It’s always crucial to have a target – to know where you want to get to. It’s even more important when you have uncertainty, which of course we have at the moment. When you have your targets, it’s even more important that you hit your targets.
Hi. I’m Anna Goodwin, your friendly finance mentor. I am keen to help people forecast accurately so that they hit their targets.
How To Start
To be able to hit your targets, you first need to make sure that your targets are the right ones for you. This can be done in 3 easy steps:
1. Be Specific
Define your target as specifically as possible. For example, ‘to increase sales by 5% over the next 12 months’; rather than ‘to increase sales’. Being specific will focus your mind and give you a clear goal to aim for. Also all of your team will have clarity in what they need to achieve.
2. Be Realistic
It’s no use setting a goal that is not achievable with your existing capacity. You want your goal to challenge you but not to mean that you’ll fall at the first hurdle!
Of course, the target can be reached and then exceeded once an investment in extra capacity has been made.
3. Focus On All Departments
Your target may be outcome-based, such as an increase in sales or profits, or operational, such as improving the quality of your products. To achieve a target, then attention must be paid to the whole production process – from production to delivery.
Planning To Hit Your Targets
Once you have your target, then you will need to set a budget to hit your targets.
Here are some tips from my online course – Finance for Non-Financial People – on how to budget:
- State any assumptions
- Use last year’s figures as a guide but take account of any sales campaigns you are planning this year which will impact on the figures or any online sales
- Create realistic budgets – don’t overestimate income or underestimate costs
- Monitor the key drivers of your business – such as sales, costs and working capital
- Involve the right people – don’t work on the budget in isolation; ask staff with financial responsibilities to provide you with estimates of figures for your budget, eg. Sales targets, production costs If staff are furloughed and can’t give you this information then use your best guesstimate.
- Review regularly – This is especially important this year as there are likely to be big changes in your costs and income. You may find your transport and networking costs are down but maybe you are not getting the same income.
- And one from my latest book – Use your figures to prepare your budget for success, using the table outlined in ‘Your Business Your Numbers’.
The steps to prepare a budget are the same for you as an individual as they are for a business owner.
The steps you need to take:
- Decide on the period of the budget – usually 12 months (see below) – it can be from whenever you choose, say 1/5/20 or 1/4/20. The starting date will depend on your year end.
- Gather all your income information together.
- Gather all your costs information together. Remember to include loan repayments if you have received a Government loan and Vat repayments if you have deferred them.
- Enter the above income and expenditure into your budget on a monthly basis.
During periods of uncertainty, it’s beneficial to move to quarterly forecasting to improve the reliability of your figures.
After each quarter end, you can review your figures and make sure that any problems are addressed. Future quarters can be adjusted depending on the actuals of the previous quarter. This helps you to set realistic goals and will enable you to hit your targets.
You will feel so much better when you take control and make a start on planning for the future. Visit my site to download my free 11-step action plan to get organised and plan ahead so you can hit your targets.
It may be that you are a sole trader and the tax year end of 20/21 is nearly over. It’s a good time to consider any specific targets you want to achieve in 21/22.
Also think about the following and their impact on your targets:
- Should you employ your spouse?
- Would using accounting software make your business more efficient?
- Do you need to make any further adjustments to your business because of Coronavirus restrictions?
- Do you need help to reach your targets? Who or what would help you?
In this time of uncertainty, it is more important than ever that you plan for the future, assess your progress and aim to hit your targets. Imagine how it would feel if 2021 was the year you hit your targets. Use your time now to prepare a plan and put a forecast in place.
In the next blog, I’ll give you tips on how to put steps in place to achieve your goals.