Do You Know Where You Are?

What would you think if that question was from air traffic control(ATC)  to the captain of the airliner on which you were traveling? You would be highly concerned for the question having to be asked–and even more fearful if the captain didn’t have an answer!

As a business owner you are the ‘captain’ of your airliner–your business.  The ATC might be your bank, a key vendor, or another investor. Your employees, customers, or vendors are you traveling on the airplane.  How would they feel if you as the owner of your business were asked:  “do you know where you are?”  Do you have the answer?  And how can you confirm that you really know where you are?

Fortunately, airlines and pilots file flight plans with the ATC, so both the pilot and the ATC know the  intended route.  And today ‘global positioning systems” (GPS) help make positioning even more accurate.

Your business plan is the flight plan.  It contains the crucial information on where you are planning to go and how you intend to get there.  Your plan includes your current year forecast(budget) and some key performance indicators you wish to adhere to.  This plan is your compass to assist in determining where you are.

So are you on course?  Are you ahead of your plan?–maybe revenue is higher than expected;  much like an airliner with tailwinds that has been able to make better time.  Are you behind on your plan?  Revenue hasn’t come in as planned.  Results of marketing are slow.  As with the airliner, it might have departed late or is experiencing headwinds, so too the execution of your plan has its challenges.

Do you have a business plan or are you flying in the clouds with no instruments?  Owning and operating a business doesn’t come with a promise of clear skies—it actually comes with the responsibility to plan knowing there will be delays, turbulence, and course corrections needed. Landing safely  (reaching your plan goals) is a result of being a wise steward of your business—those depending on you will appreciate you staying on course.


Posted in Managing Your Business | Leave a comment

It’s In The Follow Thru

In order to score in basketball one must focus and follow thru with the shot. In bowling in order to get that strike, one must focus and follow thru in the throw or roll. The same holds true in golf, baseball, and …well, you get the point.

So as a business owner you have completed your business plan, which includes your 12 month cash forecast. The key to your success is now in the implementation and execution of your plan. Like a golfer at the tee box who is imagining the outcome of a perfectly well executed swing, so too must you envision the outcome of your well executed plan. What does the profit and cash in the bank look like in your mind? How about sitting on the beach enjoying the fruits of your dedication to execution?

You have done your driving range preparation by formulating your plan, so now it’s time to see what is going to work. Staying focused and being true to those things you put into your plan that you know will bring the success your company needs is very important. Do not get distracted by matters that will not help you achieve your goals—it takes discipline.

The professional golfer works each day on swing mechanics and makes adjustments to perfect the swing. Your business plan will be adjusted daily, weekly, and monthly to accommodate unforeseen events within your business. This is okay; it is necessary to stay on course to achieve the prize (your goal).

So to avoid the shot off the rim, the gutter ball, and the slice please remember to follow thru and stay focused. Great outcomes await you for doing so!

Posted in Managing Your Business | Tagged | Leave a comment

Vacation Planning

Have you written a business plan for the current year? Have you projected how much your business is going to make? What are you doing different this year than last year? How about you, business owner—how much are you going to earn this year? Taking a vacation this year?

I find that most business owners plan for their vacations better than for their own business operations. Find a person who is taking a vacation and they can tell you when they are departing, how they are getting to their destination, how much the airfare cost them, when they arrive, how much they have saved and will be spending, and probably can tell you their plans for each day.

Why is it easier to plan the vacation then plan for the source of your income and livelihood? Sure it’s a commitment of time and energy to accomplish writing the plan, but the fruit of your labor will bring measurable results. As a business owner you should have an idea of how you would like your business to perform (vacation destination). What will you do to accomplish this goal or how will you get there (transportation)? What financial resources will you have to invest in reaching this goal (cost of vacation)? What do you have in retained earnings or what amount will you have to borrow to provide the working capital to achieve your goal (amount saved for vacation)?

You owe it to yourself to plan and be to strategic about your business! It’s your responsibility and no one else’s! Your lender will appreciate it! Your employees will appreciate it! And most importantly YOU will benefit from it. Don’t be like Clark Griswold of the movie Family Vacation and overlook a critical planning tenant—not checking to see if Wally World would be open when his family was vacationing. Think and plan for the final outcome.

Know where you’re going! How you will get there! And that you have chosen the perfect accommodations!

Posted in Managing Your Business | Tagged | Leave a comment

Cash Is King

One of the successes to weathering a financial crisis is having enough cash on hand to get you through the storm. Many business owners know well how to manufacture or distribute a widget, but fail in maintaining cash and staying on top of funding working capital. While traveling I will hear business owners say “my business is doing well, sales are up, but I do not have cash in the bank”. When asked if they prepare cash budget or cash forecast the topic of discussion changes quickly to the weather. Yes, the process of preparing the cash forecast takes time and might be painful, but the benefits of knowing how much cash you will have in the bank outweigh these costs.

What information do you need to do a 12 month cash forecast?

  1. A good estimate (forecast) of your sales by month—don’t beat yourself up—it’s an estimate and can be adjusted along the way.
  2. How long does it take your customers to pay you? If you give them terms, are they paying on time or paying beyond due date. You’ll need to calculate the number of days your receivables are outstanding—this will be used to determine when you receive your cash. If your terms are cash, then monthly cash collected equals your sales.
  3. A list of your expense accounts and monthly amounts paid, not an average—we’re tracking cash.
  4. The monthly payment amounts on your loans and long-term obligations.
  5. If you are taking distributions (S-Corp, LLC) –you’ll need this information, too.
  6. Timing of your material purchases (for manufacturing) or product purchases (for distribution or retail) is critical to the cash forecast.

The key to a successful cash forecast is accurately entering when the cash is received and when the cash is spent. And remember, it’s a process subject to many changes along the way.

Posted in Accounting Tips | Tagged | Leave a comment