As you might know a budget plan is key to planning growth, getting cozy with “your numbers” in your budget (your revenue, and expense needs) is vital for planning growth and profit. Your business plan is your bible for decision making, it should be current to help you make daily decisions. A business plan doesn’t have to be complicated, it can be very simple. The business plan should explain: the why the business was established, its purpose, for what customer, how the business will operate and by when it will do certain things. It doesn’t need to be exact because it will change, likely in a couple of months! If you want to make informed decisions about growth you truly need a current biz plan and a budget to start to do what the plan says the business will do. Here are some reasons why you need a current business plan and budget to help you make decisions and plan for growth:
- If you have fast growth goals identified in your biz plan, a long-term office or equipment lease may not make sense though it might reduce expenses now. Quick growth generally requires flexibility, so don’t get stuck in a contract that could cost you more to get out when that welcomed growth arrives and your needs change due to the increased business.
- Understand your cash flow. For those with inventory, inventory ties up capital, so it’s important to know exactly how much you have in stock and timing of orders. For services, do you know how much it costs to deliver the service? That means have you ever reviewed what it costs in person power and resources to deliver a service? If you haven’t, do it. That is the only way to know if you are charging enough and to know when you need to hire and whom you need to hire. Of course, for a new business collecting this data is a struggle until you have sufficient data (likely a year or so) of delivered services or goods. But committing yourself to tracking and reviewing the data regularly and maybe investing in the right technology for its collection, will give you a better chance for predicting cash flow and business needs.
- Speaking of cash flow, technology can make it much easier to keep track of when money comes in and when money goes out. Online software can allow credit cards and other accounts to feed into your business bookkeeping software. But looking at the bank account balance isn’t enough, understanding the who, what, where, and how the revenue is coming in and going out is vital for planning. A regular review of this info will help you manage and plan for money gaps/shortages, which will inevitably happen. This data is also essential for overcoming problems. For example, when accounts receivable becomes an issue, you can mitigate the challenge, by adding language to your agreements with new clients, and by proactively communicating with vendors for help.
- Finally, reviewing a monthly/weekly budget variance report, will show you if your budget (your plan for income and expenses) is off and why. By keeping monthly or weekly track of the budget and the budget variance, you will start to understand more about the business’s trends and concepts, which helps decision making and profitability. Which results in improvements to your business plan and your personal and professional growth.
The information provided does not, and is not intended to, constitute legal advice; all information is for general informational purposes only. This information may not constitute the most up-to-date information. The links provided are only for the convenience of the reader. A. Ferraris Law, PLLC, and its members do not endorse the contents of third-party references.
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