1. GOAL SETTING - FIXTHE PROFIT & CASH FLOW YOU WANT IN THE NEXT 12 MONTHS
1.1. Have a Clear Financial Goal - Write down the numbers
1.2. Fix the Profit you want the Business to achieve first, even before setting goals for Sales. Work backwards - To achieve the desired level of profit, what should be the Sale keeping in mind the Expenses.
1.3. Have a Clear Action Plan along with timelines based on the Goal's Set - Tag & align People and Team
1.4. Goals need to be Monitored, reviewed and updated ongoingly - We cannot just prepare once and forget
2.BUDGETING
2.1. Based on the Goal Setting - Prepare the Financial Budget
2.2. Key Components of a Financial Budget
2.2.1. Sales/ Top Line - Category Wise, Month Wise
2.2.2. Budget for Direct and Indirect Expenses month wise, head wise
2.2.3. Be Clear with your Fixed and Variable Expenses month wise - Have a Plan to reduce fixed cost on a continuous basis
2.2.4. Budget the Gross Profit and Net Profit you want month on month - ROI Driven Budget
2.3. Based on the Budget Prepare a Cash Flow Statement
2.3.1. Even if you have a cash and carry business, preparation of cashflow week wise, month wise is important
2.3.2. List down the Payment schedule -Plan your Cash Inflow based on the Outflow planned
2.3.3. Expenses should be driven only based on the Budget - Payments beyond the budget or overshooting needs to be approved and control - Avoid Unplanned Expenses and Surprise Payment or blocking of funds in unnecessary Investments
3.KRA & KPI - ACCOUNTING & FINANCE TEAM
3.1. Ensure you have a Clear KRA & KPI for your Accounting Team
3.2. Ensure you have a Clear KRA & KPI for your Finance Team
3.3. KRA - Key Result Area
3.3.1. List Down Top 5 Key Results you want from each of your team members
3.4. KPI - Key Performance Indicators -What Gets Measured ONLY Gets Done
3.5. Have a clear Job Description, clearly defined roles & responsibilities for accounting and finance team.
Monitoring and reviewing monthly performance are key to ensure results.
3.6. Know the difference between Accounting Vs Finance - Both are not the Same.
4. REVIEW DAILY MIS - KEY FINANCIAL METRICS
4.1. Prepare a Simple Daily MIS Template
4.2. Ensure the accuracy of the data in the MIS
4.3. Ensure you get a Daily MIS Reporting from your Accounting Team and Finance Team
4.4. What all Should a Financial MIS Template Contain?
4.4.1. Cash & Bank Balance on hand -Available Balance Vs Balance which can be utilized for Payments
4.4.2. Sales Value for the Day - Customer wise, Product/Service Wise, Branch wise
4.4.3. Expenses or Cheques issued for the Day
4.4.4. Inflow and Outflow - Cash/Bank Summary
4.4.5. Payments Due for the next week/month
4.4.6. Bank & Cash Reconciliation Confirmation
4.4.7. Stock Movement Summary
4.4.8. Debtors and Creditors Ageing
4.4.9. P&L High Level Summary as on Date
4.4.10. Balance Sheet Summary as on Date
4.4.11. Goals Vs Actuals Summary of the Budget
4.4.12. Statutory Compliance Tracker
5.BUILD FINANCIAL DISCIPLINE
5.1. Review MIS Daily - KNOW YOUR NUMBERS - More the Data, better it is. Ensure Accounting is done right. You get the Right Output if the Input is Correct
5.2. Ensure Payment on TIME - Delay in Payment affects the Brand and organizations Growth - Build Trust - Don’t make Payments every day - Have a clear weekly or bimonthly policy for payments
5.3. Focus on having a surplus and building corpus - Focus on Long term financial stability and don’t just keep managing your finances - Have a Strong CIBIL Score - Higher the Score, lower the Interest Rate
5.4. Follow the Expense Budget - Do not Deviate - Actuals should always be less than Budget
5.5. Ensure the whole organization is ROI Driven/ Profit Focused and align activities keeping in mind that each and every decision made in the organisation by every dept has a direct or indirect impact on the Finance and Cash Flow of the company.
5.6. Ensure to disclose 100% of the Transactions - Avoid Cash as much as possible in the Supply Chain - Ensure Transparency and accountability
5.7. Ensure You Save and Invest based on your Goal
6.FOCUS ON CASH FLOW AND NOT JUST TOP LINE & BOTTOMLINE
6.1. Cash is King - Focus on Cash Flow than on Profit - You may have Profits in the Books - Its Valuable only if it is Realizable - Key Blockers are Debtors & Stock - Manage Efficiently
6.2. Don’t allow your funds to be blocked
6.3. Focus on Scaling and not on Managing
6.4. Manage your Working Capital and Debt Equity - Know your Limits - Know your Capacity and the Limits you can Stretch - Don’t Gamble too much based on Future Order or Future Cash Flow
7.FOCUS ON PROFITS & CHOOSE TO SAY NO
7.1. Have a Clear Credit Policy both for Sales and Purchases/Expenses -Inflow should come faster than the Outflow
7.2. Do more projects or focus on a revenue segment which generates maximum profit - Cost Benefit Analysis is very important before you choose to work with a client.
7.3. Be Clear with the Costs - Have a Clear Cost Sheet in Place for each of your Products/Services - Preparing Product/Service wise P&L account and branch wise P&L is the Best Practise.
7.4. Business Owner should take home his/her salary first and not after all expenses and based on availability - Plan your Taxes in Advance - There is only a thin line of difference between Tax Avoidance and Tax Planning - Know what is allowed
7.5. Work only with Clients who Pay on Time
7.6. Any Purchase or Investment Decision should be backed with Clear Data and Capital Budgeting - Every Yes Should be Justified and should be planned
7.7. Cost Leadership is Important - Continuous efforts should be made towards bringing down the cost using technology and process
8. CHOOSE THE BUSINESSMODEL WHICH GENERATES MAXIMUM ROI / NET PROFIT %
8.1. Its either a Volume Game or Niche - Be clear with your Business Model
8.2. The Business Model, Team & Process all should be AGILE - Ensure Faster Turnaround and Regular Flow of Funds.
8.3. Focus on Building Monthly Recurring Revenue in line with your Fixed Costs.
8.4. Your Profit & Loss account should be Ballooned and Balance Sheet Should be Lean - Asset Light Model is always beneficial
8.5. Business Models are evolving every day, Markets are changing everyday, demands of consumers are changing every day - Hence take informed decision and keep yourself updated about every day changes and have the power to forecast - Change is the Only Constant!
8.6. Adopt various Lean Management tools like Six Sigma, 5s, Kaizen, TQM Etc
9. BE100% STATUTORY COMPLIANT
9.1. Do Not Cut Corners - Ensure all the Statutory Registration are Done
9.2. Ensure to have a Compliance Calendar with Clear Due Dates fixed in Advance and Ensure payments and returns are done/filed as per Schedule - Avoid Payment of Late Fees & Penalty
9.3. Track and Monitor the Compliance Cost - Cost of Non-Compliance is always more than the cost of compliance
10.REAL TIME ACCOUNTING
10.1. Ensure to have the Right Accountant in Place
10.2. Accounting should be Real Time on a Daily basis -Avoid Backlog
10.3. Have a Clear Chart of Accounts customized based on your organisation - Keep the Head of Accounts and Ledgers Standard
10.4.Have a Clear Accounting SOP In Place -
10.5. Ensure adequate Training is giving on an ongoing basis to the Accounting & Finance Team - Every single day there is a new amendment and Updates
10.6. Choose an Accounting ERP which is suitable for your organisation and ensure availability and access to the data 24/7 - Have the Accounts available on Cloud.
