Setting SMEs up to succeed

This is a very important role for SME Advisers.

After the ‘Due Diligence Review’ on the business operations, we now move into the serious business relating to the preparation of a Business Plan for the SME.

The Business Plan will not be set in stone because they need to be documents that are regularly reviewed and updated – they need to be ‘living documents’.

It is essential that the leadership team is involved in the deliberations relating to the items to be included in the Business Plan. These are the key people who have to instigate the Business Plan.

The Predictive Accounting Process now begins.

The Predictive Accounting Reports – Budgets – Key Drivers of Key Accounts – Cash Flow Forecasts – Projected Balance Sheets are the ‘Financial Interpretation’ of the Business Plan.

The leadership team should be involved in the preparation of the Predictive Accounting Reports and formally adopt the Financial Forecasts for the next 12 months. As the Business becomes more familiar with the Predictive Accounting Process, the forecasts could be for 3 – 5 years to give the business some long-term forecasts.

The Bookkeeper or Accountant who has been involved in this process can then act as the STORYTELLER, to utilise the ‘Projected Balance Sheet’, to illustrate to the leadership team what the business’s position is projected to be at some future date, if the budget forecast and other assumptions that have been made have been achieved.

The budgets should be utilised each month to calculate ‘Budget Variance Reports’.

When these variation reports are prepared, there will be instances where changes have occurred. It is best to preserve the original budget so that the leadership team can refer back to, but it is desirable to adjust the forward forecasts to reflect what has happened up-to-date and to then incorporate the ‘Forward Budget Amounts’ – this process is referred to as the ‘rolling sorry you will forecasts’.

Our recommendation is that these processes for the preparation of the Business Plan and the Predictive Accounting Reports are clearly identified to your SME client as tasks that need to be prepared. If you are uncertain about undertaking these tasks, we suggest that you suggest to the client that a separate consultant be engaged for the preparation of the Business Plan and Predictive Accounting Reports, so that the business systems introduction to assist the ‘SME to succeed’ are implemented within the business.

ESS BIZTOOLS has developed a wide range of resources to assist Accountants and Bookkeepers to implement STRATEGIES TO ASSIST SMES TO SUCCEED. We are presenting a complimentary webinar outlining one of these packages – ‘Advisory Intro Package’ – on Tuesday 19 March at 11am AEST. CLICK HERE to register.