MoneyMinding Monitor

Developing and using your spending plan (otherwise known as your cash flow projections) is the key part of putting together your overall business success – in good time or bad.  Keep it available to you and up-to-date.

One of the first steps in any business planning, of course, is to write your income goals.  And while it seems obvious that you go in to business to make money, I’m amazed at how many businesses don’t know where to start to make the connection between their goals and the actually financial decisions needed to make them real.  They seem to either want someone else to do it for them, or to do it once then set is aside to be reviewed some time in the future – maybe never. 

The development of a spending plan is simple.Using a spreadsheet:

1. Start by identifying the detailed expenses your business will incur on a monthly basis while doing the work of running the business to make a profit.  These will be things like office overhead, staff salaries, marketing expenses, inventory, etc.
2. Then calculate how much income you expect to earn from the expenses you plan to incur above.  The income might not happen in the exact month the expense was incurred and that’s ok – that’s why you need this document.
3. Calculate the difference between the income and expenses and the resulting surplus or deficit will need to be accounted for either through borrowed funds, investment capital or revised expenses on the deficit side, or through re-investment on the surplus side.
4. This process continues from month to month and any deficit carries forward and will then very simply give you a clear picture of the impact of more or less sales, and more or less expenses.

Once your initial cash flow spending plan is created it becomes a living, breathing document that guides day-to-day decisions.  In a tight economy this is the glue that connects the business to the bigger picture of success or failure.