When developing a strategic plan for your business, the first question we ask is, “What are your long term business goals?”

This is not as easy of a question as it might seem. It can require a significant amount of soul searching on the part of the business owner and greatly depends on the maturity of your business and how long you want to remain involved.

Here are some common questions we ask clients:

• Do you want to increase cash flow?
• Do you want to expand your business to other markets or locations?
• When do you want to retire?
• Do you want to sell your business?
• Do you want to pass along your business to children or other family members?
• Is your primary concern reducing tax liabilities?
• Do you have a retirement plan in place such as a Simple IRA or pension and are you funding it?

The strategic plan can vary greatly from one business to another depending on your answers to these questions. The answers need to be truthful to you and can often serve as a reality check on where you stand with your business.

Every business owner has the right to say, “Enough is enough!” and to call it quits.

It’s not an easy decision to make but we’re here to help support you in that decision and to wind down the business or to get it ready for sale.

On the other hand, you may need a trusted advisor to lay all the cards on the table, put in the hard work, and give that boost that will catapult your business to next level. We’re here for you as well!

Creating a full business budget can be one of the more difficult and time consuming tasks in accounting. It requires the inputs of multiple departments and people to get it done.

The wrong way, and easy way, to create a budget is to copy last year’s results into the budget for this year… But can anyone really call that a budget?

The correct way involves significant strategic planning and forethought about what you want your business to accomplish in the future.

The major parts of the Master Budget include:

• The Operating Budget which emphasizes obtaining and using current resources and is used to create a Pro Form Income Statement.
• The Financial Budget which emphasizes obtaining the funds needed to purchase operating assets and is used to create the Pro Form Balance Sheet and Statement of cash flows. It includes the Capital Budget and Cash Budget.

Once the Master Budget has been completed for the next year, Flexible Budgeting and Variance Analysis can take place to provide feedback to management on how close the business was to achieving its goals.

Creating a Master Budget is a costly endeavor whether it is completed in-house or by an outside CPA firm and should only be considered if the time and resources will be committed.

But if you’re ready to take your business to the next level… Now may best time to consider this investment.

The number of Key Performance Indicators (KPIs) that require management’s regular review could be endless and greatly depend on your individual business needs. Many of these will depend on your Strategic Plan and key Variances pulled from your Master Budget to actual performance.

Some examples to consider are:

• New customers and new customer sales.
• Lifetime customer value
• Website analysis and lead generation.
• Accounts Receivable aging.

Cash is the lifeblood of every business… Big or small. When cash runs low, nothing else matters to your business.

While cash flow forecasting and monitoring should be part of a bigger Strategic Plan, there are some things you can do to strengthen your cash position:

• Take all trade discounts provided by vendors. While 1% or 2% might not seem the payment of cash before an invoice is due, that percentage when compounded over an entire year can add up. In some cases, depending on your cost of borrowing, it may be cheaper to borrow short term in order to take advantage of trade discounts.
• Provide trade discounts to your customers. Just like you, your customers want to take as long as possible to pay their bills. By providing an incentive to pay early, you can shorten your cash collection cycle and increase cash flow.
• Use debt wisely. As mentioned above, borrowing over the short term to take advantage of trade discounts can net to positive cash flow. All debt purchases should be analyzed to ensure a positive Return on Investment and positive cash flow.
• Invest excess cash and earn a return today to pay for capital investments in your business tomorrow.

Product costing, whether manufactured or puchased, or whether an actual product or a service, can be tricky. However, knowing your product costs is critical to Strategic Planning and pricing.

There are multiple pricing methodologies that can be used and understanding which method to use for internal use (pricing and management reports) and external use (tax authorities and external stakeholders).

• Absorption Costing: Required by Generally Accepted Accounting Principles (GAAP) and the I.R.S.
• Variable Costing: Used for internal management purposes such as product and service costing.
• Joint Product & By-Product Costing: When a single process creates more than one product or a by-product that can be sold (i.e., scrap).
• Job Costing: Used when a manufacturer or service organization performs discrete jobs that are unique and generally larger in scope.
• Process Costing: A costing methodology that involves large quantities of goods or services that are indistinguishable from each other (i.e., petroleum production).

Standardizing business processes are necessary for:

• Reducing errors
• Eliminating duplication of effort
• Ensuring a consistent product or service; and
• Reinforcing your expectations from employees which increases moral, reduces turnover, and reduces the opportunities for fraud.

All this helps to free-up the time of owners and managers so they can focus their efforts on big-picture business strategy… Or to take some well-deserved time off without fear of the business falling apart while gone!