As a business owner, you know that your contribution to the economy helps to propel us forward. Running every aspect of your business can be daunting, especially generating revenue, minimizing expenses, improving margins, marketing, and staying relevant. After a successful year, you may ask yourself, "How can I keep more of my top-line revenue?"
A good business is not only well-managed but stays on task. The best way to do this is to set reasonable goals, work toward them, and constantly evaluate their progress. We've compiled a guide on the best way to set financial goals and why they are more relevant now than ever.
Financial goals can be thought of as the ocean. The best way for a ship to navigate significant and perilous waters is to plan meticulously. This doesn't mean you need to have a perfect vision of exactly where you are going, but a road map that keeps you consistent.
Setting SMART goals is a tried and true method of project management and key performance indicators. When you create a SMART plan, it can get measured. Remember, anything that gets measured gets done.
Setting financial goals is necessary for proper resource allocation to avoid wasting any time, money, or expertise in the wrong area. For example, evaluating your team's skills to identify opportunities for cross-training and professional development can reduce the cost of onboarding. Furthermore, bringing on a business consultant can reduce costs while giving you the peace of mind that you are headed in the right direction.
Resource allocation also helps you make more out of your budget. Evaluate partnerships, re-negotiate supplier contracts, and review the performance of your current objectives to determine if you are on track to stay the course.
Many factors can affect your ability to set financial objectives for your brand, company, or team. Some common challenges revolve around how goals are constructed in the first place. It is prevalent for teams to focus on "busywork," tasks that may seem essential but may detract particular focus from one project to another.
A common way to get over this hurdle is to have a dedicated goal-setting process evaluated, both ad hoc and on a regular cadence. This not only guarantees that goals are met but takes into consideration the process as a whole. A great question to ask yourself is, "How has this goal helped my vision to move the company forward?"
Perhaps the most significant challenge a small business faces is the lack of expertise or a dedicated person (or team) to create reasonable goals and objectives. It is not enough to share your vision with your staff; they must champion what it means to steer the brand in the right direction.
Reading through this guide, you may have determined that it is a good idea to create well-constructed goals and stick to them. At the very least, you should consider your current goal-setting process and its efficacy in the grand scheme of your business process. Here are some great tips to think about when setting SMART financial goals:
It is said that cash flow is the lifeblood of all businesses. Of course, not all problems can be fixed with cash — but a healthy amount of positive cash flow helps to keep your company afloat and to take other risks. Your goals should first look at practical ways to increase this number with the resources you have at your disposal. Look at invoicing terms and favorable contracts and adjust payment schedules where possible.
If there is a significant disparity between your top and bottom lines, it is crucial to understand why. As stated above, increasing your cash flow could be the answer, but it could be rendered more efficient with higher margins. Analyze your current vendor relationships or improve your revenue verticals to increase your profit margin.
Debt is not always a bad thing when it is under control. If you have a large amount of debt financing, negotiate better terms with your lenders or consolidate them together for an advantageous deal. If you don't have any debt but are looking to expand, finding creditors to improve your financial position can be healthy.
Many businesses are losing out on available capital because they do not have proper systems to track their expenses or possible deductions and credits. It's essential to make the most of your financial documents.
Financial goals can greatly influence your business' success. When in doubt, focus on activities and goals that increase your cash flow and profit margin while reducing actions detracting from your overall vision.
With the most prominent challenge to set a financial goal being a lack of expertise, it's paramount to seek a qualified professional to save money and help you achieve peace of mind.
With the guidance provided by business accounting professionals like the MB Group team, you can rest assured that you are getting the best care and support you deserve. Take the first step toward a bright and more profitable future today and contact us.
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