Part IV “Monitoring”
It’s often been said in one fashion or another that “if you are failing to plan, then you are planning to fail”. None of us like the idea of failing at something that we set out to achieve, and only a select few can afford to financially fail in a business enterprise. Whether we are starting a new business from scratch or just embarking on a new year, it is wise to look out from where we currently stand and create, as best we can, a vision of where we want to be and a plan for just how we intend to get there. In this five part series, I will review the basic components of the business plan we recommend for our clients.
IV. Follow up with Monitoring:
We started with a vision, we developed an operating plan, and we created a budget. At last, we’ve done everything necessary to assure the long term success of our business venture. Nothing could be further from the truth. Those first three steps are vital, but business planning does not end with the “plan”. Depending on the venture or enterprise, daily, monthly, quarterly and/or annual monitoring must be carried out. It is equally critical that it be done in a systematic and analytical fashion from a totally objective and critical perspective. Just how often and when to pull out the magnifying glass and give your business a detailed review will depend on its complexity, the level of risk and the personal goals of the business owners. Who will conduct the monitoring will likewise depend on those same variables.
Inventory tracking, quality control, margin per unit, resource utilization, and market and production trends are just a few examples of the day to day items to monitor. While a calculation of net worth ratios, a review of adherence to mission, and a market saturation analysis may occur only annually. At the very least, a detailed annual financial review of your business operations by your accountant will reveal any miscalculations in or deviations from your plan.
As is true with budgeting, computer based bookkeeping makes the financial monitoring considerably easier. However, as is also true with budgeting, though it is easier it is not automatic. A few key strokes on the computer and you can print out up-to-the-minute reports of accounts receivable and payable, income and expenses statements for the week, month, quarter or year and call up a comparison to the previous period. Changes in the balance sheet can reflect business income or losses that do not necessarily appear on the income and expense statement. An astute manager with a critical eye can quickly identify shifts, errors or omissions that left unattended may lead to failure of the business plan and ultimately the business.
There’s a great old adage that claims, “There is nothing better for the land then the footprints of the owner upon it.” I would paraphrase that statement to suggest, “There is nothing better for a management plan then the shadow of the author falling across it.” For any plan to be successful, it must be referred to, used and monitored.
A little bit of accountability won’t hurt here either. Key individuals such as, your accountant, your cattle buyer, your business associates and your employees could all lend helpful insight and a different perspective to the monitoring phase of your management plan.