How to Strategically Plan
Kerri Lawrey-Jones | Operations. Accounting. Organization. | Friday May 7 2010When writing your strategic plan, it is imperative that your financials are analysis ready. Bookkeepers and accountants often code items under an umbrella such as “commission income” and “dues and subscriptions”, which is fine for tax purposes, but not for budget and planning purposes.
To ensure profitability, it is imperative for business owners to know the details of their expenses and the income that offsets it. To do this, I recommend using subaccounts. The practice of assigning items to subaccounts clearly identifies areas that are thriving and areas that are failing, and provides an easy outline for future business-building strategies.
For example, if you are in insurance broker you should be more concerned about the type of policies you sold than what company wrote your commission check. Yes, listing the company in your chart of accounts is important, but I would take it a step further and add a subaccount to identify the exact type of policy you are being paid for, such as: Health, Life, Disability or P&C. Another example would be for a consultant. A consultant wants to know what services are selling, so they can match the trend when marketing and writing proposals.
On the expense side of your P & L, if you are spending $1500 a year on various networking groups, it is important that you match the incoming revenue generated by those relationships, so you may effectively decide in following years which of those commitments are justifiable.
The bottom line… know what is coming in and going out and the relationship between the two. The more detail you have, the better. At the end of the day, your financials are the story of your business and knowing that story inside and out is essential to growth.
