identify when extra funding would be useful.

After major events: Review your entire plan

There are certain moments when it might make sense to review your plan, regardless of the time of year. External events or life events can cause you to reconsider where your financial priorities lie, personally and professionally.

“All throughout life, things are going to change,” said Jordan Patrick, CFP, the Senior Financial Adviser at Use Commas. “You’re going to have different desires. You’re going to have different priorities. You’ll want something that you didn’t want in the past, or vice versa — you’ll not want something that you did want before. It could be losing a job. It could be growing your family.”

Consider reviewing your business’s financial plan after a merger or acquisition, bringing on a new partner, during succession planning, or after an external event (such as a natural disaster, a drop in the stock market, or a global pandemic). Personal events, such as retirement, marriage, and expanding your family, can also be a cause for reviewing your financial plan.

“Major life events are good reasons for a financial checkup even if it’s been less than a year from your previous review,” wrote Farm Bureau Financial Services.

Your financial plan is meant to be a living document. Manage it actively to make sure it still serves your business needs.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published February 13, 2024