The start of a new year is a great time to review all aspects of your business and put some plans in place. Hopefully you have just come back from a break and the batteries are re-charged. So what do you focus on? I am an accountant, so here are some ideas on the financial side of the planning process.
The new-year is the time to ensure the year’s budgets are in place and up to date. My preference is a profit and loss budget, as well as a cash flow budget. These budgets should focus on the sales, expenses and profit figures that you are aiming to achieve, and when cash flow may be tight. It is also good to budget for any large capital expenditure that you may have to outlay during the year. The great thing about financial budgets is it forces you to then think about how you will achieve these goals.
Financial budgets can also be broken down into smaller areas of focus. Generally it is best to start with the important aspects of the business. A sales budget is a great start. What are the overall sales that you are trying to achieve and which months will be better than others? From there you need to look at the product you are selling, and if there are any savings that can be achieved. If you are in service industry your product is your people. How can you get the most out of your team and improve efficiency? By focusing on this area you may be able to generate the same revenue at a lower cost. It is the same with a product based business. You need to look at how you can increase the profit margin on each item sold. Lastly it is important to review the fixed costs and determine if there is any money that can be saved.
By reviewing budgets regularly you are forced to analyse the financial ins and outs of your business and in turn build a better and more profitable enterprise.