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No Time for Forecasting?

No time for Forecasting
No time for Forecasting?

I don’t have time to worry about forecasting or budgeting

I hear from a lot of business owners that they don’t have time for forecasting or to do budgets or forecasts. I get this, I’m a busy business owner too, but that’s foolish and short sighted. But, let me ask you this – do you have time to scramble on payday to make sure there’s enough in the bank? Do you have time to waste and deliberate when you’re making a big investment? Or would you rather have the financial information to make the best decision? Do you have time to hound your customers when you really need them to pay you because you haven’t kept on top of things to start with? Do you have time to recover from making a big financial commitment that you really couldn’t afford? Do you have time to waste because you didn’t make the investment you could afford? NO? I didn’t think so!

So this is why you need to be looking ahead in your business. Yes, it takes a little time, but it saves a lot more time plus the stress and uncertainty.

I’ll tell you how I fit it in – a little at a time. Yes, it takes some time to build the initial forecast, but once that’s done (and you can get help) maintaining it is not terribly time consuming. Personally I’ve picked Friday mornings to do my “admin” work, and part of that includes updating my forecast. If you look at it weekly, and keep it up to date, it’s not a big deal. It’s also available and valid when you do need it. When you do have that big business decision to make and you’d like some insight into your financials.

Try it. And then let me know how it works for you.

7 Top Tips to Avoid Excel Errors

5395284268_d4d99151f8_oErrors in Excel spreadsheets are very common. I make them too! We’ve been hearing more and more about how much it’s costing companies here, here, here, and here.

I’ve written about using purpose specific commercial software products here, but what if you just HAVE to use Excel? Well, today, I’m going to give you a few tips on avoiding the most common Excel errors.

Design / Build / Test

Just like ‘real’ software, an Excel spreadsheet will be better designed if you take some time to do some minimal design work up front. At least for a moment, think about what you’re trying to accomplish. The data you’ll need, the data you have, the formulas you need, etc. Thinking in advance will prevent you from building something that isn’t going to suit your purpose. Or isn’t going to do it easily.

Step by Step

One technique I particularly love it building the model step by step. This means you may have some extra columns. Here’s a very simple example. If I was building something to calculate (A + B) / 3, I’d create a column that was (A + B) and then another column that takes the result of that and divides by 3. You can always combine the formulas later (be sure to keep your step by step model and check the results along the way) or hide the intermediate calculations. See below for an example.

Avoid Errors with intermediate calculations
Make intermediate calculations in Excel

Row by Row

Build your model for one row of data first. Test it, proof it, and then, and only then copy it for all data. Test it again as your data varies, but start with one row to make things simpler.

Check your Totals

One error I see commonly (and have made more than once myself!) is forgetting to extend the totals at the bottom when new rows are added. Just double click on the total, to see the range of cells included. Check this after making any major edits or adding new data. This works for any formula – you can make sure you’re using the cells you expect, by double clicking.

Another Set of Eyes

The single best way to catch errors in your spread sheet (or even in your thought process) is to explain it to someone else. This means you need a willing victim – oops – I mean collaborator, but if you can find one that will go through all the details with you do it. And then buy them lunch!

Lock it up

Another very common cause of spreadsheet errors is overwriting formulas. Before you share your spreadsheet (and even if you don’t) protect the calculated cells. It’s also a good idea to provide a visual indicator of either areas where users can and should enter data and where they should not. This is relevant even if you’re the only one using the spreadsheet.

Use your sanity

If a result seems surprising, or unexpected, question it. That’s probably good advice in any circumstance, but especially here. If you can, try to make the calculation by hand and make sure that unexpected result isn’t the result of an unexpected error.

With these tips, you’ll be much less likely to make a big Excel error, but still – be careful! And please – share your favorite tip in the comments!

We Can’t All be Good at Everything

frustrated-at-work

“We can’t all be good at everything” is a phrase I have always heard people mention, but haven’t always related to. For example, I’ve always known that there were people that struggled with numbers and, more specifically, Excel. As a person that loves statistics and analysis, I didn’t feel like I could relate, until recently…

As a startup founder, I wear a lot of hats. As you can probably imagine, some of them fit better than others. Graphic designer is not a hat I wear particularly well. In fact, it’s one of the tasks I almost always hire someone to do.

Recently, I had to make a minor change to the text in one of my images. I thought briefly about giving this to my designer, but quickly talked myself out of it. I asked myself, “How hard can it possibly be?” before letting myself know that “you’ve got this.”

I opened the image in my editing program, and immediately felt my shoulders tightening and my stomach churning as I scanned the overwhelming list of menu selections trying to figure out how to change the text. I had a few false starts, painted my image black, fumbled around for a few minutes more before I finally let out a curse, closed the file, and called my designer.

So for all of you that cringe at the thought of doing anything in Excel – I feel your pain. And, can anyone help me change some text?  🙂

The Top 10 Ways to Keep Your Business Financially Healthy

Recently, I gave a presentation on my “Top 10 Ways to Keep Your Business Financially Healthy” and thought I’d turn it into a blog post to share with all of you.

The Top 10 Ways to Keep Your Business Financially Healthy

  1. No co-mingling.
    No, this is not an HR issue! This refers to co-mingling personal and business funds. Not only does this make your accountant’s job a nightmare, it opens your personal accounts to inspection if you should have legal or tax issues with your business. The reason many of us have incorporated or started an LLC is precisely to obtain this protection of our personal assets (that corporate veil). But, co-mingling your funds pierces that corporate veil and negates any protection you might have. Don’t do it!
  2. Get a system.
    Having some sort of accounting system is key. You can’t do it all on spreadsheets or in a shoebox. Again – your accountant will hate you, but more importantly it provides you no visibility into your business. There are inexpensive, very easy-to-use systems out there, so there’s no reason not to do this.
  3. Have a checklist.
    Don’t miss a filing date or regularly scheduled task. There are too many things to do on a regular basis to skip this. If you’d like to get our regular advice on the matter, sign up for our newsletter and we’ll be happy to send it to you.
  4. Look ahead.
    Accounting systems can tell you what happened last month, last quarter and last year. While you can make assumptions from that, it’s not nearly as powerful as having leading indicators, a budget and a forecast to steer you right. Read more about why and how here.
  5. Know your margins.
    Make sure you know what it’s costing you to deliver your products and/or services. Include things like credit card charges and shipping. If it’s services, make sure you include all the additional costs beyond your employee’s salaries, such as payroll, taxes and benefits. These costs can be 20-25% or more of payroll. Delivering more services that you’re losing money on is going to put you out of business faster.
  6. Know who your best customers are.
    Most of us have customers that we make the most money from, who appreciate our value the most, and who we enjoy working with the most. If those customers meet all three criteria, that’s fantastic! Knowing what kinds of customers are best for us allows us to look for them and run screaming from those who are not, saving everyone a lot of headaches.
  7. Invoice promptly.
    The easiest way to keep your cash flowing is to invoice promptly and frequently. If you’re working on a long term project, invoice at multiple times during the project (if at all possible). To further assist the project, try coinciding your billing with specific deliverables. As an extra tip, follow up with customers immediately after their due dates if they are late with payment. Simply reach out with a nice phone call to remain “top of mind” when they do pay.
  8. Know your reporting responsibilities.
    We all have annual, quarterly, (and sometime even) monthly reporting responsibilities to the IRS. Additionally, local taxing authorities, states (registration), banks, investors and ourselves may all require additional reporting; make sure you know who needs what. If at all possible, prepare once and deliver to many to save yourself some time and effort. Don’t forget reporting (reviewing) financial reports yourself.
  9. Have a source of backup funds.
    One very common time for a company to experience a cash crunch is when they are growing. You might need funds to purchase raw materials, inventory, or pay people to perform services before you are paid. The time to line up this source of funds is BEFORE you need it. It can take time to get a Line of Credit or Loan approved, and banks are much more likely to lend when you are not desperate. Don’t wait until you are.
  10. Engage an expert.
  11. You’re an expert in your business, but may not be an expert in finance, accounting, or taxes. That’s why it pays to engage an expert and have reviews with them periodically (quarterly is a good frequency). Once you have a relationship with them, you can also call them and ask questions during the year to keep yourself on track.

I hope these suggestions were helpful. Any others suggestions on how to be financially healthy? Leave them in the comments field below.

Forecasting Growth

Is your company growing? Would you like it to grow?  We tend to think of growth as a universally good thing, and while it is a good thing, it comes with its share of challenges.

Did you know that almost every growing company will run into cash flow shortages? Or even worse, limited cash flow; something that will greatly stunt your growth. Think about it – if you sell widgets and the demand for your widgets is growing, you need to buy the widgets or the materials to make your widgets to satisfy market demand. Sure, you can finance that purchase – to a point. I don’t know anyone that has unlimited credit, and eventually you’ll run up against that limit.

Say you’re a service company. You think you’re in the clear because you don’t have to purchase or make inventory? Think again. You need to hire more people to perform more services. This can actually cause a bigger cash flow shortage because it can cost more, and payment may be delayed even further.

The best way to avoid stunting your growth is to figure out how much cash you’re (likely) going to need and make arrangements in advance. Whether it’s a line of credit, terms with suppliers, or pre-payments and deposits on certain orders, there are ways to mitigate the cash crunches associated with growth so you can grow to be as big as you’d like.

Forecasting Growth

 

 

Why Financial Forecasting is Not Just a Financial Activity

Financial Forecasting

We tend to think of anything having to do with numbers as a financial activity, and that alone makes some of us shy away from it. However, financial forecasting and budgeting are so much more than just a financial activity.

First of all, financial forecasting is an operational activity. You want to make sure you have the resources – whether it is people, inventory, or cash – to operate your business. You also want to make sure your business runs as smoothly as possible. To enable maximum efficiency, avoid the kind of “fire drills” that come from a cash flow crisis whenever possible. Regular forecasting will minimize these fire drills and let you focus on your business.

Second (and most importantly), financial forecasting and budgeting are strategic activities and should be a part of any strategic planning activity. Developing a strategic plan without putting the resources (funds) in place to achieve it is a hollow exercise.

Don’t let those pesky numbers intimidate you, and don’t just lump them into that icky finance bucket. Make financial planning a part of your operational and strategic work.

Forecasting Growth

Is your company growing? Would you like it to grow? We tend to think of growth as a universally good thing, and while it is a good thing, it comes with its share of challenges.

Did you know that almost every growing company will run into cash flow shortages? Or even worse, limited cash flow; something that will greatly stunt your growth. Think about it – if you sell widgets and the demand for your widgets is growing, you need to buy the widgets or the materials to make your widgets to satisfy market demand. Sure, you can finance that purchase – to a point. I don’t know anyone that has unlimited credit, and eventually you’ll run up against that limit.

Forecasting Growth

Say you’re a service company. You think you’re in the clear because you don’t have to purchase or make inventory? Think again. You need to hire more people to perform more services. This can actually cause a bigger cash flow shortage because it can cost more, and payment may be delayed even further.

The best way to avoid stunting your growth is to figure out how much cash you’re (likely) going to need and make arrangements in advance. Whether it’s a line of credit, terms with suppliers, or pre-payments and deposits on certain orders, there are ways to mitigate the cash crunches associated with growth so you can grow to be as big as you’d like.

Habits of Financial Health

Here at GrowthCast, we have users that find our service valuable for making big-yet-infrequent financial decisions such as moving, hiring or making a big investment. However, we also have businesses that monitor their financial position regularly. Guess which ones are healthier?

Financial Health

Using any sort of forecasting tool exclusively for the big (and infrequent) decisions is like crash dieting and exercising before a big reunion and eating cheeseburgers on the couch the very next day. While it might give you some short term results, it doesn’t make you any healthier. On the other hand, keeping an eye on your cash flow and knowing where you’re heading with revenue is the equivalent of eating healthy and working out regularly. This is what pays the long term dividends, keeping you healthy and active long into your life. It’s no different with your business.

So, are you the crash dieter or the consistently healthy person?

It’s your choice.

 

#1 Tip on Dealing with Cash Flow Issues

I was recently asked for my #1 tip regarding small businesses and how they deal with cash flow problems and issues. While keeping up with your collections and invoicing promptly are essential, my number one tip is to avoid these crises entirely.

The best way for small businesses to deal with cash flow issues is to have a system in place that allows you to see the issues coming; avoiding or mitigating the problem before it becomes a crisis. Many small business owners have had that panicked “how am I going to make payroll?!?” moment. If you have a forecasting system in place, you can see this coming in advance and give yourself a chance to gather solutions. That may mean any of the following: securing a short term loan, transferring money from somewhere else, liquidating assets, or working out an arrangement to delay payments elsewhere.

cash_flow_issues
Furthermore, if you’re a growing business, temporary cash flow issues are inevitable and should be expected. It’s likely that you’re putting out money for inventory, equipment, and staff to handle the growth before you receive the revenue. In this situation, having a line of credit in place is a must – but again, that needs to be arranged in advance.

To sum this all up, handle cash flow issues in the least stressful way possible – avoiding them!

After all, don’t we already have enough stress?

Why People Struggle with Budgeting Apps

I recently read an article regarding the reasons people struggle to use most budgeting software. The author’s premise was that most software is too detailed and time consuming to keep up to date, so people give up on it.

While partially true, there are enough quick-and-easy options out there (like GrowthCast) that prove that there’s far more to the story. Here are some other reasons why business owners and others struggle with budgeting:

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“I don’t know what my expenses are going to be.”

Okay, maybe you don’t know the exact dollar amount of every expense, but you probably have a better idea than you think.  Additionally, you’re not required to get it exactly right – this is not a test.  Make your best guess, use some past data, and adjust as you get better information. Don’t make “perfect” the enemy of good.

“I don’t want to know.”

Oh, this one is insidious! I hear and see this in many different ways. Denial is not going to make the picture rosier. In fact, it’s likely to make things more difficult. Add to that the fact that you can’t make things better if you don’t know where you stand and have a way to measure progress.  Bite the bullet, put some numbers down and face the facts; only then can you change them.

“It’s too hard and too time consuming.”

Sure it can be, but it doesn’t have to be like this! You can spend tons of time building beautiful, complicated, super-detailed Excel spreadsheets, or buy some complicated software or app. But, there are so many other options now that are both easy and quick. This one shouldn’t stop you.

“I don’t have time.”

First off, it doesn’t have to take a lot of time. Second, do you have time for the emergencies that come up because you haven’t done your planning? No? I didn’t think so.

As you see, there are plenty of excuses. But, they are just that – excuses.  If you want to budget and forecast, you can. If you just don’t want to, I’d be interested in hearing why.

Leave a comment below; I’d love to hear what you have to say.