Finance & Accounting

Time to Revisit Your Financial Plan

Time to Revisit Your Financial Plan

Periodic reviews of your financial plan can help keep your personal and business expenses separate—and your business thriving.

By Sandra Beckwith


Most successful small businesses thorough financial plans and treat them as dynamic resources rather than leaving them to rot in a file cabinet somewhere.

 “Managing your financial goals means being alert to trends in your industry and making sure you’re adapting to those trends,” says Linda Pinson, author of Keeping the Books: Basic Recordkeeping and Accounting for Small Business.

Here’s advice from Pinson and other experts about why a financial plan will help you to achieve your business and personal goals, and when and how to revisit it.

Roadmaps Keep You From Getting Lost
Harvey Reiner, a financial consultant with AXA ADVISORS in Rochester, N.Y., says there are two types of business owners—those with a roadmap and those who “wing it.” He advises those who are intimidated by the financial planning process to delegate it to someone with those skills on staff or to work with an outside financial advisor. “A lot of business owners know their field, but know little about cash flow, tax advantaged investments, retirement savings accounts, or how to save to expand,” Reiner says. “This is where somebody with a financial planning background can be helpful.”

You Will Grow Quicker
Alan Weiss, an organizational development consultant and author, says companies often set an arbitrary number and applaud when they reach it consistently without thinking about whether that goal should be higher. “Your goals are too low if they are easily attained,” he says. Monitoring your numbers regularly lets you set more appropriate growth goals.

You Will Get a Life
A business’s goals are often driven by what the owner wants to accomplish on the personal side. Maybe it’s retiring at a certain age, contributing to a college fund, having the time to coach soccer or funding philanthropic interests. Revisiting the financial plan regularly to make certain it is meeting those personal goals will help you make the necessary adjustments, such as raising prices or dropping unprofitable products, which will keep your life on track. “Your business is a fuel for your life, not the other way around,” Weiss says.

The Company Will Attract Better Employees
The best employees expect the best benefits and compensation. You can’t offer or afford them without a financial plan that helps you structure the business so that you can provide health insurance, a retirement plan or bonuses linked to the company’s success. The financial health of the business and the cost of those benefits must be monitored regularly.

Your Banker Will Be Happy
Pinson is a board member for the Small Business Financial Development Corp. that provides state loan guarantees for companies that might not fully qualify for SBA guaranteed loans. “Sometimes applications get dropped because the company can’t provide the necessary financials,” she says. “We take into consideration a company’s financial management. If it isn’t monitoring and updating its financial plan regularly, it will show when the business applies for a loan.”

Change Happens
And you can react to change more quickly if you’ve planned for it in advance. Kathleen Seitz Watson, managing director of CBIZ Accounting, Tax & Advisory’s Cleveland office, uses a successful local restaurant as an example. A national restaurant chain opens a place down the street and all your regular customers want to try it out. “This has a financial impact on your business,” Seitz Watson says.

Review The Plan at Least Quarterly
While a mature business in a static industry might be able to get away with reviewing its financial plan annually, it’s better to review it at least quarterly. One small business owner looks over certain numbers every other month. “Everything in business starts with gross profit, so I project and review every cost area in my company bimonthly,” says Judah Lerer, owner of CSI Office Solutions in Spring Valley, N.Y., and Office Zone in Fall River, Mass. “It’s how I know if I need to cut expenses or whether I can afford an unexpected purchase.”

Pinson suggests looking at the profit and loss balance sheet at the end of every month and revising cashflow projections accordingly.

Revisit The Plan When Things Change
These situations could include: You hire or lose key people in the company; you add a division, warehouse or building; you plan to introduce a new product; you’ve secured a big new account; competition is becoming more fierce; or when you expeirence significant changes in your personal life.

Look For Trends
Start with revenue—has it gone up while collections have gone down? Next, examine your cost of sales. “If you’ve generated a lot of revenue on less profitable ventures, you’ve got a problem,” Lerer says. Then look at expenses. If prices from vendors have increased, maybe it’s time to look for new suppliers.

Stick To Your Plan
When you are busy or in crisis, it’s easy to forget about your sales goals. A regular review reminds you of the importance of marketing and sales efforts to keep the income flowing in.

Determine Which Products and Services Are Most Profitable
Lerer noticed when reviewing his financial plan that competition is fierce for office equipment but not on the service contracts he sells with it, so he has a sales plan to secure service and supplies contracts, too.

Get a Good Accountant
Find a financial advisor who is a smart business person and who wants to help your small business grow and succeed. You want somebody who acts like a business partner, not a tax accountant. Keep that person informed about developments in your company—and don’t worry about the meter running every time you pick up the phone. A good accountant will more than pay for himself. “I tell my clients, ‘You do what you do best, I’ll do what I do best, and eventually we’ll talk about wealth management,’” says Seitz Watson.