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This podcast selection is taken from a series of Business Hub radio shows broadcast on Star FM between February 2011 and October 2014 with advice from basic book-keeping through to crowd funding, directors loans, cashflow and a whole lot more!

There's something for everyone so do feel free to download and share - it might just be the golden nugget of information you need for your business to succeed!Listen at Star 107.9 FM

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Business Trouble - your choices

Looking Forward Not Back

The Business Hub Show - 20 November 2011

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I saw a great quote recently from Tom Clancy, the author “"Fix your eyes forward on what you can do, not back on what you cannot change”.  It got me thinking.

In business too much effort is placed on analysing the past and not enough on planning the future. With financial information that is often the case as traditionally accounts are historical documents reporting and interpreting what has happened.

On the Business Hub a good number of guests have discussed the need for and the benefits of planning, and how critical this is if you are to move your business forward. Indeed you don’t set off in your car in the morning without knowing your destination, and also with a tank of fuel to get you there (well at least I hope you don’t!). The route to your destination is your plan, and the tank of fuel the money and resources you will need to get you there. Having these things recorded and written down is also key to ensure that they will happen.

Some research in the USA illustrates this very well. A selection of graduates leaving Yale University in 1953 were interviewed and the results recorded in depth. In 1973, the same graduates of 1953 were interviewed and the results recorded. The results showed that 3% of the graduates had greater monetary wealth than the rest of the 97% added together! The significant difference between the 3% and the 97% was that the 3% had written goals recorded back in 1953.

A favourite book of mine is The 7 Habits of Highly Effective People by Dr Stephen R. Covey. The second habit is begin with the end in mind. Dr Covey says;  “To begin with the end in mind means to start with a clear understanding of your destination. It means to know where you’re going so that you better understand where you are now and so that the steps you take are always in the right direction.

It’s incredibly easy to get caught up in the activity trap, in the busy-ness of life, to work harder and harder at climbing the ladder of success only to discover it’s leaning against the wrong wall. It is possible to be busy – very busy – without being very effective.”

So how do we address this in financial reporting?  It is all about knowing your numbers, and there is perhaps no better way to really know and understand your numbers than budgeting. If you are presented with your latest accounts, they are historical, and even though you may study them knowing they are in the past, and you cannot change, them tends to reduce their value to you.

If on the other hand you use this historical data as a basis to plan forward then you truly need to analyse and understand them. Challenged with producing a budget or forecast going forward you will naturally dig into the detail much more in order to ensure you are planning properly. You with question what has happened and how you can change it in the future in order to improve performance and reduce costs.

As you go through the process of planning and budgeting more and more the forward looking picture will become clearer and clearer, you will be able to see how the future should look and how you can change it through your planning. At first there will be a lot of guess work, but by building that better understanding your ability to plan will improve and so will your businesses performance with it.

Initially it does not have to be anything elaborate – just do something. Add a column next to your profit and loss account and predict what the numbers will be going forward. Then in the next month or quarter compare what happened to what you budgeted and calculate the variance. Now ask why?  What happened? What was different to what you predicted?  Now understanding it better try again, and then plan further ahead – a year or two maybe - as you truly understand the numbers.

Not only will this process put you in much firmer control it will also dramatically benefit the performance of your business. Your budget will become your profit plan.

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