Category Archives: Budgeting, Forecasting & Planning

Four Ways to Build Better Budgets – HBR

Actually, unless you are a brand new startup, budgeting and planning for future is well under way for 2013.   If you haven’t started or need some help, this is a good points article.

Excerpt:  It’s that time of year again: Budgeting and planning for next year are in full swing. Everyone has been through this process. At one end of the spectrum is the struggling business unit that unveils the miraculous “hockey stick” trajectory their sales and profits are just about to take…again. (Don’t bet on it.) At the other end are high-performing business units that are starved of the resources they need in order to fund growth because they are subsidizing another business unit’s hockey stick.

Through hundreds of sessions like these across dozens of industries, we’ve identified four best practices to make your budgeting and planning process much more effective and less dependent on illusory projections.

Read full article via Four Ways to Build Better Budgets – Jason Green – Harvard Business Review.

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Revenue is Not Coming Back | Change Management Strategy | PwC

Recommended for all small business owners  — takeaways and how-to.

Excerpt:  The current economic environment in the United States and around the world is challenging for banks and business alike. Given the macroeconomic forecast, financial institutions can no longer grow their way out of their problems. Business areas that traditionally provided revenue growth for financial institutions are not growing sufficiently to overcome new capital and regulatory requirements, and activity levels of several major financial sector businesses are flat or declining.

Increased regulation and capital requirements along with limited revenue leverage will require business-model changes boost profitability. Leading institutions are implementing continuous expense management programs to extract value from business-model changes by focusing on efficiency through each key step in the budgeting and reporting systems.

Watch video and download report via Continuous expense management for financial institutions: PwC.

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Filed under Budgeting, Forecasting & Planning, Leadership, Operations & Innovation, Management, Small Business

Three Tips for Leaders About to Miss Their Forecasts – HBR

Recommended read for all leadership and management.   In his beginning, this professor makes me feel I am back in school!   🙂   However, I will take issue with his limiting remark that only those in engineering and physics will immediately know that the task is impossible  —  excuse me …  you forgot there are lots of accountants and math experts and …….. who will all also immediately recognize they have hit the wall.   However, this is just an aside — the article content and points are of paramount importance and that is the focus.

Excerpt:  Harvard Business School Professor (and former IBM and Kodak executive) Willy Shih poses an intriguing question:

“Let’s say your goal is to average 60 miles per hour in a journey across a one-mile bridge,” he said. “Your average speed is 30 miles per hour at the half-mile mark. How fast do you have to go over the remaining half-mile to achieve your goal?”

The most common answer is “90 miles per hour.” But those with backgrounds in engineering and physics immediately recognized the task’s impossibility.  After all, to average 60 miles per hour you have to cross the bridge in one minute and you’ve already burned that minute crossing the first half mile.

Willy’s point? If you start a year too slowly, at some point it becomes impossible to hit a forecast.

It’s a scary moment when a company realizes that the goals it has set for a quarter or a year are simply not attainable. And yet in today’s continually choppy environment, leaders are encountering that moment with increased frequency. And it is at this moment that leaders truly earn their pay, because many short-term actions can have devastating long-term consequences, particularly when it comes to innovation.

Read full article via Three Tips for Leaders About to Miss Their Forecasts – Scott Anthony – Harvard Business Review.

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Filed under Budgeting, Forecasting & Planning, Leadership, Operations & Innovation, Management

Forecasting Revenues Key to Successful Launch

Recommended read as reminder to all entrepreneurs and wanna be entrepreneurs — actually add all small business owners to the list as well.

Excerpt:  The late, legendary Silicon Valley attorney Craig Johnson used to say, “The leading cause of failure of start-ups is death, and death happens when you run out of money.”

And the leading cause of running out of money in a start-up is poor financial forecasting.

At the core of unrealistic forecasts is the undying optimism of most entrepreneurs. Their “what could possibly go wrong?” attitude leads to many forecasting disasters. My father used to say that when he looked at investing in an entrepreneurial venture he would always double the start-up costs and triple the time it takes to get to breakeven.

Read full aritcle via Forecasting Revenues Key to Successful Launch.  From Dr. Jeff Cornwall

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Filed under Budgeting, Forecasting & Planning, Cash Management, Entrepreneurs & Startups, Small Business

Divisional Managers and Internal Capital Markets — The Harvard Law School Forum on Corporate Governance

Of-interest and food for thought and strategy.   Small business takeaways.

Excerpt: While the capital budgeting process is one of the most fundamental corporate decisions, introduced at the very beginning of virtually any finance textbook, we still know relatively little about this area of the inner workings of a firm. Our paper seeks to advance our knowledge of this corporate decision by studying the role of human capital in a firm’s capital budgeting and the involvement of managers at various levels of hierarchy. In particular, we construct a hand-collected dataset of divisional managers at the S&P 500 firms and examine the effect of managerial influence on investment decisions and firm value. We study managerial influence via both formal channels (e.g., managers’ board membership and seniority), and informal channels (e.g., managers’ social connections to the CEO via prior employment, education, and nonprofit organizations).

Read full article via Divisional Managers and Internal Capital Markets — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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One-Stop Guide to Financial Forecasting Including Free Templates

This collection of articles, how-to, templates and examples covers a lot of a small businesses’  questions on forecasting to include the difference between budgeting and forecasting.   Great “stuff” but unless you plan to download to peruse when you need it or have time later  —  a heads-up,  it is lengthy.

Excerpt introduction: Whether you’re starting your own small business or if you’re already managing a successful enterprise, there are ways to streamline your forecasting processes. At the end of this catalog you’ll even find advice for forecasting and analyzing your own personal finances.slide 1 of 2 When it comes to financial forecasting, are you a novice, or do you think your analyses are pretty reliable? This useful collection of articles starts with the basics, helping you to learn the difference between forecasting and budgeting and brushing up on your accounting terminology. You will also learn, step by step, how to analyze a financial statement and create a three to five-year sales forecast. If you’re unfamiliar with common forecast ratios, you can read all about them. What if you’re a little further along in your knowledge? You can look at different types of formulas or study the benefits of a rolling forecast method. For those familiar with Excel we have plenty of templates and worksheets to help you along the way. Find out where you can download some free Excel (and other) templates.

Read full list and use links via One-Stop Guide to Financial Forecasting Including Free Templates.  From BrightHub.com

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Filed under Accounting, Bookkeeping, GAAP, IFRS, Budgeting, Forecasting & Planning, Small Business

Budgeting Tips for Small Business Owners

Good read…..1st  Quarter done…..use information and to-do for 2nd, 3rd and 4th Quarters 2012.

Excerpt…….If your fiscal year parallels your wall calendar, then you made it through Q-1 or as you may formally call it, the first quarter. Perhaps you’re feeling optimistic about the goals you’ll accomplish this year, or are concerned about your revenue goals for the second quarter. It’s best to look at where you’ve been to figure out a great strategy for where you are going next. Here are four things you can immediately do to make the most of the remaining three quarters of this year in your small business.

Read full article….via Budgeting Tips for Small Business Owners | SucceedAsYourOwnBoss.com.  From Small Biz Lady

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Re-Anchor Your Next Budget Meeting – HBR

Why we do what we do…….this time the reference is on the business budget and the article is a good information read.    Too often a small busines budget is something that is a mandatory task once a year as a report and then totally forgotten or at least ignored as a vital part of the business planning, metrics and success.  Read why you may be anchored on a memory number with little or no value to a reality.

 Excerpt………What happened? The short answer is, you’ve been anchored. Anchoring is the psychological phenomenon that makes a number stick in your mind and influence you — even though you think you’re disregarding it.

Read full article…….via Re-Anchor Your Next Budget Meeting – Dan Lovallo and Olivier Sibony – Harvard Business Review.

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Using Break-Even Analysis to Determine Your Company’s Financial Health

Planning and forecasting……the analysis results you need….. great small business leadership and management takeaways….

 Excerpt……Determining the break-even point is crucial to determining margins, which, in turn, aid in financial planning for the next year. Break-even analysis determines both the minimum amount of sales required to avoid a loss or to “break-even” at the end of the fiscal year and permits you to adjust sales estimates accordingly.

This article reviews the break-even analysis process by discussing elements like the following: fixed costs, variable costs, units, selling price, sales estimates, revenue, profits, and margins. Primary sections address cost components of break-even analysis, the margin of safety, and contribution margin analysis.

Read summary then download full PDF paper here………Using Break-Even Analysis to Determine Your Company’s Financial Health | Los Angeles Fractional CFO Services | CFO Edge, LLC.

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Filed under Budgeting, Forecasting & Planning, Small Business

How to evaluate capital expenditures and other long-term investments

A tool to help you in this important part of your business planning strategy…….cash management

Excerpt………Evaluating capital expenditures and long-term investments is a critical process for businesses. Better-managed organisations view all long-term programmes (capital and noncapital) in a disciplined environment. This resource will explore some of the unique issues concerning budgeting and evaluating, financing, and managing a variety of activities. In addition to typical capital projects, expenditures such as R&D, IT, advertising, training, and even planned builds in working capital can be viewed as long-term programmes. These all consume cash in anticipation of future payout.

Read article and download tool………via How to evaluate capital expenditures and other long-term investments.  From CGMA.org

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KPMG Global Retail Director Discusses Industry Trends for 2012

Good read…….you want it in a nutshell?…….. it is time to get on with it folks!!

Excerpt…….For retailers, there’s not much left to do with the remnants of the recession other than pick up, learn and move on – and that’s just what they are doing. According to the NRF Foundation’s recently released Retail Horizons: Benchmarks for 2011, Forecasts for 2012, retailers in the coming months will focus solely on initiatives that drive sales growth and grow their customer base rather than the cost-containing initiatives seen well throughout 2009, 2010 and even 2011. According to the report, building mobile capabilities, investing in leadership development, furthering IT upgrades, optimizing their merchandising, increasing their spend on marketing and advertising and growing their customer relationship management tools are all top priorities for retailers in 2012

Read full article…..via Retail’s BIG Blog | KPMG Global Retail Director discusses industry trends for 2012.  From Retails Big Blog via KPMG

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Filed under Budgeting, Forecasting & Planning, Leadership, Operations & Innovation, Marketing, Branding, Sales, Advertising, eCommerce & Social Media, Small Business

Retail Accounting: Library of Helpful Resources, Tips and Techniques

Here are some basics and “get started” retail accounting for you.  As the author writes….even if you hire an accountant, and we hope you do, you need to know the basics in order to manage your business.

Excerpt…Are you looking for some expert advice to help you with your retail accounting? Browse this guide of tips, techniques and resources from the Bright Hub library of general accounting tips.

Whether you hire an accountant or CPA firm to handle the accounting for your business or you handle it yourself, you need to have an understanding of general accounting principles, methods and formulas. After all, if you don’t understand the process yourself, how can you be sure that your accountant is following the proper procedures?

We’ve created a collection of expertly written articles to help you increase your knowledge about this important business topic. You will find out why you need to budget and what the best inventory tracking and reporting methods are. By the time you finish this guide, you will know the difference between a balance sheet, a trial balance, and a general ledger……

Read full article and access sources here….via Retail Accounting: Library of Helpful Resources, Tips and Techniques.  From Bright Hub

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Three Capabilities to Fuel Today’s Dynamic Planning and Forecasting

The link provides a download button for the white paper…… Sorry, guys, you will have to register to download….. it is free once you register.

Excerpt introduction……“In this white paper, you’ll read why traditional planning and forecasting processes are not enough in today’s environment. And, you’ll learn about the three capabilities that form the foundation of modern, dynamic planning and forecasting processes:

• Analytics – including multi-dimensional analysis, on-demand scenario planning, and predictive analytics

• Modeling – the ability to quickly build and revise sophisticated models to find the best path forward

• Contribution #or participation# – rich workflow and role-based interfaces that facilitate broad, frequent contributions to plans and forecasts

If you want to move beyond the traditional finance role and play a more visible, pro-active role in supporting business decision making, read this white paper today. “

Download white paper here…via Three Capabilities to Fuel Today’s Dynamic Planning and Forecasting | Proformative.

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Battle-Tested Best Practices in Planning and Budgeting

You do have to register in order to download the whitepaper …….

Excerpt introduction………The planning process includes: Strategic Planning, Operational Planning, and Financial Planning. It’s the integration of these plans that provides the mechanism to adjust to the actual scenario.

Download white paper here……via Battle-Tested Best Practices in Planning and Budgeting | Proformative.

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The Budget-Building Book for Nonprofits: A Step-by-Step Guide for Managers and Boards, 2nd Edition

According to the blurb, this is the “gold standard” for non profit budgeting help…..it is not free but affordable in either book or ebook form.  Leadership

Excerpt…..This best-selling nuts-and-bolts workbook, now in its second edition, has become the gold standard for nonprofit managers and boards who must work through the budget cycle. The book offers practical tools and guidance for completing each step of the budgeting process. Designed to be comprehensive and easy to use, The Budget-Building Book for Nonprofits provides everything budgeters and nonfinancial managers need to prepare, approve, and implement their own budgets.

Read full introduction of book here…..via Wiley: The Budget-Building Book for Nonprofits: A Step-by-Step Guide for Managers and Boards, 2nd Edition. From Wiley

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Filed under Budgeting, Forecasting & Planning, Leadership, Operations & Innovation, Not for Profit