You’re virtually just a month away from a new Financial Year and unless you prepare for it, it won’t be very different from the last one.

Developing the strategies and budget for your company will be key to making 2013-14 stronger than this last one.

Your budget and your plan go hand in hand and you cannot have one without the other. Here are some tips:

Step 1: Review Your Achievements and Set Your Goals

The results of the review of your business should be a set of strategic and business improvement objectives (financial, customer, process, people, technology) which you can sequence and allocate to different quarters for achievement. The objectives will often be broken down into subordinate initiatives and tasks which provide a logical completion schedule.

Step 2: Agree On Explicit Objectives

Think broadly:  Get input from staff to encourage engagement and commitment. Take a balanced view of the business and test each issue by asking yourself what are the implications decisions.  What if you do nothing?  What if you take action?
Set clear business objectives: All objectives should be action statements which specify an outcome.  They should start with a verb.  Someone must be the owner and they should have a completion date. They should have clear measures of success.  For example:

• 20% More customers
• 5% More transactions per customer
• 5% More dollars per transaction
• 5% Lower relative cost of service
• 5% Improved staff productivity
• 30% Less rework
• 7% Lower overhead expenses
• 10% Lower relative debtors

Step 3: Clarify Costs and Revenues

When creating your budget remember that it’s the financial representation of your business plan, so both are done in conjunction. Key points to remember when creating the budget are:

1. Define costs, properly

Separate your costs between those which are a cost of service and those which are an overhead or support cost. This is essential if you are going to accurately know your true cost of service and know the profit behind growth.

2. Include revenues

Make sure you have included the revenues you expect to get out of your growth initiatives and marketing activities.  Each month should have their expected targets.  Consider making these gross targets publically available to your team.

3. Check capacity 

Do you have the capacity to achieve the necessary monthly, quarterly and annual targets?

• If not, can you increase price, increase productivity, improve efficiency, or reduce costs?
• If you do not have the capacity will need to go back and review the business plan and the budget assumptions.

Step 4: Set targets, policies and strategies

You need targets, policies and strategies to account for factors including these:

1. Business development: What are your marketing strategies and sales-conversion strategies to secure the growth targets you have?  These need to be translated to monthly schedules: strategies, the tactics that deliver them, the costs of each and the expected returns of each. Then each one needs an owner.
2. Operations and Quality: What are the changes you need to undertake to deliver what will hopefully be more of what you sell?  Do you need to reduce errors and increase productivity?  If so, these need strategies behind them so that you fulfill your promise to your market.
3. Debtors (accounts receivable): What will be your collection terms, when will you remind the client, how do you collect and enforce collection?  If you want to improve these, you need a strategy behind them.
4. Operating cash: How much cash does your company need to hold so it can maintain its liquidity and meet its payments as and when they fall due. There should also be a buffer to cover unforeseen circumstances. What is your cash management policy?

Taking the time to plan and prepare effectively for the coming financial year will help you to continue to grow and improve your business.  All owners and managers should be ensuring that realistic business plans and budgets are prepared for the year, quarters and months.  Staff, managers, investors and lenders expect good businesses to have business plans and budgets.

Adapted from: http://www.alpma.com.au/_blog/A_Survival_Guide_for_Legal_Practice_Managers/post/budget-tips-for-financial-year-planning/