The beginning of the year is a good time to review last year’s results and plan for this year. A financial budget is a tool that is available to help guide and design your future. It can tell your story before it happens.
Let’s get started…
Understand your business. Discover changes in revenue streams and expense structures. Look for trends. Begin with your most recent financial history. (Note that this information is only as accurate and complete as your system.)
- Get a copy of your last two years or more of financial information. For a fast paced business – compare months.
- Organize your income statement into basic elements – sales, direct cost of sales, occupancy, salaries & benefits, marketing and overhead. To reduce clutter, identify major issues and narrow your focus – apply expense categories. You can get into the details when you start to implement changes.
- Break down sales by the different types of revenue, by products, services, etc. This breakdown will be unique for you.
- Add percentages. Compare the type of sales to total sales. Compare the expense totals to total sales. Calculate cost of sales by revenue.
- Look for trends. Ratios are very helpful here. Identify which sales are increasing or decreasing, expenses that are increasing or decreasing, the relationship between cost of sales and sales, salaries & benefits to sales, etc.
Identify the good, the bad and the ugly!
- What is working for you? How can you refine it to work even better?
- What is your biggest frustration now? What can you change to improve the results?
- Is there anything that could threaten your business?
Create your vision. Write down where you want you or your business to be in the future, by total sales, cost of sales, and expenses. Brainstorm as to how you will shrink the gap between where you are now and where you want to be.
Create an action plan. List all possible actions that will move you in that direction. This will include new habits to develop and current habits to discontinue. Rank them from most probable to needs a miracle.
Keep it simple. Focus on the results desired and the action plan to achieve it. Once you set your desired results, identify one to two daily or weekly measurements to keep you on target. It could be # of customer contacts, # of hours spent on client work, # of orders shipped, daily sales, etc.
Recruit help. Share your goals and vision with your customers – ask for referrals. Share your vision with employees – ask them how they think they can help the business get there.
Monitor and refine your actions. For many small businesses, it is too easy to work in the business and not take time to work on the business. Take time to review your actions and compare the results achieved to the results desired. Go back to your original vision and revise your game plan.
Celebrate your successes! In some cases, your success may mean the ability to pick yourself up and refocus your efforts.
Remember to focus on your strengths! We can help interpret the numbers, provide a financial perspective and brainstorm with you ideas on bringing your story to life.
Please contact Mary, at Mary@focus-cpa.com or 920-351-4842.
By Mary Guldan-Lindstrom
