It’s almost the end of the first quarter of 2021. Hard to believe. That was quick!

Let’s take a look at a few things you should be reviewing as the quarter comes to a close.

Goals and Targets

Business leaders who want to have strong and profitable businesses tend to set big goals for the year, and often, per quarter.  How did you do with your goals?  I’m slightly behind on a couple of the “Rocks” (high priorities) that I intended to get done by the end of this quarter.  I still have a couple of weeks to turn up the heat and get them done, and so do you!

How are your financial results so far? Are you close to where you thought you’d be? There’s still time!

Q1 is tough for us accounting types. There’s a lot of activity, including closing the prior year, meetings with your CPA, preparing for taxes, finalizing your budget and goals, and communicating with your team.  It’s not unusual to miss some targets in Q1, even significantly.

There are three options if you are missing your targets already:

• Realign
• Refocus
• Give up

Option three is already off the table for an intentional business leader. But realign if you discover that your sights were set too high, and refocus if you came close but didn’t quite make it. Perhaps there are a few details you can narrow in on for the next couple of weeks to hit the target.

Financials and Recordkeeping

I’m amazed at how few companies and organizations have a solid financial close process and still don’t use a simple closing checklist – every month.  I know it’s easy to try to wing it, but from experience, things will slip – not all balance sheet accounts will get reconciled, dates will pass without action, and the overall accuracy will degrade.  I’ve experienced this myself.  We need to maintain the monthly discipline of following a checklist – every month.

A monthly close should take no more than 10 days, and should actually take less time than that. Huge companies can do it – GE, a 95 BILLION dollar company with 250,000 employees, can close in three days.

I have one client that has a complex billing process.  When I began working with them, their month-end close took 30 days.  Not only did the slow billing process affect the close, but it also caused delays in customer payments and cash flow. By focusing on changing the process, we were not only able to improve the close timing, but accounts receivable turnover also increased significantly.

If you are having closing in 10 days or less, investigate what’s slowing the process down.  A recent survey indicated the month-end close (close to disclose) process has slowed due to internal levels of review, growing need to identify and consolidate more detail for financial statements and more time to check for errors.  While these all sound good, the problem seems to be that the close is run by memory rather than clear and specific protocols and checklists

With the quarter ending – plan now to get back to basics.  Get your financials closed quickly (download the closing checklist), compare to your forecasted results, determine what is necessary to get back on track, and plan out an action plan to get back on course.

Tasks and To-Dos

All work isn’t created equal, despite it all feeling urgent.  Step back and ask yourself

What is of highest value right now?

Sometimes, I will look for the path of least resistance.  I can still feel productive checking my email or knocking a small task or two off my list. But deep down, I know I’m avoiding the significant project or important initiative I should be working on.  I have found the following three actions helpful when this occurs, and suggest the following for you:

1. Delegate routine tasks. An administrative assistant (in person or virtual) can help with recurring tasks so you can focus on what only YOU can do.
2. Batch tasks. Try to do your “lower value” tasks in batches. Schedule time to process email, read professional development articles, clean up files, etc. as one appointment block so you can knock off a lot of administrative tasks at one time.
3. Automate.  When possible, utilize apps and other systems to take care of routine details. Automatic payments help you avoid late charges. Weekly reminders through tools like Outlook or Google Assistant help you stop the “try not to forget to …” thoughts swirling in your head. Using tools that snooze email to a more appropriate time can keep you from feeling distracted by a full email inbox.

A quarterly review is invaluable in helping you, and your company, succeed.  I love to help clients grow stronger in their review/closing process. Is it time for some extra help? Schedule a free strategy call today!

There is a saying in the turnaround world that when you cut staff, cut deep and deeper than you think – but only make the cuts once. This approach helps reinforce the morale of the remaining team members, reassuring them that no additional cuts are expected.  I’ve worked with turnarounds for 20+ years and almost every time, we didn’t cut deep enough.  There was always a rationalization as to why we need to keep this person or that person. In the end though, the majority of the time, we wish we’d made the deeper cuts, difficult as they would have been.

With the crazy 2020 economy, all of my clients have restructured in some way.   Business as we knew it changed, and we are all doing things differently than we did a year ago.

But now as we move into the new year, we need to ask the question, “Have we restructured enough?”  When advising clients, I recommend they think from the viewpoint: “If we started this company today, what would we want it to look like?”  Most admit they would want a leaner and stronger team.  Often, there’s a “Sally” who has been there for years but didn’t adapt as the company grew and remains difficult to work with.  Or a “Bob” who was enthusiastic when the company began, but has settled in and coasted for too long now.

My clients often would not have the same systems and processes, either. It’s natural for these to evolve over time. If they don’t, that’s actually concerning. While you don’t have to jump on the latest technology crazes or change a smooth operations procedure frequently, you could be missing out on productivity if you don’t at least stay aware of how you can adapt and take advantage of new tools and ideas.

Now is the time to take a look at staffing, process, and systems, with the new year coming quickly.  If you don’t, you may experience what a business-owner friend did.

He tried to keep things the way they were.  Their business was significantly impacted by the C-19 virus.  He had trouble facing reality.  He told himself, “Things will come back. I want to keep Bob and Jean, I’ll need them.”  He bled through all the excess cash on payroll and rent.  When his cash started to run out he called me.

We looked at his business as if it was a brand new start-up.  Would he need Bob and Jean if he was starting the business today? It was a definite “no.”  He also wouldn’t need his beautiful, but now 3/4 empty office.  He could do 100% remote if necessary.  He was focusing 100% of his time on worry and expense reduction rather than 90% of his time on revenue generation and strengthening his team—key roles for the CEO of a small business.

To be fair, these considerations aren’t easy.  And to his credit, he did the following:

• He started to work within the 80/20 principle, giving 80% of his effort to the top 20% of priorities for the company.
• He adopted the 13-Week Cash flow process, and stopped the cash bleed.
• He gave serious consideration to his business plans and budgets for 2021, even if some decisions wouldn’t be easy.

Things still aren’t perfect for him, but his business is surviving. And these days, a surviving business can almost be considered a thriving one.

How about you? Do you need to make some deep cuts? Do some hard thinking? Make some significant changes? It’s not easy, but being a business owner often isn’t. There are ways to handle these decisions with grace and helping your people adapt or even find new places to spread their wings if your company isn’t the best fit for them anymore. You all may find you come out of this global difficulty a little stronger and better positioned for the future.  Let me know if I can help.

It’s budget season.  Time to get your budget process started and formalize your plan for 2021.  (And before you panic and say, But I’m Not an Accountant! remember that all executive leaders need to develop at least a basic understanding of the financial outlook for the companies they own or help to manage to make wise decisions! Use this as an opportunity to learn and enhance your leadership skills.)

It’s also a good time to reflect, review, and re-focus before you actually start crunching numbers.

When I help business owner clients with budgeting, I do the following:

• Reflect: We take a look back to where they were five years ago (in this case, 2015).
• Review: We look at the transformation (or not) from 2015 to now and determine where things stand right NOW.
• Refocus: We look at where they want to be five years from now and tighten our focus on those goals.

The look-back is important to appreciate where we are. The lessons are, yes, painful at times, but are good for us in developing as individuals and successful business owners. The look forward primes us to seize what is ahead and make it count.

This exercise helps us develop goals to move toward the five-year vision. We look at sales and marketing, operations, profitability, working capital, EBITDA, and lifestyle. This helps clarify the vision. It’s a simple, but very effective exercise. This helps us activate our brain’s reticulate activating system to do the right things to move toward that five-year vision.

After the reflect, review, refocus process comes the nuts-and-bolts part–creating the budget.

As you start forming your 2021 budget, use the following as a guide to having the budget finalized by the end of November.

• Sales Budget: The overall company budget starts with the Sales budget. Look at customers’ sales and gross profit history. Synergistically work with your sales team to develop what is possible for your business. Look at your current customers. Set targets for new customers. Look at your current segments–are there any new segments for 2021? Put your customer data into a size/profitability matrix. If possible consider fully absorbed gross margin (i.e. some customers use more operating expenses than others). Consider allocating variable operating expenses to your cost of goods sold by customers. Understand your average transaction size and number of transactions per customer. Fact: Super-successful companies focus on sales growth more so than expense reduction. Make that your focus too. What are your planned sales by segment by month for 2021? What are your gross margins by month?

• Production Budget: This depends on what type of business you’re running. The production plan must be able to support the sales plan. For example: Do you need to adjust shipping schedules? Is production driving revenue or is revenue-driving production? Focus on lean, smooth, and efficient processes.

• Personnel Plan: Plan your organization chart with salary dollars and key responsibilities. Here’s a Personnel Plan (on my resource page) you can use.

• Operating Expenses: Look at your trailing 12 month-by-month to see any seasonality or sales relationships. Forecast each line item by month and document the assumptions in a summary of significant assumptions document.

• Interest Expense: Calculate planned debt usage. Ensure all debt on your balance sheet ties out to an amortization schedule. Plan to meet with your bankers to improve your borrowing capacity.

• Depreciation: Plan your capital expenditure budget. What fixed assets are you buying, when, and how (lease/buy, cash/finance)? Use your fixed asset register to forecast your current depreciation for 2021 and needed fixed asset additions.

• Cash Flow: Can you make improvements in your DSO or Inventory Turnover to improve cash flow? Your forecasted balance sheet will be driven by your cash flow drivers.

• Calendar Your Quarterly Accountability: I use a Year-at-a-Glance Calendar and schedule everything: holidays, important dates, vacations, quarterly meetings, etc. It’s a good idea to get this drafted now.

A step-by-step budgeting process preceded by a “Reflect, Review, Refocus” exercise can help you tackle this sometimes intimidating but very necessary project in preparation for the new year. If you need help, contact me!

Image by Gerd Altmann from Pixabay