As you prepare for the new financial year, it’s important that you step back and reflect on what has occurred – good and bad, and start your planning for the year ahead. Most businesses tend to complete this in two stages; the review stage, and the implementation.
What should you include in your business review?
This month we explore the review stage, and stay tuned for next month’s edition where we’ll talk you through stage two – the implementation.
Your budget is the financial representation of your business plan. You should be able to define the activities which are associated with the fees generated, the cost of service and the overhead expenses. It’s important you take the time to assess your strategic objectives, and how these align to the broader business plan.
Reviewing your achievements and setting your goals
A review of your business will likely identify a set of strategic and business improvement objectives (financial, customer, process, people and technology) which you can sequence and allocate to different quarters for achievement. The objectives will often be broken down into subordinate initiatives and tasks which provide a logical completion schedule.
In your review you should also have identified the minimum standards of performance. The attainment of your ‘business as usual’ (BAU) targets is critical if you are going to achieve your budget.
The budget should specify clear financial objectives for the year, quarter and months. You could also create detailed budgets for different offices, services, or client groups. These financial measures will typically include fees, cost of service, gross profit, overhead expenses, operating profit (EBIT), debtors, WIP and lockup.
The non-financial targets in the business plan will typically include:
Planning your budget
When planning your budget, it’s necessary to think broadly and get input from staff to encourage engagement and commitment. Take a balanced view of the business and test each issue by asking yourself ‘what are the implications?’. What if you do nothing? What if you take action?
Further, as previously mentioned, consider your business objectives. All objectives should be action statements which specify an outcome. Someone must be the owner and they should have a completion date. They should also have clear measures of success, such as increased fees, improved staff productivity, decreased overhead costs, or reduced rework, to name a few.