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Having a strategic plan in place for your business is the best way to ensure you achieve your goals. After all, if you’re failing to plan, you’re planning to fail. That said, it’s not enough to create a strategic plan. You need to be sure that your strategic plan is not created in a way that will pretty much guarantee it won’t work.
Here are 12 things to watch out for:
1. Having unobtainable goals based on pie-in-the-sky projections.
2. Setting unrealistic budgets that don’t cover actual costs and needs.
3. Failing to create action plans for implementing the strategies and tactics described in the strategic plan.
4. Not getting buy-in from the people who will do or oversee the work.
5. Failing to communicate the vision and strategic objectives to the “rank and file” within the company, or to communicate progress over time.
6. Not assigning responsibilities for each step, and not assigning due dates and timelines.
7. Not planning for the infrastructure needed to accomplish the goals laid out in the plan, such as:
d. Physical space
e. Ability to obtain materials, parts or products
f. Production capacity
g. And more
8. Not budgeting for mandated wage increases caused by contractual obligations or increases in the minimum wage.
9. Not doing your homework, such as to determine the actual viability of entering new markets.
10. Not planning for proper marketing and sales support for a new product launch.
11. Not taking steps to avoid scaring customers away with poor customer service, negative press, etc.
12. Taking a “set it and forget it” approach to the strategic plan, rather than following up at regular intervals to ensure it’s being implemented as anticipated.
Want to bring in an outside expert to help you create a strategic plan that makes sense? Give me a call. As a part-time CFO, this is one of the many services that I provide.
The monthly financial reports that most companies issue and review are a great way to keep tabs on how the business is doing. However, for most organizations, reviewing financial data once a month is really not frequent enough. If a problem is brewing, you might not see it until it’s too late to change course.
Financial dashboards, which can be created on a project- or company-wide basis, fill in this gap. Usually set for weekly data, they give management a clear, high-level snapshot of current performance.
Your financial dashboard is used to track things that are easily measured and convertible into a key metric. While they’re most useful if you have a budget to which the numbers can be compared, they’re still helpful even if you don’t.
What to Include on a Company-Based Financial Dashboard
For a company-wide financial dashboard you might want to include the following metrics for that week:
• A/R collections: actual versus budget
• A/R aging: actual versus budget
• A/P payments made: actual versus budget
• A/P aging: actual versus budget
• Payroll expense: actual versus budget
• Full Time Equivalent (FTE) employees: actual versus last week and versus budget (useful for companies where labor fluctuates weekly)
• Cash balances: actual versus last week and versus budget
What to Include on a Project-Based Dashboard
As this will vary greatly based on the industry, I’ll present some possibilities for a construction firm. Here the idea is to track job progress by hours of work completed, and then support that by a measurement of where the project actually stands.
• Actual labor hours
• % of project completed based on labor hours (i.e. actual labor hours divided by total budgeted hours for the project)
• Metric to measure work that was done, actual versus plan. For example, if you’re building a block wall, how many blocks were installed this week? How many blocks will there be in the entire wall?
• % of project completed based on work actually done (i.e. the metric that measures the work that was done divided by the metric representing the entire project)
• Actual labor costs versus budgeted labor costs for this stage of the project. If the project is 72% done, have you burned through more than 72% of the allotted labor budget?
Need help getting a financial dashboard set up for your company? Give me a call! As your on-call CFO, this is one of the many services I can provide for you.
Depending on your industry, your workers’ comp insurance might be a significant expense. In my last article, How to Control Your Workers’ Comp Premiums, I mentioned the need to pay attention to your workers’ comp classification codes. Because this is such an important issue, I’m going to explore it in depth here.
What Are Workers’ Comp Insurance Classification Codes?
Like any form of insurance, premiums for workers’ compensation insurance are based on risk factors. One of these is the likelihood of injury, which is determined based on the type of work performed. For example, a rodeo clown is more likely to get injured than a telephone operator. The classification codes, which in California are set by the Workers’ Compensation Insurance Rating Bureau (WCIRB), reflect this.
How Are Your Company’s Classification Codes Determined?
A representative of the WCRIB will periodically visit your company and do an inspection and audit to determine your classification codes.
How Do My Classification Codes Affect My Premiums?
There is a standard workers’ comp premium rate associated with each classification code. Base premiums are calculated by multiplying payroll x classification code x experience mod rate.
As part of this calculation you must report your payroll in each of your assigned classification codes. To keep your premiums as low as possible, be sure to:
• Ensure your assigned codes are correct – There might be two codes that are very similar, but one will cost you 10% more than the other. Sometimes employees are misclassified in the first place. Other times employees are misclassified because things have changed over time. For example, if you have purchased machinery that reduces the risk of what was being done manually in the past, the classification code might change.
• Report your payroll accurately – Avoid typos and mistakes.
• Project your payroll accurately – Each year your insurance company will require a projection of payroll for the upcoming year, listed by classification code. Your premium will be based on this projection, subject to adjustment after an audit at year-end.
How Do I Get My Workers’ Comp Classification Codes Changed?
If your codes need to be adjusted, contact the WCIRB and complain loudly enough to convince them to come back out and take another look at your operation. Your insurance broker may be able to help you with this.
Of course, if you need help getting your company’s costs under control, give me a call. As your part-time CFO, I’m here for you.