Issue link: http://psai.uberflip.com/i/883683
WEEKLY EDITION OCT 4, 2017 Financial Forecasts and Your Business…continued By PSAI Executive Director Karleen Kos It's also beneficial to look at how your business is tracking against industry benchmarks. There may be good reasons that your numbers are different since benchmarks are averages. If you live in an area where the cost of doing some part of your business is very high or very low, your numbers will be different than the benchmarks. They'll also be "off" if the benchmarks are a little out of date. Even in those cases, though, you can still benefit from looking at the relationships between the numbers and seeing how yours fare. If you know the going rate for wages in your area are 20% higher than average, is that approximate proportion reflected in your actual numbers? Analysis against benchmarks can help you see where you may have opportunities for savings or growth – or where you might have to make changes to remain viable. A Critical Factor To get the management benefit of forecasting, you have to spend a minimum of time tracking results and comparing them to the past and to the forecast. The active phrase is "plan vs. actual analysis." Accountants and financial analysts call that "variance analysis." It means looking at your forecast and comparing that to the actual results, so you can note the difference, and make changes in your business. Good management is frequent course corrections. It's a fact of life. Even on a straight super highway, steering requires lots of small movements. And business leaders know well that nobody is on straight super highways. For the owner, the path includes a lot of hills and valleys, starts and stops, and turns. The Benefits So you forecast your key business indicators including sales/rentals, costs, expenses, and cash flow. And every month, you review results and compare what happened to what you expected to happen. Ideally, you compare it as well to the previous month, quarter, and year. You don't just look at the numbers. You look at the business behind the numbers. You identify what to do more of, what to do less of, and what to change. And that, in the end, means both better management and better results. PAGE 3 Note: The "Purchases" category includes all disposal fees, supplies, and fuel. "Other Operating Costs" includes insurance, selling costs excluding marketing, general and administrative expenses, travel, and legal expenses. Note: Table above reflects the most recent information available from the US government.