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HR Performance Management Software for 2023: Our Top 15 Picks
Looking for ways to help your employees and make them happier at work? Don't look any further than performance management that works! This comprehensive process includes a lot of different steps, such as figuring out the job requirements, giving ongoing training, making sure the pay is competitive and much more. Rating systems used to be the norm, but now many of the best companies choose a more personal method: having meaningful conversations between managers and employees. By using these ways to improve communication, you can help your team grow and reach its full potential. Don't stick with old ways of managing performance. Instead, switch to a more effective, employee-centered method today.
What is the importance of performance management?
Are you tired of outdated performance management processes that only leave your employees feeling undervalued and unmotivated? It's time for a change. With research showing that 51 large firms have already adopted a no-ratings system and 70% of companies rethinking their approach, it's clear that performance management is due for a major overhaul.
By implementing performance management software, you can not only provide transparency, recognition, and feedback but also improve employee engagement and help your team focus on company goals. The software continuously tracks all activities related to company goals, providing valuable insight into employee performance and contribution to organizational growth.
Plus, with the option to integrate with HR and compensation management software, you'll have everything you need to streamline your processes and create a thriving company culture. Don't settle for a subpar employee performance management solution - make the switch to an innovative performance management software solution today!
Elevate your performance management game with these top software picks
Below, you'll find a comprehensive list of the top-rated online software systems for managing and appraising employee performance that is widely utilized across the globe.
#1. Synergita
Looking for an all-in-one employee performance management and engagement solution? Look no further than Synergita! With over 350,000 users from 100+ companies across the globe, Synergita is trusted by organizations in IT/ITES, manufacturing, pharma, financial services/FinTech, retail, and non-profit sectors.
Synergita features:
What sets Synergita apart? Here are just a few features that make it stand out from the crowd:
●AI-powered sentiment analysis: Say goodbye to negative feedback cultures. With Synergita's AI-powered sentiment analysis, you can cultivate a positive feedback culture across your organization.
●Lightweight OKR solution: Launch OKRs instantly to specific functional teams or across your entire organization with Synergita's lightweight, result-focused OKR solution.
●Deep functionality: Synergita offers a range of features to help automate your digital performance transformation, including matrix goals management, continuous check-ins, 360-degree appraisal feedback, 1-1 meetings, and smart promotion management.
●Culture score: Measure adherence to your company culture with Synergita's culture score feature.
●Configurable dashboards and reports: Get insightful people and performance analytics with Synergita's configurable dashboards and reports.
Synergita best for:
●Synergita delivers exceptional continuous performance management, employee engagement, and OKR solution to establish and grow high-performing teams.
Synergita Price:
●Their basic package starts at just $5 per user per month
#2. PerformYard
PerformYard's performance management software is the ultimate solution for HR teams who seek flexible features and easy-to-use tools for building a successful performance management strategy.
This software offers customizable options for 360s, project-based reviews, rating scales, continuous feedback, and cascading goals to fit your organization's specific needs.
Moreover, PerformYard delivers a streamlined employee experience to help employees focus on quality feedback and effective performance discussions.
With this software, you can expect to have dedicated customer success managers who will guide you from the onboarding process to employee training and provide ongoing support.
PerformYard understands the importance of building a culture of continuous feedback and quality conversations. That's why they provide the necessary tools and features to make it possible for HR teams to manage and monitor employee performance effectively. Choose PerformYard to help your organization achieve success in performance management effortlessly.
Perform features:
Here are the top features that set them apart:
●Tailor your performance management strategy to meet your organization's unique needs with our fully customizable features. You can choose from 360-degree feedback, project-based reviews, continuous feedback, and more to help drive performance across your workforce.
●PerformYard believes that every customer deserves the very best. That's why they provide a dedicated Customer Success Manager to every customer, regardless of the size of their organization. From onboarding to ongoing support, they will be there to guide you every step of the way.
●Achieving your goals has never been easier with their robust goal management system. With features like cascading goals, individual progress tracking, and performance insights, you'll have all the tools you need to drive success at every level of your organization.
●They understand the importance of integration, which is why their software can be seamlessly integrated with most major HRIS/Payroll systems, including ADP, BambooHR, Gusto, Rippling, UKG, Paycom, Workday, and Paylocity. Say goodbye to manual data entry and hello to streamlined processes.
PerformYard best for:
This performance management software is designed to be flexible and accommodate the specific HR needs of each organization while maintaining respect for those needs.
PerformYard Price:
The pricing for this software solution begins at $5-$10 per month per employee.
#3. Reviewsnap
Reviewsnap's performance management software is the perfect solution for businesses looking for a flexible, powerful, and user-friendly online platform at a cost-effective price point.
With features like performance reviews, 360-degree feedback, note-taking, and reporting all bundled together under a single affordable annual subscription fee, Reviewsnap offers the most comprehensive performance management solution available today.
This software is designed to enhance employee communication, boost morale and productivity, and cultivate a high-performance culture within your organization.
With Reviewsnap, you can create a collaborative, goal-oriented environment that inspires your team to perform at their best.
Reviewsnap features:
●Reviewsnap boasts top features that streamline performance management processes and promote employee growth and development, including:
●Electronic signatures, automated reminders, email notifications, and secure archiving for efficient and secure review processes.
●Goal tracking and management functionalities that enable SMART goal setting, progress monitoring, objective definition, and achievement tracking.
●Automated and customizable appraisal forms that fit the needs of any organization.
●Unlimited review cycles to facilitate ongoing performance management and feedback.
Reviewsnap best for:
Reviewsnap offers an impressive range of performance management features at a budget-friendly price.
Reviewsnap price:
The Express plan costs $3496 per year, the Standard plan costs $3933 per year, and the Pro plan costs $4807 per year, all for a team of 1-25 employees. You can find more details on their website.
#4. Leapsome
Leapsome is the ultimate solution for organizations seeking to streamline their performance, engagement, and learning processes. With its highly-customizable modules, Leapsome offers an all-in-one platform that empowers HR teams to create and manage performance review cycles, 360-degree feedback talks, leadership assessments, and many more performance-oriented processes.
Leapsome's superior analytics and advanced features enable HR teams to establish a connection between team performance, engagement levels, compensation, and career progression.
Leapsome offers the perfect tool to enhance employee satisfaction and foster a culture of performance and engagement. With Leapsome, organizations can gain valuable insights into what makes employees thrive, which will result in a more motivated and productive workforce.
Leapsome features:
●Discover the full potential of this powerful platform with these standout features:
●Elevate employee performance with expert templates, automated cycles, and reminders for performance reviews, 360 feedback, leadership reviews, note-taking, and more.
●Keep your employees engaged with engagement surveys, instant feedback, public praise, and turnover prediction.
●Align your teams with goal & OKR management, and visualize goals at an individual, team, or company level with comments and discussions.
●Build a skilled workforce with learning paths, skill matrices, onboarding, and offboarding.
Leapsome best for:
Ideal for organizations seeking to bridge the gap between performance, engagement, and learning.
Leapsome price:
Price: Starting at $8 per user annually.
#5. Trakstar
Trakstar's Performance Appraisal software is a must-have for organizations that want to take control of performance reviews, employee engagement, goal management, and real-time feedback. With the option of 360/Multi-rater feedback, this software has everything you need to manage your workforce effectively.
The implementation process is also personalized to meet your organization's specific needs. Plus, Trakstar's feature set and visually appealing interface come at an affordable cost. Don't settle for less when it comes to performance management - trust Trakstar to help your organization thrive.
Trakstar features:
Here are its top features:
●Generate flexible reports to identify your top performers with ease.
●Take notes and receive automated email notifications with the provided functionality.
●Set and track goals using its features.
●Receive 360 Degree Feedback in real time.
●Conduct frequent check-ins and self-appraisals for optimal performance.
Trakstar best for:
Trakstar is an intuitive and user-friendly platform that excels in goal management, 360-degree feedback, and performance management.
Trakstar price:
Based on our research, the annual cost for Trakstar is $4370.
#6. 15Five
15Five is a top-notch employee performance software that takes a proactive approach to enhance employee engagement by prompting insightful questions and capturing critical data.
With 15Five, you can gain access to an array of cutting-edge features and functionalities designed to streamline feedback management and boost employee morale. Plus, all of your valuable reports and data are stored securely within the 15Five system, ensuring that your organization never misses a beat.
15Five features:
Here are the top features of 15Five:
●Plan and conduct 1-on-1 meetings with team members.
●Access to a powerful question bank and feedback questions for weekly check-ins.
●Objectives and Key Results (OKRs) feature to keep teams focused, aligned, and engaged.
●Ability to conduct self, manager, peer, and upward reviews.
15Five best for:
Its strongest suit is its communication features.
15Five price:
15Five has three pricing plans: Basic ($7/mo), Plus ($14/mo), and Enterprise. You can contact them for more details.
#7. ClearCompany
ClearCompany is a software that specializes in talent acquisition and management. Its suite of tools offers solutions for hiring, onboarding, performance management, and goal alignment, making it an ideal choice for small businesses looking to streamline their HR processes.
ClearCompany features:
ClearCompany offers a range of features for its talent acquisition and management software. These include:
●The ability to conduct unlimited peer reviews.
●Time-based reviews can be scheduled and tracked.
●Automated reminders to ensure timely completion of reviews.
●Full customization options allow you to create your own scales, questions, and sections.
●The ability to connect performance data to hiring decisions.
●An applicant tracking system with features such as bulk emails, mobile career sites, and social sharing tools.
ClearCompany best for:
The system excels as an applicant tracking system.
ClearCompany price:
According to the information available online, the system's starting price is $70.
#8. BambooHR
BambooHR is a top-rated HR software that caters to the needs of small and medium-sized companies. The system's employee review software is a game-changer for managers looking to track and compare individual performance and engagement through intuitive performance reports.
BambooHR also offers an efficient applicant tracking system and electronic signature software, making it a one-stop shop for all your HR needs. With its user-friendly interface and comprehensive feature set, BambooHR is the perfect solution to streamline HR processes and enhance employee engagement.
BambooHR features:
●The top features of BambooHR include the following:
●Collaborate with managers to create and monitor goals.
●Generate performance reports for comparing organizational performance across departments.
●Centralized employee database storing various information, including healthcare and home addresses.
●Obtain insightful performance feedback from peers through simple and meaningful questions.
●Receive automated reminders.
BambooHR best for:
Ideal for small businesses, the system is designed with a user-friendly interface.
BambooHR price:
BambooHR offers Essentials and Advantage pricing plans, with pricing information available by contacting the company. Reviews suggest that pricing starts at $99/month.
#9. Namely
Namely is a comprehensive HR, Payroll, and benefits platform designed to meet the needs of mid-sized businesses in any industry. With its cloud-based solution, it stores employee information in a centralized location, making it easily accessible for HR personnel. Namely also offers a mobile app for iOS and Android devices for convenient access on the go.
Namely features:
Its top features are as follows:
●Custom Profiles
●Mobile App
●Analytics
●Organizational Charts
●Calendar
●Workflows
●Central storage and management of documents
●Configuring time-off plans
●Setting roles and responsibilities
●Storage for billing reporting and documents
●Automatic benefit deduction syncing to payroll
●Company-wide announcement sharing
Namely best for:
The system is ideal for those looking for robust HR and payroll features that are user-friendly.
Namely price:
The company hasn't disclosed the pricing details; however, according to online reviews, the cost per employee per month is estimated to be between $12 to $30.
#10. Bambee
Bambee offers affordable HR solutions that implement the best practices in the industry. It caters to small businesses looking to optimize their HR policies and staff performance. With Bambee, you are assigned a dedicated HR professional who ensures that your HR policies are up-to-date and your staff performs at their best.
You receive report cards to assess your staff's overall performance, and you can openly communicate with them to give feedback or praise. What sets Bambee apart from other performance management services is its implementation of 2-way feedback, allowing employees to voice their opinions regarding their work environment.
With Bambee, you can create a positive work culture and achieve your business goals at an affordable price.
Bambee features:
The top features of Bambee include the following:
●Employee Relationship Management
●Employee Coaching and Training
●HR Problem Solving
●Compliant Onboarding and Termination
●2-Way feedback system
●Performance report cards
Bambee best for:
Suitable for businesses that prioritize employee feedback and performance evaluation
Namely price:
The starting price of the system is $99 per month.
#11. HRSoft
HRsoft offers a straightforward and effective project management solution that can take your team's productivity to the next level. Their cloud-based system provides an intuitive interface that enables managers to foster stronger relationships with team members. This, in turn, promotes higher engagement levels and empowers the team to achieve their goals efficiently.
HRSoft features:
The top features of HRsoft include:
●Organizational goal-setting features.
●Simplification of processes with features like 360 feedback, review automation, automated workflows, and focused templates.
Manager-specific features such as goal approval controls, performance ratings, development plans, and real-time reporting and alerts.
HRSoft best for:
Ideal for those looking for effective solutions for managing employee performance and compensation.
HRSoft price :
The company has not disclosed its pricing information. To learn more about the product's cost, you need to get in touch with the company.
#12. UltiPro
UltiPro is an excellent choice for companies of any size seeking to streamline their human capital management. This comprehensive, cloud-based solution provides a range of powerful features and tools to support HR, payroll, and talent management.
With UltiPro, you'll have access to advanced capabilities like time management, performance management, succession management, a predictive analytics tool, compensation management, and much more. Whether you're a small business looking to improve efficiency or a larger organization in need of more robust HR capabilities, UltiPro has you covered.
UltiPro features
You get the following features with UltiPro:
●Time tracking feature
●Recruiting processes support
●Employee surveys and sentiment analysis
●Continuous performance management process for talent management
●Employee career development support
●Payroll administration functionality
●Tax management functionality
●Compliance functionality
UltiPro best for:
The system is ideal for businesses looking for efficient Payroll management features.
UltiPro price:
The company follows a subscription-based pricing model, and unfortunately, the pricing information is not available on the website. However, you can easily get in touch with the company to learn more about its pricing policy.
#13. Oracle HCM
Oracle HCM is a comprehensive cloud-based solution that offers a wide range of HR, Talent Management, and Workforce Management services for medium to large businesses. Its Talent Management feature is specifically designed to cater to your recruiting, performance management, talent profile, and learning needs. With its advanced tools and features, you can streamline your HR processes and optimize your workforce performance, ensuring your business stays ahead of the competition.
Oracle HCM features
Here are the features of Oracle HCM:
●Set and share meaningful goals.
●Real-time progress tracking.
●Creation of training programs.
●Easy access to candidate profiles and talent pool.
●Global HR product for employee information management.
●Accurate time capturing for all employee types.
Oracle HCM Best for:
The product is ideal for those who prefer a user-friendly and intuitive interface.
Oracle HCM price:
Prices are as follows: Talent Management - $8/user/month, Talent Acquisition - $5/employee/user, Global HR - $13/user/month.
#14. SAP SuccessFactors
SAP SuccessFactors offers cloud-based solutions for HR, Payroll, and analytics, providing recruitment, learning & development, performance management, and compensation features suitable for businesses of all sizes.
SAP SuccessFactors features
Features of SAP SuccessFactors include:
●Goal Library with 500+ predefined goals.
●Mobile Goal Management for easy updating and commenting.
●Continuous performance management through employee-manager dialogue.
●Writing Assistant and Coaching Advisor for effective feedback.
SAP SuccessFactors Best for:
The cost of SAP SuccessFactors Performance and Goals is $4.17 per user per month.
SAP SuccessFactors price:
SAP SuccessFactors is best suited for HR management.
#15. IBM Talent Management
IBM Talent Management offers a comprehensive set of HR solutions, including Talent Management, Talent Acquisition, and Assessment tests. Its Talent Acquisition suite includes various solutions such as IBM Kenexa Talent Acquisition Suite, IBM Kenexa Employee Assessments, IBM Watson Candidate Assistant, and IBM Watson Recruitment.
The assessment tests provided by IBM include Individual Assessments, Enterprise Assessments, and Cybersecurity Assessments. IBM Talent Management is an ideal solution for businesses of all sizes.
IBM Talent Management features
The top features of IBM Talent Management are:
●AI-powered Talent Acquisition
●Behavioral and skills assessment tests
●Enterprise assessments
●Watson AI provides data-driven insights to help find the best-fit candidate for the organization
IBM Talent Management best for:
IBM Talent Management is suitable for businesses of all sizes, offering a range of solutions to help train and develop talent.
IBM Talent Management price:
IBM Cloud Application Performance Management starts at $26.60/month, while IBM Kenexa Employee Assessments starts at $319.20/10 scores.
#16. OnPay
OnPay is a robust payroll and HR platform that's a versatile solution for startups and enterprises. Its user-friendly dashboard makes it easy for businesses to get the most out of OnPay. The best part about OnPay is that it makes the labor-intensive part of setting up a payroll application incredibly simple, even if your company has unique payroll needs.
OnPay can also serve as your insurance broker and tax accountant, allowing you to effortlessly input and deduct insurance premiums, garnishments, tax withholdings, and much more.
OnPay can even handle complicated onboarding procedures, from administering documents to setting up direct deposit. Plus, ONPay will take care of new hire reporting in your state.
OnPay feature
Why go with OnPay instead of any other system?:
- Offers HR teams, businesses, and individuals to navigate payroll, HR, and benefits seamlessly using one easy-to-use dashboard that provides all the information they need.
- Pay your team in record time, on your phone or on the desktop. Thanks to its custom payroll reports, you can feel safe knowing that payroll will be done right the first time.
- Promises a better HR software without any extra cost. Its platform makes onboarding, PTO and vacation management, and maintaining compliance easy, boosting productivity.
- Navigate employee benefits with confidence. Since everything is in sync with your payroll, you can automatically deduct health insurance and 401 (k) premiums.
- Integrates with popular accounting, time tracking, retirement, and HR & compliance software to make your life easier, like QuickBooks, Xero, and When I Work.
OnPay is best for:
Organizations in every industry that need to combine their payroll, HR, and benefits tasks and compliance protocols into one system. Anyone who needs a full view of their HR department.
OnPay price:
Price: First month is free, then it starts at $40/mo + $6/mo/user
Frequently asked questions about HR performance management software
What is a performance management system in HR? Enter heading here...
To ensure that the organization's strategic goals are met, managers and employees engage in a process called performance management, which entails constant feedback and open lines of communication.
Since its inception, the concept of "performance management" has undergone several iterations of definition. Management of employee performance is shifting from an annual to a continuous process. The purpose of these meetings is to check in on employees' progress throughout the year and deal with any problems that might get in the way of their productivity.
What is performance management software?
A performance management system monitors employees in a uniform and quantifiable fashion.
The system uses a variety of technological and methodological approaches to guarantee that all employees are committed to and helping to achieve the company's long-term goals.
Managers and employees participate in the system's collaborative nature by working together to establish expectations, determine goals, define performance measurement, and distribute and discuss performance reviews and appraisals.
What are the different types of performance management systems in HR?
Personnel performance management systems, also known as human resource (HR) performance management, are a method for assessing an organization's human resources and ensuring that their efforts are in line with the business's overall goals.
Employee performance can be managed in two ways: through human resources (HR) reviews, or through Objectives and Key Results (OKR).
What are the 5 stages of performance management?
Are you ready to boost your team's performance to the next level? Look no further than the five stages of performance management!
●First, we have the Planning stage, where we set clear goals and expectations for our employees. We define success criteria and create a plan to achieve those goals.
●Then comes Monitoring, where we observe our employees' progress toward the established goals. Regular check-ins and feedback keep everyone on track.
●Next up is Developing, where we identify areas for improvement and create a plan to address them. Training, coaching, and support are key to helping employees reach their potential.
●The Rating stage allows us to evaluate employee performance against established goals. Through formal reviews or feedback sessions, we can provide valuable insights and identify areas for further growth.
●Finally, we have the Rewarding stage, where we recognize and celebrate employee achievements. Bonuses, promotions, and other forms of recognition show employees that their hard work is valued and appreciated.
Don't let your team's performance fall flat. Use the five stages of performance management to take your team to the top!
What are the 5 good qualities of performance management?
Here are five key qualities to keep in mind to take your performance management to the next level:
First, set Clear Goals and Expectations. Establish achievable goals and communicate expectations to your employees to give them a clear path to success.
●Next, don't forget Regular Feedback. Keep your employees informed about their performance, what they need to improve on, and what they are doing well. This will help them stay on track and motivated.
●Thirdly, make sure to conduct Fair and Objective Evaluations. Use established criteria to evaluate all employees consistently and ensure that the process is seen as credible.
●Collaboration and Support are also crucial. Encourage managers to provide support, resources, and training to help employees improve their performance. Employees should also be encouraged to provide feedback and share their ideas for improvement.
●Finally, Continuous Improvement is key. Regularly review your performance management system to ensure it remains effective and aligned with your organization's goals and objectives.
With these qualities in mind, you'll be well on your way to achieving outstanding performance and success!
What are the 3 best practices of performance management?
Are you looking for ways to improve your organization's performance management? Look no further than these three best practices:
●First, goal setting and alignment are key. By setting clear goals for employees and aligning them with the overall goals of the organization, everyone will be working towards the same objectives. This will help employees understand how their work contributes to the success of the organization and keep them motivated.
●Secondly, ongoing feedback and coaching are critical to improving employee performance. By providing timely feedback and coaching, managers can help employees understand their strengths and weaknesses and identify areas for improvement. This will help employees stay on track and continuously improve.
●Lastly, data-driven evaluation is essential. By using data to evaluate employee performance, organizations can ensure that evaluations are fair, objective, and based on measurable results. This will help ensure that employees are evaluated on their actual performance rather than their subjective opinions.
By implementing these best practices, organizations can create a culture of continuous improvement and achieve better outcomes through their performance management efforts. Don't wait any longer to improve your organization's performance management - start implementing these best practices today!
What is a performance management platform?
A performance management platform is a powerful software tool that can help you streamline your performance management efforts and achieve better results. With features like goal setting, ongoing feedback and coaching, performance evaluations, and data analysis, these platforms provide a comprehensive solution for managing employee performance.
With a performance management platform, you can set and track goals for your employees, provide them with regular feedback and coaching, and conduct performance evaluations to identify areas for improvement. You can also gather and analyze performance data to gain insights into your team's strengths and weaknesses and make data-driven decisions to optimize your performance management processes.
Overall, a performance management platform can help you create a culture of continuous improvement and achieve better outcomes through your performance management efforts. Whether you're a small business or a large enterprise, these platforms can provide you with the tools and resources you need to succeed. So why not give it a try and see how a performance management platform can help your organization thrive?
What is the performance management process?
The performance management process is a set of activities and steps that organizations implement to manage and enhance their employees' performance.
This process usually includes several steps, such as defining clear objectives, providing continuous feedback and coaching, evaluating performance, and utilizing data to enhance performance.
To begin the performance management process, organizations first need to establish clear goals and expectations for each employee.
This means identifying key performance indicators (KPIs) and developing an action plan to achieve those goals. By setting clear objectives, employees can understand their responsibilities, the expected outcomes, and the metrics by which their performance will be evaluated.
What are performance reviews in hr performance management?
Performance reviews are a crucial part of HR performance management, aimed at evaluating and enhancing employee performance.
They involve a formal assessment process in which managers evaluate their employees' job performance and provide feedback on their strengths and areas where they can improve.
The main objective of performance reviews is to ensure that employees are meeting their job requirements, contributing to the organization's goals, and having the necessary skills and resources to perform their tasks effectively.
Typically, the performance review process begins by setting specific goals and objectives for the employees to work towards.
Throughout the year, the employees receive ongoing feedback and coaching from their managers to help them achieve their objectives. At the end of the performance period, a formal review is conducted where the manager and employee discuss the employee's performance and progress toward their goals.
They identify areas for improvement and create a plan for the upcoming performance period, including training or coaching to help the employee enhance their performance.
Wrapping up
HR performance management software is a must-have tool for organizations that are serious about optimizing employee performance and boosting productivity.
By providing you with the right tools, it can help streamline the performance review process, identify top performers, and address any underperformance issues. But that's not all.
The right software can also help you establish a more personalized approach to performance management, facilitating meaningful conversations between managers and employees, leading to improved communication and a more engaged workforce.
With our top 15 picks for HR performance management software in 2023, you can rest assured that you'll find the best tools to drive success in your organization.
These cutting-edge platforms offer innovative features and functionalities that help you better manage your workforce and get the most out of your employees.
So, why stick with outdated performance management methods when you can upgrade to a more effective and employee-centered approach with our top 15 picks? Start your journey towards a more productive and engaged workforce today.
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Setting up a new business is no walk in the park, and when it comes to financial support small business owners often struggle to find the help they truly need.
A good question is whether you are confident your small business can survive its first five years—or even the first year. According to the U.S. Bureau of Labor Statistics, 1 in 5 small businesses fail within the first year, often due to poor financial planning and lack of strategic support.
Starting a business in 2025 means navigating a rapidly evolving economy, rising costs, and tighter competition. While passion and innovation are essential, your financial plan will ultimately determine your success.
Even the most exciting ideas can fall apart without a clear strategy for managing cash flow, expenses, and funding.
This article will guide you through building a brilliant financial plan tailored for small business success in 2025.
Whether launching a new venture or refining your current operations, you'll learn how to align your budget with your goals, forecast more accurately, and gain the financial stability needed to grow.
With the right plan, you'll gain investor confidence, make smarter decisions, and future-proof your business for the challenges ahead.
What is a Financial Plan for a Business?
What is a financial plan for a business? It's a strategic tool that helps determine whether a business idea is financially viable and provides a roadmap to maintain long-term financial health.
A financial plan is a crucial part of any business plan, offering clarity and direction as the business evolves. It typically includes three core financial statements: the income statement, the balance sheet, and the cash flow statement.
Each of these sections comes with a brief explanation or analysis to help interpret the numbers.
Together, they provide insight into profitability, liquidity, and overall financial stability—key metrics every business needs to track.
Who Needs a Financial Plan?
Financial planning isn't just for the wealthy—it's a valuable tool for anyone looking to take control of their financial future.
Regardless of your income or life stage, having a structured financial plan helps you set clear objectives, stay focused, and feel confident about your path.
A personalized financial plan offers more than just guidance—it acts as a roadmap to help you navigate major life events and unexpected changes.
Whether saving for a home, preparing for retirement, or adjusting to new financial responsibilities, a solid plan ensures you're making informed decisions.
You'll find financial planning especially beneficial if you're:
- Buying your first home or upgrading your current one
- Experiencing a significant change in income or expenses
- Starting or growing a family
- Thinking ahead to retirement and long-term savings
- Organizing your assets through estate or legacy planning
A proactive approach to your finances helps you reach your goals and builds resilience, allowing you to adapt to life's curveballs with greater ease and security.
Understanding the Role of a Financial Plan in Business Success
If you're starting a new business and wondering what a financial plan is, it's more than just budgeting—it's a strategic roadmap that outlines how your business will manage income, control costs, and reach long-term financial goals.
A financial plan brings clarity and control to your operations by linking daily decisions to your company's vision.
The importance of financial planning for small businesses cannot be overstated. According to the U.S. Bureau of Labor Statistics, around 20% of small businesses fail within the first year, often due to poor financial management.
A solid financial plan can help avoid this fate by providing insight into cash flow, funding needs, and operational priorities.
So, what is a financial plan example?
It could include projected income statements, balance sheets, cash flow forecasts, expense breakdowns, and growth targets. These documents serve internal strategy and inspire confidence among lenders, investors, and stakeholders.
A good financial plan helps businesses:
- Manage cash flow more efficiently to avoid shortfalls
- Set realistic goals and map out scalable growth strategies
- Present a strong, credible financial position to stakeholders
Ultimately, a financial plan enables small businesses to stay agile, make informed decisions, and achieve lasting success—even in uncertain economic environments.
Why Is a Financial Plan Important to Your Small Business?
A solid financial plan not only boosts your confidence in managing your business but also gives you clearer insights into how to allocate resources effectively.
It reflects a commitment to responsible spending and demonstrates your company's ability to meet its financial responsibilities.
With a financial plan, you can assess how specific decisions may impact revenue and identify when it's appropriate to use reserve funds.
Also, a financial plan is a powerful asset when presenting your business to potential investors. It highlights how your organization manages expenses, generates income, and plans for growth.
Most importantly, it provides a clear picture of your current financial position and outlines what's needed—through sales or investment—to achieve key financial goals.
Financial Plan for Beginners?
1. Develop a Sales Forecast
A critical component of any business financial plan is the sales forecast—an estimate of the revenue your business expects to generate over the next three years.
Start by building a spreadsheet that outlines each quarter of your fiscal year. Include key columns for product or service names, unit prices, units expected to be sold, and projected revenue.
If your business is already up and running, review past sales reports to identify seasonal trends or growth patterns you can use to inform future projections.
For startups without existing sales data, begin by calculating your cost of production per item or service. From there, estimate how much you plan to sell based on market research, competitor benchmarks, or industry demand.
Not confident in your manual forecasting skills? There are plenty of tools and software solutions available that can help you automate and refine your sales projections with greater accuracy.
A sales forecast estimates your future revenue and is crucial for building a solid financial plan.
Here's how to create one:
- Set up a spreadsheet to track products, prices, and projected sales.
- Use past sales data to identify trends (if your business is already operating).
- Estimate unit sales and pricing based on market research for new businesses.
- Forecast monthly revenue for the first year, then annually for Years 2 and 3.
- Use tools like QuickBooks or LivePlan to improve accuracy.
- Compare your forecast to industry benchmarks to ensure it's realistic.
This helps demonstrate your business's potential profitability to investors and lenders.
A well-prepared sales forecast isn't just for internal planning—it also builds confidence with potential investors or lenders.
It demonstrates that your business has a clear growth trajectory and can generate consistent revenue, making it more attractive for financial backing.
2. Outline Your Business Expenses
After completing your sales forecast, the next step is to create a detailed breakdown of your business expenses.
This section shows investors that your business can realistically afford to produce its products or services and maintain profitability. Ideally, your total expenses should remain below your projected revenue.
Start by identifying all your business costs and categorizing them into fixed and variable expenses:
- Fixed costs remain consistent throughout the year—examples include rent, insurance, and salaries.
- Variable costs fluctuate depending on operations and sales volume, such as marketing, shipping, or raw materials.
While some costs like production or rent may be straightforward, others—like taxes or maintenance—may require estimation.
Your expense forecast helps assess financial feasibility and ensures you're planning for both predictable and unexpected costs.
3. Build a Cash Flow Statement
A cash flow statement outlines the movement of money into and out of your business over a specific period.
It's a key component of your financial plan, as it shows whether your company generates enough income to cover its operating expenses and obligations.
The goal is to maintain positive cash flow, which means more money is coming into the business than going out. This signals healthy financial management and ensures you can pay bills, invest in growth, and handle unexpected costs.
To create a cash flow statement:
- Use historical profit and loss records to calculate incoming revenue and outgoing expenses.
- If you're a startup, make realistic projections using your estimated sales and known expenses.
- Always account for potential payment delays from clients or vendors. Adding a buffer for late invoices helps you avoid cash shortfalls.
Being conservative and realistic in your estimates helps you prepare for real-world financial conditions.
A clear cash flow projection gives investors confidence in your business's financial stability and helps you stay in control of your financial health.
4. Create an Income Projection Forecast
An income projection, a profit and loss forecast, provides a forward-looking snapshot of your business's expected revenue, costs, and net profit over a specific period. It's a crucial part of your financial plan, especially when presenting to investors or lenders who want to understand your business's long-term viability and profitability.
This document includes your projected sales, the direct costs of producing those goods or services, and your estimated operating expenses. The result is a forecast of your expected net income—essentially showing whether your business will be profitable.
If your business is already up and running, focus your forecast on the upcoming year.
For new ventures, consider projecting income over two to three years to demonstrate sustainability and growth potential.
To build an accurate forecast:
- Use sales forecasts and expense estimates as the foundation.
- Base your projections on industry trends and historical data, if available.
- Factor in seasonal variations, economic conditions, and potential business developments.
- Consider using financial forecasting software or consulting a financial advisor for added accuracy.
A well-prepared income forecast builds credibility and can significantly improve your chances of securing funding or investor interest.
Download the free financial projections template excel for a great starting poin.t
5. Build a Forecasted Balance Sheet
A forecasted balance sheet offers a snapshot of your company's projected financial position by outlining what it owns (assets) and what it owes (liabilities).
This document is essential for investors, lenders, and stakeholders to evaluate your business's financial stability and net worth over time.
Assets represent everything your business owns that has value, such as cash, inventory, accounts receivable, equipment, real estate, and intellectual property. Liabilities include financial obligations like loans, taxes, unpaid wages, or outstanding vendor payments.
To create your forecasted balance sheet:
- Start by listing all expected assets, including cash balances, office equipment, inventory, property, and receivables.
- Next, outline projected liabilities, such as credit lines, loan repayments, outstanding invoices, or payroll obligations.
- Subtract total liabilities from total assets to calculate your projected equity or net worth.
A positive balance sheet—where assets outweigh liabilities—demonstrates financial health and signals to investors that your business is solvent and capable of meeting its obligations.
Conversely, if liabilities exceed assets, it may raise red flags about your ability to manage debt.
Having a clear and realistic balance sheet projection not only builds credibility but also helps you plan for future capital needs and operational investments effectively.
Here is a simple balance sheet template excel, feel free to use this financial projections template excel.
6. Identify Your Break-Even Point
Understanding your break-even point is crucial for evaluating the financial viability of your business. It represents the level of sales needed to cover all your expenses—where your total revenue equals total costs. Only after crossing this threshold will your business begin generating profit.
Determining your break-even point gives you a clear financial target and helps you make informed pricing, budgeting, and investment decisions. It also reassures potential investors that your business can become self-sustaining within a reasonable timeframe.
To calculate your break-even point, subtract your variable costs from the unit selling price, then divide your total fixed costs by that result. The formula looks like this:
Break-Even Point = Fixed Costs / (Unit Price – Variable Cost per Unit)
For example, if your fixed costs are $100,000, and each unit you sell brings in $50 in profit after covering variable costs, you'd need to sell 2,000 units to break even.
Most successful businesses break even within two to three years. If your projections show it may take significantly longer—say five years or more—it could signal the need to reassess your business plan or reduce operating costs.
Also consider including an exit strategy in your financial plan. This helps mitigate risks and outlines a path to minimize losses should your business not perform as expected.
7. Plan for Contingencies + (contingency plan template word)
Every business faces unexpected challenges—from sudden market downturns and supply chain disruptions to equipment failure or economic shifts.
That's why it's essential to build contingency planning into your financial strategy.
A contingency plan includes setting aside a financial buffer (often referred to as an emergency fund) to cover unforeseen expenses without derailing your operations. Many financial experts recommend having three to six months of operating costs set aside as a safeguard.
Beyond savings, consider preparing alternative revenue streams or flexible cost-reduction strategies you can implement quickly if revenue drops. This might include renegotiating vendor contracts, scaling back non-essential spending, or leveraging credit lines responsibly.
A solid contingency plan increases investor confidence and gives your team peace of mind—knowing you're prepared for the unexpected.
It's not just about weathering storms, but staying agile and resilient enough to pivot when necessary, keeping your business on track for long-term success. Download out free contingency plan template word.
5 Steps of Financial Planning
1. Define Your Financial Goals
Start by asking yourself: Where do I want to be in 5, 10, or even 20 years? Whether owning a home, retiring early, travelling the world, or funding your child's education, having a clear vision helps shape your financial plan.
Break down your aspirations using the S.M.A.R.T. method:
- Specific: Clearly state what you want (e.g., "Save for a down payment on a house").
- Measurable: Assign a number or milestone (e.g., "Save $30,000 in 3 years").
- Attainable: Make sure the goal is realistic based on your income and expenses.
- Relevant: Focus on what matters most to you and your long-term lifestyle.
- Time-Based: Set a target date for each goal to stay accountable.
Use a digital notebook or spreadsheet to list and categorize your goals into short-term (1–2 years), mid-term (3–5 years), and long-term (5+ years). This will help you prioritize where to start saving and how much to allocate monthly toward each goal.
A great way to boost your financial literacy is through online MBA finance programs. These programs offer practical, flexible education tailored to real-world business needs. Whether you're planning for growth or just managing your first year of revenue, sharpening your financial skills gives you a competitive edge and a better shot at long-term stability.
2. Assess Your Risk Tolerance
Understanding your risk tolerance is essential when creating a financial plan that suits your lifestyle and goals.
Risk tolerance is your comfort level with investment ups and downs—how much loss you're willing to accept in pursuit of higher returns.
Your tolerance depends on factors such as:
- Your age – Younger individuals can typically handle more risk since they have time to recover from market fluctuations.
- Your financial goals – Short-term goals often require safer investments, while long-term goals may benefit from more growth-focused strategies.
- Your income and savings – The more financial stability you have, the more flexibility you may feel when taking risks.
- Current economic conditions—Inflation, interest rates, and political stability can all affect how much risk you're comfortable with.
Use an online risk tolerance quiz or calculator to get a quantified score. This helps align your investments with your comfort level and expected returns.
Consider this score when choosing between conservative options like bonds, balanced mutual funds, or higher-risk investments like stocks or crypto.
Understanding your risk tolerance ensures your financial strategy is realistic, sustainable, and aligned with your peace of mind—even when markets fluctuate.
3. Analyze Your Cash Flow
A solid financial plan starts with knowing exactly where your money is going.
Cash flow analysis tracks the money coming into your accounts (income) and what's going out (expenses). This step helps you identify spending patterns and areas for improvement.
Start by reviewing your last 3–6 months of bank statements.
Categorize your spending into:
- Essential expenses - Rent or mortgage, utilities, groceries, insurance, transportation.
- Discretionary expenses - Dining out, subscriptions, shopping, entertainment.
Once categorized, subtract your total expenses from your income to see your net cash flow.
Use budgeting apps like YNAB, Mint, or Excel templates to automate your tracking. Set a monthly review reminder to stay accountable.
After this analysis, you may find non-essential costs that can be reduced or eliminated. Even small changes—like cutting unused subscriptions or reducing takeaway meals—can free up cash for savings, investments, or emergency funds.
Understanding your cash flow gives you control over your finances, prevents overspending, and ensures your financial plan is based on accurate, real-world data.
4. Protect Your Assets
Protecting what you own is a critical part of any strong financial plan.
Start by calculating your net worth—the total value of your assets (home, car, savings, investments) minus your liabilities (loans, credit card debt). This gives you a clear picture of what needs protection.
Once you understand your financial standing, evaluate your insurance coverage:
- Homeowners or renters insurance for property and personal belongings.
- Auto insurance with sufficient liability coverage.
- A Personal Liability Umbrella Policy (PLUP) for extra protection in case of major claims or lawsuits.
- Life insurance—either term (for affordable temporary coverage) or permanent (whole, universal, or variable universal life), depending on your long-term needs and family situation.
- Long-term care insurance to protect your retirement savings from healthcare-related expenses later in life.
Review your insurance policies annually or when your life circumstances change (e.g., marriage, new home, children).
Speak with an independent insurance advisor to ensure you're neither underinsured nor overpaying.
With the proper protection in place, you're shielding your financial future from unexpected events—and giving yourself peace of mind.
5. Evaluate Your Investment Strategy
Your investment strategy should align with your financial goals, timeline, and risk tolerance.
Begin by identifying your approach:
- Active Investing involves hands-on management, frequent trading, and efforts to outperform the market. This strategy demands time, expertise, and often higher fees.
- Passive Investing focuses on long-term growth by tracking market indexes (like the S&P 500), often through ETFs or index funds. It typically involves lower costs and less frequent trading.
- Define your investment goals - Are you saving for retirement, a home, or college tuition?
- Consider your time horizon - The longer your timeline, the more risk you may be able to take.
- Evaluate your current portfolio - Is it diversified? Are your investments aligned with your goals?
- Rebalance your portfolio regularly to maintain your desired asset allocation.
If you're unsure which path suits you best, consult with a financial advisor or consider a hybrid approach, where part of your portfolio is passively managed and another part actively managed.
Choosing the right strategy is not just about returns—it's about aligning your investments with your life goals and peace of mind.
Key Challenges Small Businesses Face When it Comes to Financial Planning
- Unpredictable Cash Flow - Many small businesses experience irregular income streams, especially in the early stages. This makes it difficult to forecast revenue and plan for future expenses. Late payments from clients or seasonal fluctuations can leave businesses scrambling to cover costs.
- Limited Resources and Budget - Small businesses often lack dedicated financial experts or advanced tools. With limited time, staff, and money, financial planning is either put on hold or handled by someone without formal training in accounting or finance.
- Lack of Financial Literacy - Many small business owners are passionate about their product or service but may not fully understand financial statements, forecasting, or budgeting. This can lead to poor decision-making and prevent the business from growing sustainably.
- Difficulty Accessing Capital - Securing loans or investment requires detailed financial plans and projections. Small businesses that struggle to create professional financial documents may find it hard to gain the trust of investors or lenders.
- Overestimating Revenue, Underestimating Expenses - A common trap is being overly optimistic. Overestimating how much revenue will come in and underestimating how much things cost can result in shortfalls and missed targets.
- Economic and Market Volatility - Changes in interest rates, inflation, or supply chain disruptions can derail financial forecasts. Small businesses are more vulnerable to external shocks, making contingency planning even more important.
- Scaling Without a Plan - Rapid growth without financial controls can be just as dangerous as stagnation. Businesses that grow quickly may overextend themselves, take on too much debt, or fail to manage increased operational costs.
Best Tools and Resources for Small Business Financial Planning
Here's a list of some of the best tools and resources for small business financial planning, including top-rated financial planning apps that help manage budgets, cash flow, forecasting, and more:
#1. QuickBooks
Best for: Accounting & financial reporting
A go-to tool for small businesses, QuickBooks helps with expense tracking, payroll, invoicing, and generating financial statements. It also offers forecasting tools and integrates with many other apps.
Why it's great: Easy to use, scalable, and trusted by millions of businesses.
#2. Xero
Best for: Online accounting & collaboration
Xero is a cloud-based accounting software ideal for small businesses that want real-time collaboration with bookkeepers and accountants.
Why it's great: User-friendly interface, strong financial reporting features, and great for managing cash flow.
#3. Wave
Best for: Free accounting and invoicing
Wave offers free invoicing, accounting, and receipt scanning tools. It's perfect for solopreneurs and freelancers just starting out with financial planning.
Why it's great: No monthly fee, intuitive layout, and ideal for basic financial needs.
#4. LivePlan
Best for: Creating business plans & financial forecasting
LivePlan helps businesses build professional business plans and financial projections. It's a great tool if you're pitching to investors or lenders.
Why it's great: Pre-built templates, industry benchmarks, and easy forecasting features.
#5. PlanGuru
Best for: Advanced forecasting & budgeting
PlanGuru is designed for in-depth financial analytics and 3–10 year forecasts. It's more advanced than most small business tools and ideal for growing companies.
Why it's great: Budgeting, forecasting, and reporting all in one platform with powerful analytics.
Wrapping up
Financial planning isn't just for big corporations—it's the secret weapon that helps small businesses thrive.
When you take the time to understand your costs, stay informed, monitor your cash, and invest in solid systems, you set your business up for long-term success. The earlier you start building that financial foundation, the stronger your business becomes.
You don't need to be a financial wizard to make smart choices.
You just need the right mindset, some good habits, and a commitment to staying proactive. With these ten steps in place, you'll be ready to lead your business with clarity, confidence, and control.
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Jill Romford
I am a digital nomad, lover of exploring new places and making friends.
I love to travel and I love the internet. I take pictures of my travels and share them on the internet using Instagram.
Traveler, entrepreneur, and community builder. I share my insights on digital marketing and social media while inspiring you to live your fullest life.
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