Goal setting: Budgets and targets
Without barely noticing (it feels like!) we have slipped into a new financial year. Focus has, understandably, been elsewhere. However, new financial years usually heralds the adoption of new goals which can be defined by financial budgets or targets.
Goal setting gives an organisation or an individual something to work towards and to measure one's performance against. My marketing guru said to me recently
If you don't measure your performance, how do you know how you're doing?
And she's totally right! This applies to all aspects of our business, and just my specialty of the numbers.
A client said to me once that they weren't the type of business that uses or needs budgets. I strongly disagree with this. I think all businesses can benefit from some form of goal setting and quantifying what that looks like from a numbers point of view. At a formal level with more mature companies, budgets are presented to the Board for approval and adoption and this becomes the metrics which the business is measured against for the next year. And agreed goals or targets don't have to be only financial or accounting based, they include KPIs for marketing teams - CAC costs for example, or net promotor scores.
As we have seen in the past few months, things can change rapidly and our businesses have to pivot to adapt. Goal setting can move with this and morph from budgets into forecasts and from there to rolling forecasts. There is a lot of flexibility and versions that can be tailored to your specific situation.
When reviewing your performance against targets; KPIs or financial budgets, we get a chance to pause and reflect on what happened. We can examine why results were way off the expected result - either up or down. And then look at how we can replicate a positive comparison again or what to do differently to influence a negative variance.
Setting budgets allows us to execute on the strategy that was defined and measure against the expected outcomes. We are enabled to plan for future costs like tax bills which lends more certainty to our cashflows. It doesn't have to be a complicated process and financial metrics can easily be uploaded to your preferred accounting software, leaving you, the business owner, able to review your actual performance against your planned performance at the touch of a button
Reach out to your virtual CFO or business advisor and start setting your goals.