After Christmas, for those small to medium business owners with Financial Years that end in March 2020, it will be time to begin the process of forecasting the monthly sales, costs, profits and losses likely to happen in the new financial year Apr-2020 to March 2021.
I don’t believe any Business Owner can foresee that far ahead but nevertheless it is wise to go through the exercise and set the goals that the company must endeavour to attain.
Monthly Sales Targets get set. Monthly Direct Costs are calculated. Gross Profit is assessed. Monthly Overheads are worked out leaving, hopefully, a monthly net profit being predicted.
Especially in these uncertain times, the Business Owners Chrystal Ball often goes on the blink! Does anyone know what’s going to happen to the UK business in 2020 at this moment in time? (11.25 am Dec 4 2019) No, I don’t think they do!
To combat this or uncertainty in general its is best to monitor your Financial Year Profit and Loss Forecast on a monthly basis and review the results at the end of each quarter. If by chance, sales are growing faster than expected, say 10%, in the first quarter, beating your forecasted target, it is wise to raise the targets for the following quarters in line with the increase.
As resources such as wages (Team numbers and equipment etc. etc.) are direct costs and linked to sales they should be linked by a budgeted percentage to ensure that provision has been made to service the increasing above forecast sales. Conversely, if forecasted targets are not being met it is wise to lower the sales targets in future quarters in line with the percentages of target attainment, so as to trim the expenditure and protect, where possible, net profit margin.
All this Management Directing takes time and if you are currently immersed working in your business and not preparing to spend time working on your business in the form of forecasting in financial detail what will happen in 2020 then your fate will be in the hands of the gods. (Or politicians)