The Importance of Forecasting

Why Forecasting Is So Important!

A number of years ago I asked my youngest daughter what she thought the weather was going to do the next day. She asked what the weather forecast had said. I said I did not know. Why did she need to know that?  She said that most of the time the weather was the opposite of what was forecasted so if the weather forecast was for rain it would probably be a nice day tomorrow.

Surprisingly at that time, even though the meteorological models have been built over centuries and are robust,  she was regularly correct. I admired the powers of observation for one so young and subscribed to her theory up until recently.

Forecasting In Action

I live in Whangarei and last Friday(17/7/2020) had made appointments with two of my mentees who operate from Paihia and Kerikeri respectively to meet face to face for the first time post Covid 19 lockdown. The weather forecast was apparently for bad weather but I looked out the window before my girlfriend and I departed and it didn’t seem nearly as bad as was forecasted. I subscribed to my younger daughters theory. 

As we drove north the weather got progressively worse but I remained positive. I attended my first meeting in Paihia then moved on for my next one in Kerikeri. While I was meeting in Kerikeri, my girlfriend decided to drive to the Waipapa warehouse for a look. She was in the car waiting for me when I completed my meeting. She said that she could not get to the warehouse because of flooding. I thought, huh, the weather didn’t seem that bad.

So we headed South back to Whangarei, just before Moerewa we had to stop as water was over the road in Moerewa. I thought that’s Ok, we will go via SH15, the NZTA website was saying SH15 was still open. So, we headed back to Kaikohe and then down SH15. That went really well until just before Pakotai where there was water across the road. We had to retrace our steps to Kaikohe. 

We stopped for some food at Kaikohe McDonalds and talked to some locals who confirmed all routes back to Whangarei were now closed as a result of flooding. Thankfully, some friends of ours that live at Waimate North were home and we were able to make it to their place where they kindly accommodated us until Sunday when the roads were clear again.

The Moral of the Story

In a business environment, it is important to forecast where your business is heading as this can highlight possible issues that may arise in the future. If you have built a good forecasting model then you can rely on it, forecasts are not made to be ignored. If I had listened to the forecast for Friday’s weather, I would have postponed my appointments (or at least packed a toothbrush).

A good forecasting model and approach needs to be flexible and regularly reviewed so that if events occur differently than you thought they would, then you can adjust for them.

A good model also allows you to build scenarios around what the financials would look like given different sets of circumstances.

How You Can Forecast

There are a number of different forecasts that link together to give you a three dimensional view of your business. 

  1. The Profit and Loss forecast – which may just simply be your budget month by month.
  1. The Cashflow forecast – which shows the cash movements and timing based on a month by month and often week by week basis (this allows you to forecast funding requirements or surpluses through the period being forecast).
  1. The Balance Sheet forecast – this ties the Profit and Loss and Cashflow forecasts together. Forecasting the balance sheet of a business allows you to monitor important ratios such as Liquidity ratio to ensure you are not going to have issues meeting your commitments, Equity ratio to show how much of the business you own versus you lenders and creditors, and so on.

If you aren’t quite sure how to create these different business forecasts, give me a call and I can guide you on the forecasting journey. This will help you to be aware of the good and bad financial weather that may be in your future so that you can plan for it.

Organisational Culture

What is meant by the culture of the organisation?

It is subtly different to what The Knobz sang about in their song from 1980.

In my experience, it is the feel of the organisation, the aura from the staff that work for it. 

Depending on the size of the organisation there may be subcultures within the same company. An organisation’s goal should be to have one culture as opposed to a number of subcultures which can promote unhealthy jealousy or negative rivalry.

So, how can you do that? Let’s explore what good company culture is and how you can achieve it.

Creating Organisational Culture

Many entities spend a lot of time developing their mission statements, their vision, and their values. These are just words until they are exemplified by the organisation’s leaders. The Board of Directors, the CEO, the senior leadership team, or in smaller organisations the owner/manager and the more senior employees. They all need to march to the beat of the same drum.

Building A Good Company Culture

Good culture does not generally just occur, although in some very lucky organisations it may. It needs to be thought about and nurtured. Confused culture occurs if the leaders of an organisation say we need to do something in a certain way, but they don’t do it that way themselves. If they do not follow the processes that they have put in place, and if they don’t do what they say they are going to do, then these things have a negative impact on culture. 

I have seen this first hand and know the unnecessary disruption it creates.

However, if the key stakeholders lead from the front… 

The Benefits Of A Good Organisational Culture

Culture, as well as great practises, grow out of mutual respect and feelings of being valued. Having a strong and healthy culture leads to improved productivity, staff retention, people who will go the extra mile, and a greater willingness to share ideas about possible business and improvement opportunities.

Organisational culture needs to be considered as part of an entity’s business planning process.

If you need assistance and/or facilitation of this process, or any business planning and system implementation, Biz Assist can help you. Feel free to make contact for a free no obligations conversation about what Biz Assist can do for you.

Seize the day and the dollar!

Small business owners go into business for many reasons. This may be to do something they are passionate about, pursue a dream, because they have been made redundant, or they are tired of being told what to do by someone else, to name a few. 

Unfortunately my experience has shown that many of them do not have some basic business understanding of things like cashflow, terms and conditions for customers, administration time required, how to do the administration, and having sufficient working capital to get them through the startup phase and indeed to operate effectively throughout the business cycle.  

As a  direct result of having insufficient working capital business owners are often reluctant to ask for the advice that they really need to make their businesses hum as they see doing so as being expensive and therefore can put it off. To state the obvious recent times as a result of the Covid 19 pandemic have made the existence for many businesses even more challenging.  

What I say to these business owners is, in order to relieve some of your stress as well as improve your future business operations, now is precisely the time when you should be getting the advice that you need from someone like myself to advise and guide you for an investment price that you can afford.

This advice can be in small bites to fit in with actually being able to operate your business and spread the investment needed over a period of time by buying a block of hours each month. The quantity of hours can be as small as 1 hour and up to as many as the business owner may think necessary. The advice provided can be wide ranging but covering such topics as below to name a few: 

  • Basic Financial report understanding
  • Cashflow management and populating some simple spreadsheets to keep a strong overview of this.
  • Business planning and goal setting, what do you want your business to look like by when, then putting in place a plan to achieve that.
  • Customer Management and communication, sometimes this involves debt collection.
  • Supplier Management and communication, this can be around getting better deals, better trading terms, or having difficult conversations with them.
  • Systems implementation and improvements
  • Evaluation of whether to outsource some functions or not.
  • Evaluation of asset  investment options.

After 30 years of financial and management experience I can deliver some practical guidance and solutions in a time efficient manner.

Don’t put off giving me a free no obligation call as there is never a better time than now.

Collecting your dues

One of the jobs that we love to hate as business owners is collecting money that is past its due by date. Taking a positive view on this, it can be a rewarding way of connecting with your customers although you should not leave it until they are overdue to invigorate your relationship with them. You do not have to pursue them too vigorously to start with. Most accounting systems these days issue reminders to customers about when payment is due in the days prior to the due date. This is set up in the system setup along with how that reminder is worded. The same thing can be done for when payment is not received on time. 

Most people hate owing other businesses money but in tough times it is often the smaller businesses that can have their payment delayed as they are not always perceived as important or in some cases as threatening as the larger suppliers. Sometimes the gentle automatic reminders are enough to spur the payment getting made. They can also be the easiest things to ignore. 

The important thing about collecting debt is to be proactive. There is no embarrassment in asking for a payment date even if the payment is not due yet. Get on the phone early to customers and have a chat, remind them about payment and let them know how important the cash coming in is. They may share some of their issues with you, if payment is to be delayed at least you know. Never hang up without getting a date for payment committed to. The commitment to a payment date allows you to budget for the delayed payment in your cashflow, and makes your customer accountable for the date.

If your business has been operating for a number of years with an established customer database you will know from history who may be a slow payer so focus on those customers first, then focus on your new customers that have not established a trading pattern with you yet. Time is always short so hopefully the rest of your customers will follow their established patterns and other follow up will not be required.

Take the following actions to put your business in a stronger position:

  • At the beginning of a business relationship advise them of your terms and conditions of trade. 
  • Get the prospective customer to physically sign the credit application which, in addition to the above, should include all of their correct billing and legal entity details, existing suppliers as references(who you will contact to help give you some assurance of them being a good customer), and hopefully a properly executed personal guarantee if they are not a sole trader. If you have not done this it is not too late to update this with existing customers, in fact it is good practice to do so.
  • If you are a construction trade business make sure you understand the Construction Contracts Act 2002 and comply with that. This puts you in a stronger position to get paid.
  • Where possible get paid in advance or at least be paid a deposit so that you remain cashflow positive through the relationship.

Remember Cashflow is King and you can collect debt in a proactive and positive way without needing to feel apologetic about it. It is simply an important business function.

What’s your end game?

We’re not talking about rugby!

People go into business for many reasons, perhaps they have a strong passion for what they are doing, or are sick of working for “The Man”.

When you set up your business did you create a business plan?  An important part of business planning is working out what your end game is, how do you exit the business when you are ready to. This may range from selling the business to closing it down, and many variations in between.

Thinking about your end game enables you to ensure you structure your business appropriately to lock in the value that you have created and achieve whatever goals you set for when you decide to leave the business. It is never too late to start this process.

If setting your end game feels like a tricky one to work out, you’re not alone. If you need help with creating your end game, or any other part of your business planning Biz Assist is here to help you!

Click here to get in touch today

Supercharge your biz with Genoapay

Here’s how you can do it!

How are things going for you? Business has faced a lot of challenge in recent weeks, and it’s not going to be over just because the current set of circumstances leaves us.

It’s also probably fair to say that the old adage of ‘spend money to make money’ feels a little abrasive right now, with all available funds going into keeping the doors open. But it is a true sentiment, and sometimes it makes sense to get a little help.

That’s where we come in. We work with you to help you navigate your way through any stage of your business – from start up to struggling to growth stage. We’re here to provide you with the best possible advice and support. But it does cost money.

Meet Genoapay. To make things a little less stressful, we’ve set up Genoapay to help you spread your Biz Assist payments out over ten weeks, with ten equal payments up to a total of $1,000.00. The best part is it is interest free – always.

So, how do you access this? It’s really simple.

First, we have a chat about your business and your goals (remember, the first chat is on me). We can do this with a virtual coffee via Zoom, or a phone conversation. The choice is yours. Once we’ve established what your needs are, I will provide you with a proposal, and that will include the initial cost.

Once you’ve confirmed you’re committed to taking the next step, and you choose Genoapay as your payment option, I put you in touch with Genoapay where they will go through their two minute approval service with you. It really is that simple.

What then? We supercharge your business of course!

Get in touch with me by clicking here. Let’s take that next step and boost your biz today!

Business is tough

Thanks Covid-19 for the extra challenge

Okay, here’s an admission – I started this business right before the Covid-19 lockdown here in New Zealand. Great timing right?

Despite the obvious hardships that Covid-19 is bringing to business in New Zealand, I have faith in my business model, more so now than ever, and here’s why.

When times get tough, the tough get going, and that’s us Kiwi’s through and through. We sent some of the highest number of troops per head of population, into battle in the World Wars (lest we forget), and we have gone head long into this Covid-19 elimination plan.

I can’t deny that the current Labour government has brought about some pretty average statistics when it comes to SME satisfaction ratings across their first term in government.

But a shift has occurred. The government has shown a hard lined and decisive approach to Covid-19 in New Zealand, and they haven’t overlooked SME’s in the packages that have been released since the Level 4 lockdown began. In fact they have made it clear that they are intent on supporting SME’s survival through this global pandemic. And they’ve put their money where their mouth is.

The confidence in the government, and the satisfaction for the government climbed from 21% to 30% in the MYOB Business Monitor Survey of 1000 SME operators around New Zealand in early April this year.

With the exception of their tax relief package, which I believe doesn’t quite hit the mark, I believe the support offered by the government to date has been unprecedented, albeit required.

The question remains – why does this make me significantly confident that my business model is still the right one?

Because my goal has always been to support business. Whether that business is starting, struggling, trying to move into a growth phase, or simply navigating the complexities of life post Covid-19. Biz Assist is able to provide the necessary mentoring and support to help SME’s through these stages.

Business is tough, yes. And also yes, Covid-19 has added some huge challenges. Some businesses will be lost, but many will trade out of Covid-19 and into the future. It will be hard, but it can be done, and we’re here to support you through these times.

Keen to chat and get to know about what we can do to help? We’d love to talk. Get in touch with us by clicking here, and we can help you to boost your biz out of Covid-19 and into success!