So, what are the three essential ingredients for business success? In our view, they are:

1.An annual Business Plan.

2.An annual forecast.

3.Ongoing reporting with accountability.

Your Business Plan is your guiding document to deliver the business outcomes you dreamed.

Your annual forecast shows you the numbers you need to achieve your desired business outcomes.

Ongoing reporting with accountability means regularly monitoring your results and having someone hold you accountable for completing your actions and achieving your goals.

Let’s take a closer look at each one.

The Plan

There are literally thousands of books and articles on the internet about the components of a Business Plan. Here’s what we consider to be best practice.

1.A clear purpose. This should be a 5-7 word statement that explains why your business exists for your customers.

2.A clearly articulated vision. What will your business look like in five years’ time?

3.What you want to achieve. What does your business need to deliver to you? Remember, your business is there to serve you; not the other way around. State the hours you want to work, the holidays you want, and how much money you want to make.

4.A high-level budget. This helps identify your gross revenue targets for the year and is based on what you’ve recorded in the ‘What we want to achieve section’. The budget also forms the basis for essential tool number two.

5.Key Performance Indicators. These are the things to measure that will make sure you’re on track to achieve your goals, for example, sales per day, milk production per month, gross profit, or even the number of days team members are achieving their individual targets. Choose a maximum of five and make sure you can measure them.

6.Opportunities and vulnerabilities. Your Business Plan needs to identify these so your goals can maximise the opportunities and mitigate the vulnerabilities.

7.Goals for the year. Make sure these goals are measurable and achievable. These should cascade into 90 day goals with clear actions and a person responsible for each action. It’s important to review your Business Plan regularly to ensure the actions are being completed by the due date, and update your 90 day goals each quarter.

The Annual Forecast

In the past you might’ve prepared a forecast because the bank asked for one, but it’s something that should happen each year. If you don’t know how much money will be coming in and out of your business, and when, you can’t make informed decisions.

Even if your business has a positive cashflow, you should prepare a forecast. It can help you unlock a lot of cash, just by making a few changes.

Your annual forecast will break your high-level budget from your Business Plan into monthly targets, accounting for seasonality and allowing you to predict and prepare for large cash outflows.The second essential tool is the annual forecast.

In the past you might’ve prepared a forecast because the bank asked for one, but it’s something that should happen each year. If you don’t know how much money will be coming in and out of your business, and when, you can’t make informed decisions.

Even if your business has a positive cashflow, you should prepare a forecast. It can help you unlock a lot of cash, just by making a few changes.

Your annual forecast will break your high-level budget from your Business Plan into monthly targets, accounting for seasonality and allowing you to predict and prepare for large cash outflows.

Ongoing Reporting with Accountability

Reporting means regularly monitoring your results to ensure you’re on track to achieve your goals. If you’re not measuring your financial results and the key drivers of your business, you can’t properly manage them.

Technology provides you with real-time data to support informed decision making. Compare real-time data against your forecast and make adjustments if required to stay on track to achieve your goals.

We recommend preparing Management Reports monthly to measure your Key Performance Indicators.

If you wait until the end of the year to review your Annual Accounts, the data is too old to be of much use. By producing regular reports, you can quickly respond to any unexpected changes in your results.

Of course, without some accountability, you’re less likely to take the actions you need to in response to your reports.

“Action is the foundational key to all success.”- Pablo Picasso

For more information and to make bookings, visit us at https://cvgaccountants.com/ or call us at 0434 396 326.