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Money Matters in Q1

2010 | Jan 20 in Home Page News , Money , Leadership

By Erin Duckhorn,

podcastGreat leadership requires the ability to control what is in your power to control, to give people clarity, direction, and a sense of security, to chart a course and set goals your employees believe are attainable. As we begin a new year, it is your job as the business leader to set and communicate expectations for the year ahead. From strategic initiatives to marketing campaigns, from new positions to new product lines, your company is waiting for you to clearly set the goals for the new year.

It also falls on your shoulders right now to make sure that your financial house is in order, that you understand thoroughly where you are today, how you got there, and have a plan moving forward.

Three areas of financial focus for Quarter One

We’re all eagerly anticipating good things from the year ahead. But hoping is one thing, preparing is another. Here are three financial objectives you really need to have in order to start the first quarter off right:

  1. Set Your Budget - Your budget is the financial plan for managing and controlling revenue and expenses over a period of time. Budgeting is a core business practice and a fundamental management tool that keeps you and your employees on course, and provides the radar to tell you when you're off course. It's fairly short-range radar — most budgets look ahead month by month for one year. It's operationally oriented to help you and your employees manage the business on a daily basis.

    A budget is developed from past trends and future predictions, and is a forecast of your income statement. It emphasizes profit and the path you intend to take to generate that profit. In addition to planning how you will operate in the near future, your budget is also a control device. It helps assure that proper measurement and evaluation procedures are established throughout the company. It provides a plan so that everyone knows where the business is going and what you expect by way of performance. It also gives you a way to measure that performance.

    Need help developing a budget? The E-Myth Online program has extensive information, worksheets and examples that will help you with budgeting and much more.

  2. Determine Your Financial Goals - A big part of your budgeting process revolves around the financial goals you’ve set for the year ahead. Where do you want and need your business to be at the end of the year?

    The main purpose of creating a budget is to plan the monetary results you're going to achieve during the coming year, and then ensure that you realize those results. Rather than wait until the end of the year to see what happened, track your progress monthly and make adjustments as the year progresses. This dramatically increases the likelihood that you will, indeed, accomplish what you've set out to do.

    If you haven’t already, it’s time to set annual goals (either revenue/profit or both). You can then break these goals into a series of twelve monthly goals for short-term strategy and monitoring. Remember that these are first-pass goals that will be refined as you grow your business.

  3. Communicate to your Team - At E-Myth, we talk a lot about the importance of creating your Company Culture, or “the way we do it here” and communication is the key. You need to make sure that your employees understand the idea behind the work they’re being asked to do. The most effective strategy is to broadcast and reinforce your vision and goals at every opportunity. This includes your financial goals. You may do this in a special meeting or incorporate it into your regular team meetings, what’s important is that you share your goals so your team can help you get there. Ultimately, you need your team to be working toward the same goal—financial success.

    Some business owners are leery of sharing financial information with their employees while others believe in total transparency. Ultimately, how much you share is a personal decision. It’s up to you to decide what you’re comfortable with. At the very least, we recommend you share enough information so that your employees understand the overall financial health of the business.

    One way to do this is to make sure that everyone in your business is aware of the financial implications of their respective positions. People who have no financial information can’t be held accountable for managing financial performance. They have to know the financial dynamics of the positions they hold before they can make positive changes. This can be a tricky topic, and we have an entire process in our Mastery Impact! coaching program dedicated to bringing financial awareness and accountability to employees at all levels of your organization. The bottom line is that the more that managers and workers become aware of their impact beyond their own positions, the greater their appreciation of their roles within the business and the greater their positive impact can be.

How your business does in Quarter 1 sets the tempo for the entire year. Make sure that you set the right tempo for the year ahead with clear direction, a realistic budget and the support of your team. Here's to your success!

Share Your Story

Have you set your financial goals and budget for Q1 and beyond? Post a comment below and tell us about your challenges and triumphs.

Further Reading

Practicing Financial Leadership
Company Culture: A Game Worth Playing
Your Cash Management System

Six Steps to Maximize Cash Flow

Need help controlling the cash flow in your business? At our Six Steps to Maximize Cash Flow virtual seminar, an E-Myth Business Coach will help you identify and maximize the cash in your business. We’ll offer tips you’ve probably never even considered…

Learn more

Comments

  1. .Louise C. says:

    One of the things we did to start the new year off is delegate some of our regular accounting to somebody else in the office. We'd held our books close, not sharing much of the information with our small staff.  But our operations person was ready and is actually able to do his job better now that we've given him some visibility into the bigger picture.

    What you said about making sure that each position is aware of the financial implications of their position makes a lot of sense.

    Submitted Jan 20, 2010 8:46 AM

  2. .Keith L. says:

    Louise, 

    Allowing a bookkeeper access into our books was a big step in the evolution of our business.  It also introduces additional standards and processes of oversight that must be conceived and worked into the owner's activities as well.  As the E-Myth Revisited notes, managing by delegation is the key in this area but managing by abdication could be disastrous.

    I'm also intrigued by the idea of "making sure that everyone in your business is aware of the financial implications of their respective positions."  We currently do this in our compensation of our managers, but I'll be looking into how that can be better achieved with some of our regular production workers.

    Keith Larochelle, CFO

    Productive Computing, Inc.

    http://www.productivecomputing.com

    http://twitter.com/keithlarochelle

    Submitted Jan 20, 2010 10:28 AM

  3. .Kim C. says:

    In the restaurant industry we have a broad range of employee "levels" but I've found success in  translating the costs of certain supplies into dollar amounts anyone can relate to. (i.e. At one point I was purchasing commercial dish gloves at a crazy rate. They were constantly getting slices in them and disappearing, etc.. I finally explained to my mostly teenage crew, that I could either continue buying one pair of dish gloves per week or I could pay one of them for 2 hours, but I couldn't do boths. Suddenly one pair of gloves lasted more than a year) As soon as the whole crew realized that it was more or less their choice on what "our" money got spent on, my bottom line improved greatly.

    Submitted Jan 20, 2010 12:46 PM

  4. .Ken R. says:

    As an accountant who works with small businesses, I find that I often have to work with owners to have them understand the importance of sharing certain financial information with their employees.  I often hear from business owners that they wish they could find employees who show initiative and treat the business as their own and yet they don’t want to share financial information.  Once I point out that these two statements are not compatible, most owners start to get it.   

    Ken Rogers, MBA, CPA

    CEO | My Fiscal Office, LLC 

    Phone: 1-888-756-3606 x701 
    Email: krogers@myfiscaloffice.com


    Check out the free resources on our website, www.myfiscaloffice.com and sign-up for our free monthly newsletter. 

    Submitted Jan 20, 2010 2:00 PM

  5. .Nicholas S. says:

    I enjoyed the part of your article when you speak of the importance of communicating employees financial responsibility to the company.  Empowering your staff by educating them on the important aspects involving your business makes them more responsible and allows them to see the larger picture. 

    This not only tells the staff member their financial liability but empowers them to think of other ideas and concepts that may be useful to share.

    In our business, we're constantly looking for new ideas and concepts.  Many of these come from our staff.  They are the ones in the driver seat every day handling many of the companies details.

    http://www.insulationstop.com

    Submitted Jan 20, 2010 9:16 PM

  6. .E-Myth Business Coach says:

    A great book that helped set the stage for what is often called "open book" management is The Great Game of Business by Jack Stack. It has inspired a number of other well known CEOs and entrpreneurs to reinvent how they do business and bring a deeper level of ownership and accountability to their employees.

    Submitted Jan 21, 2010 7:19 AM


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