“Him that makes shoes goes barefoot himself.” – Robert Burton
It’s great advice for clients, but who has time for budgeting? When I was doing research for a past writing project I discovered that many accounting firm owners never created a business plan when they started their practices. I have a strong suspicion that many do not prepare an annual budget for their own firms either. This is too bad because the planning required to do simple projections can have a profound impact on practice results.
I’m talking about creating simple, internal-use projections that capture the high-level information only…preferably by month. Don’t make this harder than it needs to be. Here is the basic structure:
Revenue (by type)
Less: Expenses (use the same account descriptions that you use on your tax returns)
=Net Income
PLUS
Cash-Beginning of Period
Plus or minus
Purchases of equipment, loan payments, owner payments, etc.
=Cash-End of Period
The trick to getting this done is to do it fast at first to create a draft. Then, play with the numbers. Try creating some projections with aggressive growth and brainstorm how you might make that happen. The benefit of doing the projections is to help you set goals that will help you take action. It works for your clients doesn’t it?
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