Whenever I walk into a new client situation the first thing I look for is a business scorecard. Sometimes if I am lucky I find that the client has an accountant who has put together a Profit and Loss statement. Of course, in most small businesses P&L statements are usually done by an outside accounting firm and usually do not get to the client until a month or so after the fact. Rarely do I find that a business has put together a budget (a financial plan). To me this is incredible and a little bit insane.
It is incredible because if you go into any business without a financial plan (budget) you do not have a clue about how much it is going to cost you to operate the business. Without a budget you do not have any control over your cost and expenses which may leave you without a profit. Without a budget you do not have a standard to compare your Profit and Loss statement to see if you are on a track for success, failure, or just survival. Without a budget to compare to you do not have a clue where in your Profit and Loss statement you should be making adjustments to ensure a profit and your business future.
Operating a business without a budget is pretty much like flying in the dark. Ask yourself where would a pilot end up without a flight plan? This picture pretty much lends itself to a business owner operating a business without a budget. Pretty crazy, don't you think? Absolutely insane! Yet I see it everyday as I visit small business owners who are in trouble. And what is more incredible to me is that most accountants and CPA's who prepare these Profit and Loss statements for the business owner
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