Understandably many businesses have been overtaken by the sheer demands of coping with the recent economic difficulties. However, intelligent forward planning is just as important to coping with a tough trading environment as is anticipating weekly and monthly issues.
By planning for the future, businesses can focus on how best to boost profit margins and to manage costs. Planning enables the identification of potential problems before they arrive and it can highlight areas where improvements can be made.
Said, Gerald Irwin of Sutton Coldfield based Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency, “Among other things, the plan should detail aims for the coming year, any possible problems, any changes to the way the business operates, an assessment of the staff and their skill levels, a financial forecast, and areas where investment is needed. In doing so a business will be able to determine its expenditure and calculate its budgets for the next twelve months.”
Business budgeting is equally important but should be realistic and based on the income that a business is likely to generate.
“It should include estimated sales for the period being planned as well as overheads, variable costs, capital costs and, from these, profit margins. Once the budget has been drawn up, it affords the opportunity to investigate whether any of the costs can be reduced or better managed. Any inconsistencies in the budget will highlight possible problem areas and by reviewing the budget on monthly figures can be compared with actual income and expenditure,” continued Mr. Irwin.