Projections, Budgets, and Forecasts!

Here we are, halfway through the year already! Are you hitting your goals? Most likely, you’re hitting some and missing some. All CEOs understand the importance of a realistic budget. It’s a tool for guiding your business and providing the information necessary to operate within your means, as well as handle unexpected challenges.

Unfortunately, no one can predict the future. One thing we know for sure, the budget will be wrong! In a fast-growing company or an emerging industry, budgets by themselves often aren’t enough.

Below is the process we recommend our clients follow. The goal is to create a tool we can use for several years to come, improving over time as we learn more about the market, our customers, and our costs.

First, let’s think about projections. Projections, or pro-formas, are typically long-term, 3-5-year, big picture documents. What can my business do in five years? How much market share could we obtain? Creating projections are an aspirational exercise and they are often used for raising capital. They are not BUDGETS! Creating projections can be a fun exercise. Even though we know these numbers may be wildly off, it’s the process and the learning that happens during the creation that’s key. At a bare minimum, we’re forced to do market research, customer analytics, and think through our hiring needs.

Next, let’s look at budgets. This is basically a refinement of the projections process. Our clients typically present an annual budget to their boards at their December board meetings. The biggest focus in most budgets is hiring and people costs. The budget typically mirrors the chart of accounts in the accounting system, with each account having its own budget. Once the budget is approved or finalized, it’s imperative to measure yourself against it monthly. Ideally, management teams should take ownership of various line items of the budget and report to each other how they are doing against their budget, and why line items are being met or missed.

Last, but not least, forecasting. One of the best tools in the financial management toolbox is maintaining a real-time (or close to real-time) forecast. When companies are growing fast, or in emerging industries with a lot of unknowns, this tool is invaluable. It starts by creating a 12-month budget as usual.  As each month is closed, the document is updated with actuals. Then, upcoming months’ assumptions are updated with the new data learned in the last four weeks.

Finally, another month is added to the end of it. Voila! We now have the most accurate prediction of the future we could possibly have. An added bonus – we always have a 12-month budget ready to hand off to a board for approval, making that often-dreaded process completely disappear.

CEO, Fine Point Consulting


10 Tips for Entrepreneurs About the Fundamentals of Accounting & Human Resources

Entrepreneurs and leaders of startups and fast-growing companies are often inundated with responsibilities. To create a solid foundation, the fundamentals of finance and human resources should be done right from the start.

At Fine Point Consulting we are laser-focused on helping entrepreneurs and early-stage companies accomplish more, scale fast, and stay lean. To that end, we have compiled both the top 5 accounting tips and top 5 human resources tips that every leader or entrepreneur should be mindful of.

 


Client Success Story – Gregor Diagnostics

“Since we started with Fine
Point, we haven’t had to solve
problems because they have
been avoided.”

Tobias Zutz,
Founder and CEO

From the beginning, Gregor Diagnostics startup Founder and CEO Tobias Zutz realized the importance of having a strong accounting and human resources protocol in place. Gregor Diagnostics is a molecular diagnostics company which has developed a revolutionary new screening test for prostate cancer.

The patient-friendly test will be the first diagnostic to detect prostate cancer at the earliest stages of the disease. His biomedical company is developed around catching a deadly disease in its early stages.

 


A Road Map to Success: Cascading Goals

A Fine Point Consulting | HR Whitepaper

Every company is working to achieve a purpose; the key goals and objectives the leaders at the top have defined.  But, what about the rest of the organization?  Are individual departments and employees all working to achieve those objectives or are they working against them? Do they even know what the company’s larger objectives are?

A cascading goal strategy is critical to the success and health of an organization. Why?

"If you don’t know where you are going, you will probably end up somewhere else." –Laurence J. Peter

 


Fine Point Consulting is a boutique consulting firm offering expert-level professional
accounting & human resources services customized to meet your budget.
We help entrepreneurs who are trying to scale fast get more done and stay lean.

Call us today for your free consultation at 877-535-1183 or use the button below

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