Birmingham Post Article - November 2010

Building a business needs great ideas and lots of enthusiasm and commitment from the entrepreneurs involved. But business planning is another vital element, as Neill Currie, a partner in Solihull accountants and business advisers Jerroms LLP, explains: “Some business founders fail through regarding formal business plans, budgets and accounting information as irritating afterthoughts.

"It’s not just about the figures; a proper business plan can be of commercial value, for example, revealing further opportunities to earn revenues or threats from competitors”. Beyond this, planning the business plan to make sure it is viable in the current environment and with the available finance and skills base. Effective budgeting is also critical to financial control and to ensuring the adequacy of available
finance.

“In terms of the commercial aspects, business plans can bring entrepreneurs face to face with answers they were not looking for” said Mr Currie. Some great ideas, even when fully exploited, may never turn in the profits that are needed to justify investment ether by the founder entrepreneur or by others. For example, this could be because the markets will not accept the prices planned to be charged or because margins are too low or overheads too high.

Business planning can also help managers to focus harder on the economic background in which the business operates. Mr Currie cites the recent announcement of cuts in public spending. He said: “It has been fairly evident for many months that such cuts were on the cards and the planning process should encourage businesses to be prepared for such changes to adapt their business model.

“Beyond the commercial advantages of planning, cash is the life blood of any company and the budgeting process is vital to understanding the cash flows, where possible, accelerating receipts or phasing payments.

“Budgets also reinforce the need for extra working capital finance that can flow from the successful growth of the business as it has to maintain higher levels of stocks and debtors.

They can highlight the need for additional finance in ensuing months and they can help owner-managers to determine when it is safe, from the cash flow angle, to draw salaries or pay dividends at the delicate early growth stages”. Mr Currie adds that potential investors will always need to see a plan, as will banks or asset finance firms, when working capital finance is sought. They will also ask for management accounts. “Apart from budgeting, good financial accounting systems and regular and accurate management information are also vital to monitor progress” he said.

For further information, contact Neill Currie at This e-mail address is being protected from spambots. You need JavaScript enabled to view it