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Don’t Say the “B” Word…

HeadlightsOh no, it’s the dreaded “B” word.  Ok, let’s just come out and say it. BUDGET!

But before all the negative thoughts emerge, substitute the word “Profit Plan” for budget.  Then extend the exercise into 3 years, making this document into the “Forecast.” The first year of the Forecast becomes the 2016 Budget, or more appropriately termed, the 2016 Profit Plan.

The good news is that it’s not that difficult to assemble.  Start with your chart of accounts for structure (very important) and input your best estimate for sales volume. Then project marketing costs necessary to achieve the sales goal. The rest is fairly mechanical. If you are projecting a significant increase or decrease in sales volume, you should also run forecasts for balance sheets and cash flow statements to make sure you don’t run out of gas during the year. You may need help on that one – let me know.

But most importantly, put the Profit Plan / Budget into your accounting software, which should be easy since you built the plan using your chart of accounts. Then get with your team every month to analyze the “Budget to Actual” reports.  It’s actually fun, especially when things are going well. If operations are challenged, at least you know it and can plot course corrections early enough to make a difference.

We all know the importance of planning. Operating a business without a Profit Plan is like driving without the headlights on.  Crank up the brights in 2016 with a Budget Profit Plan.

B2B CFO®

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