New Year's Financial Planning Resolutions

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Financial information is the lifeblood any company. Run out of money, and you're done. For startups and small businesses, it's often our accountants that keep us on track. So, to start the New Year off right, I asked several accounting and financial professionals to provide suggestions that start up leaders can use to be more effective.

Bob Hammer, MBA, CFO for Hytrust has run several businesses in several different industries. He also teaches accounting management at Monterrey Peninsula College. Bob told me "It's always important to start the new year by figuring out where you've been, taking a realistic look at last year, and seeing what goals you did and didn't make. When you create a plan for the new year, figure out financial goals and how you will achieve them. For example, If you want to reach 10 MM in sales, what are the activities you're going to perform to achieve those numbers? Every time you go over or underachieve, understand why. The numbers represent your company activities directly."

Stephen King, President of Growthforce, an outsourced Bookkeeping and Controller service for companies that use Quickbooks, also values planning. King worked as a CPA with small businesses for 15 years before creating Virtual Growth, which he sold to Administaff. "Take the time to create a budget, but don't get upset about whether it's right. By definition it's wrong - because you can't predict the future. Put something down as a placeholder to help you evaluate results against what you hoped they would be. Then after six months you can look back, and you have a way to evaluate the results against your goal. Good or bad, you have something, and over time you'll get better at making budget predictions."

King also suggests a forecast. "A budget is for a fiscal period like 6 months, a forecast is short term — 6 weeks. This helps you make sure you have cash flow to make payroll, rent, and other critical expenditures. If you have a 6 week cash flow model you can anticipate problems in advance and have enough time to figure out how to solve them. And we all know the 3 reasons that business fail are cash flow, cash flow, cash flow."

Stan Lau, Controller of Tipping Point Partners, an incubator that builds and operates Internet startups, knows "Visionaries who run startups often spend the money quickly — the finance person needs to keep them grounded around what's possible. The bookkeeping, accounting and finance (as well as HR and Insurance) is often an after-thought, and the team's focus is on building and operating the business.The office manager often gets the role to manage 'that stuff' — but can be someone who doesn't have accounting experience. They may know how to balance the checkbooks and report what happened — but the value is in providing forecasting and insight. There are a lot of startups who don't need a full time controller — there's obviously a demand for a service which acts as an outsourced controller." (Stan, you should meet Stephen.)

If you're worried about the economy, Hytrust's Hammer urges "Don't get hung up in the environment of recession. There's still money around. What's missing is a shortage of ideas that can make money. People are always willing to buy something that fills a need in their business or their life."

Growthforce's December newsletter has checklists for everyone from your CEO to your bookkeeper. In one list states that labor costs are typically your biggest expense, but investing in your people and their people skills can provide a ten-times return on investment.

What are you doing to plan the year? Let us know in the comments.

Howard Greenstein is a social media strategist and evangelist, and president of the Harbrooke Group, which specializes in helping companies communicate with their customers using the latest Web technologies. @HowardGr