It's Time To Look At The Numbers

Date Added: 13/07/2012 by Damien Moffrey - Baker Affleck Moffrey

I recently asked a new client to send me their budget and past year’s figures so I could get my head around their business and where they were headed. And the response came back “here are our year to date numbers but we don’t have any budget – we have operated by understanding our overheads weekly and monthly and just make sure we have the money in the bank each week and month to cover this.” This is a very typical response.    

The better businesses we deal with have a business plan, a marketing plan and within this a financial plan.They look at budgets, KPI’s, benchmarking and are on top of the fluctuations and differences in their business as they occur. This allows them to move with the times and understand what is coming up in front of them, rather than trying to be reactive and rely on natural cash flow to dictate to them how they should run their business.    

If you are taking a trip to a foreign country, do you arrive there and then spend the first days of your holiday working out what you want to do? Or do you plan, look at a map, jump online and look at what you want to look at and where you want to go? The same goes for business. You cannot fly blindly into your new financial year. You need to plan what you want from your business – a roadmap for the year. Understand what revenues are likely monthly, what expenses are likely and in doing this understand the challenges you may face before you face them.   

One of my better clients last November came to me and told me he would encounter a cash flow problem in May 2012. He had a plan and we were able to discuss some contingency plans for that clients business to (a) try and avoid the cash flow shortage through some marketing strategies, cost cutting, and some business improvement initiatives, and (b) in the event that it was severe and the (a) strategies didn’t work, some other options to assist, ie asset sales, business sales. In any event, there was a plan, and in June when we met to discuss tax planning the business weathered the storm and had limped through the worst of the issues and was looking to the better months for improved cash flow. We revised the plan and discussed how it would look for the next quarter.        

Many business people are too caught up working in their businesses and are not able to see the wood for the trees. There needs to be a plan. A budget is an absolute minimum and that budget should be compared to actuals each month. It is a fluid document and is able to be changed if required, but it needs to have some basis for preparation and real assumptions to allow the budget to be as close to your actual trading as possible. The budget also has to be achievable because a fanciful budget is next to useless. 

At Baker Affleck Moffrey we have a number of clients who meet with us monthly, or quarterly to discuss, review and suggest strategies to assist them improve their businesses. These clients typically feel more in control of their business, have more time with their family and are able to get away on leave and enjoy some down time.   

If you would like to discuss your business and some of the ideas mentioned in the article above,  please contact Damien, Juris or Tijen at Baker Affleck Moffrey on 07 5538 3088.

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