Plan for Growth or Die (Richard H. Meads Commentary)

Planning for growth seems obvious, but too often it’s overlooked or neglected simply because the time-starved entrepreneur/owner simply doesn’t have the time or the financial analytic skills to do the necessary planning.r

It doesn’t have to be that way. Outsourcing can lend even the smallest business the skills of a CPA or even a chief financial officer on an as-needed basis.r

Until recently, bookkeepers and CPAs represented the limits of basic outsourcing options. Two recent advances are improving both resource utilization and planning activities. r

First, the advent and rapid spread of Internet-based bookkeeping and accounting means dramatic reductions in time and cash costs for businesses. Systems and programs are now available from multiple sources to handle the most complex array of accounting scenarios.r

Perhaps more significant, though, is the increasing availability to businesses of what are generally known as Virtual CFOs. No longer do owners need to spend heavily for financial talent that is only needed sparingly. Costing/pricing strategies and analyses, capital requirements planning, risk management and analysis, among many other needs, are now available as needed, when needed.r

Perhaps a manager thinks, “I want a bookkeeper to handle the nit work. Or maybe I’ll learn QuickBooks and do the books in-house. OK, but what about taxes and compliance reporting? Get me a CPA.” r

Usually it’s a rational trade: dollars spent on outsourcing talent free up time to for other tasks. It may be that the manager or a consultant can now focus on the future.r

Every year about this time, business attention focuses acutely on the “numbers.” Most business managers focus on the books and accounts necessary to ensure we pay taxes due and make timely deposits to various government accounts. Others use the occasion to analyze where business has been. Fewer still look forward, planning where business is going, trying to manage for growth and better returns. r

Sheer exhaustion and, perhaps, disgust after paying taxes, may be the culprits. But, it’s also because planning simply ranks very low on the resource scale. r

A good business plan defines general business strategies; long- and short-term goals; operating, marketing, and execution objectives and strategies; and the financial strategies intended to secure the best possible utilization of scarce resources.r

Yet, as a management tool, a “real” business plan tends to exist in the owner’s/manager’s head. The written plan goes to the shelf, recalled and hastily updated only when a prospective investor, banker or consultant insists on seeing it.r

To make matters worse, managers too often plan ahead but manage backward.r

“This is where I want to go, but I only look at analyses and reports that tell where I’ve been and what I did.”r

This isn’t a wrong strategy, but it’s only part of the job. Nowhere is this truer than with financials. Part of the reason for this is a lack of resources, such as time and financial analytic skills – resources that are always in short supply for owners, managers and especially for entrepreneurs/founders who often wear multiple managerial hats. r

Financials serve two basic business purposes: We look backward with bookkeeping and accounting. What did we sell, what did we spend, where did we spend it and so on? From there, in an ideal business world, we forecast, project, budget, and employ other tools and analyses to plan.r

If capital were no problem, we’d have appropriate staff for the minutiae of record keeping and accounting and a controller, better yet a CFO, to manage the broad picture and keep us on our financial plans. The problem, of course, is that capital usually is a problem, and it’s difficult to rationalize expensive CFO talent that’s desperately needed only periodically.r

The general benefit of outsourcing financial help is better information is obtained with fewer resources expended. That frees scarce resources for owners/managers to use elsewhere, be it planning for the future or spending it at a children’s soccer game.r

(Richard H. Meads is a veteran CPA, business finance consultant and auditor in Springdale. He’s worked for a Big Four firm and served in several corporate capacities and may be contacted at [email protected].)r