Being happy in business has 3 foundations. Having understood #1 the numbers, you next need the insights necessary for developing #2 strategy for achieving your business and personal goals. Business ownership can be multi-faceted and complex, so #3 accessing qualified business advisory services will deliver the support you need for achieving your business and personal goals.
#2 Strategy & Insights
While getting the numbers right indicates where your business is now and enables you to develop your vision for the future, having good strategy is what will bring your vision to life. Among the key tools for gaining the business insights you will need are performance reports, a business budget, cash flow projections and predictive modelling.
Performance reporting answers the question: ‘How did we go?’ By directly comparing ‘actual’ and ‘projected’ figures for selected KPIs (key performance indicators), performance data will reveal how effectively the business does, or doesn’t, achieve key objectives. Armed with this information, you will feel confident when making decisions and implementing changes.
A business budget is a fundamental tool for setting financial targets. While avoiding wasting money is always important, the key to effective business budgeting is driving revenue rather than focusing solely on cutting costs. For example, a restaurant may increase revenue to accommodate demand by taking earlier bookings or adding extra tables. The increased patronage will more than likely offset any increased costs. Taking a pro-active approach to your business budgeting, together with making good use of information delivered by your performance reporting, will allow you enjoy the rewards of your business.
Cash flow projections are an effective tool that will allow you to estimate the timing and quantity of cash in and cash out over a specific period. This valuable insight will aid planning and empower you to implement a range of relatively simple solutions that can dramatically affect your cash position. Solutions may include short-term borrowing or deferring large outlays to tide you over when cash reserves are low.
As many professional services businesses can attest, closing over the Christmas period causes cash flow issues. Even though no work is generated or invoiced during that period, fixed costs including your rent and wages still need to be paid. A cash flow projection will alert you to your likely cash position and, importantly, enable you to implement solutions. Your chosen strategies may include invoicing earlier, calling in late payers and deferring unnecessary expenditures until later. Cash flow projections help you to create more consistent cash flow which will enable you to meet your obligations without financial (or personal) stress, while allowing you to confidently respond to opportunities as they arise.
Predictive modelling is a powerful tool that enables you to understand often-overlooked relationships among business variables that can affect business outcomes. Put simply, predictive modelling helps you answer: ‘What would happen if…?’. For instance, a medical professional could use predictive modelling to find out what would happen if they brought on one additional patient per week. The modelling would include indicators of additional revenue as well as associated cost and other financial management impacts.
Sound business strategy provides a framework that not only improves your business, but gives you clarity and, in turn, financial confidence and a sense of being in control. In my experience, these are the hallmarks of being happy in business.
My article on #3 Advisory explains how accessing qualified advisory services from experienced professionals will shore up the achievement of your business goals.
In the meantime, if you would like to discuss your insights and strategy in relation to your business goals, let’s talk and work together to make a positive difference. Please email David [email protected] or Brenden bre[email protected] or phone 3217 5700.
P+Y Accountants and Business Advisors are known for expanding the possibilities for professionals and enterprising business owners.
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