There is one thing every successful business does that reliably helps grow sales, profit and cash flow:
They plan their success.
If you haven’t at least begun your company’s 2018 financial plan, you are already late.
You’ve heard that that companies that plan better perform better. IBM actually proved it. In their annual study of 1,900 CFOs, they determined that those companies with sound financial planning systems outperformed their peers and competitors:
- 20 times higher EBITDA
- 49% higher revenue growth
- 30% more return on invested capital
Creating a financial plan is not as difficult as you think. It’s simply a matter of gathering some data, putting into a model and tracking results. Check out this 4-minute video to see what goes into the process.
Gather your team together and collect data such as sales forecasts, hiring plans and projected expenses. Develop templates for the team to use so you can gather data in a common format. It makes it easier to populate your model.
Assembling the plan
Create a model that provides a forward look of your company’s financial performance. Here’s what should be in it:
- Financial statements: the Profit & Loss, Balance Sheet and Statement of Cash Flows.
- Supporting schedules for each, such as your revenue model, personnel costs and operating expenses.
Tip! Make sure the templates you provide contain a summary that you can easily bring into your financial plan.
Management dashboards are by far the most effective way to measure and report results. Don’t bother doing a plan unless you have a way to reliably measure results. Spend some time developing meaningful metrics that you will use to make crisp decisions
Having a plan in place helps organizations focus on what’s important and improves execution. We’ve seen some impressive results with the plans we’ve created for clients:
- Over 2,000% sales increase in less than two years
- Tripling of gross margins
- Retirement of all long-term debt through internal cash flow
If you’ve never done a plan for your company before, consider doing one for 2018. You’ll be glad you did.
By Rob Ripp, Founder and President of Fintelligent. Fintelligent provides virtual CFO, Controller and Bookkeeping services to fast growing companies in New Jersey, New York and Philadelphia.