Big Picture - October 2015 - (Page 16)

business + management Prepare Now for the New Year Get a jump start on your budget analysis of the current year for a more successful, profitable 2016. | by Marty McGhie A t the close of each fiscal year, one of the most important tasks for a shop is analyzing the current year and planning for the coming year. Typically, many of us wait until late November or December to begin this process. However, starting now and identifying some specific areas of focus will kickstart a more thorough and effective approach, helping you begin the new year in a more organized manner. BIG PICTURE October 2015 BUDGETING - A DIFFERENT TACTIC Creating financial budgets for the upcoming fiscal year can be both time consuming and challenging, but it's absolutely essential to map out a direction for your company. Plus, most of us have had experience with either creating budgets or reviewing them regularly from a management perspective. When putting together a financial budget, most companies begin with sales, but I'm going to encourage you to do the opposite. Begin by determining how much net income you wish to earn in the coming year; allow this goal to be the driver. First, determine with your management team what your budgeted net income will be. Once you settle on that number, you can move on to your sales budget. If you begin the budget process in October, you'll have nine months' worth of sales data at your disposal. You should have a good indication as to whether you will end the year with sales going up, going down, or staying flat over the prior year. Review your net income budget and determine whether you will need additional sales, the same level of sales, or perhaps even lower sales to achieve your net income goal. While most companies build their sales budgets with growth in mind, that may not always be the best strategy if net income is your primary goal. Adding sales every year typically means adding personnel and perhaps even equipment. Both cost money. If your business is currently turning a healthy profit, then perhaps increasing sales isn't the answer. You may simply need to focus on current sales with existing capacity, utilizing the assets that you have at your disposal to achieve your net income budget. If you do choose to budget for an increase in sales, you need to figure out how to achieve that. All too often, a company will budget for additional sales without a strategy to accomplish their sales goals. Their answer is typically, "Well, we are just going to sell more." It doesn't work that way. Put together a specific plan to reach your sales goals and meet your budgets. As you prepare your sales budgets, make sure you include your sales organization in the process. Your total sales should reflect the commitment that your current sales team and your management team make together. It may fluctuate slightly, but, in general, everyone on the sales team should have "buy in" to the company's sales budget, knowing that they are individually, as well as collectively, responsible for achieving that number in the coming year. Once you complete the sales budget, focus on expenses. Direct materials, salaries, and wages should be straightforward MARTY MCGHIE is VP finance/operations of Ferrari Color, a digitalimaging center in Salt Lake City, San Francisco, and Sacramento. He is a partner and director of Signs.com. marty@ferraricolor.com 16 http://www.Signs.com

Table of Contents for the Digital Edition of Big Picture - October 2015

Big Picture - October 2015
Contents
Insight
Wide Angle
Upfront
Inside Output
Business + Management
Money Magnet
No Time to Waste
SGIA Expo 2015
R+D
Job Log

Big Picture - October 2015