When it comes to financial planning for your business, there are many things to consider. One important part of your overall plan is your financial story plan. This document lays out how you expect your business finances to grow and change over time. It can be a great resource for both you and your team. Listen to find out the four tips on how to create and use your financial story plan effectively.

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Conclusion

If you want to achieve your financial goals and reduce the anxiety that comes with money, then you need a plan. The four steps we’ve outlined are essential for creating and following a plan that will help guide you to success. Make sure to subscribe so you don’t miss an episode – each one is packed with information that will help you improve your finances and live a less stressful life.

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All you need is the plan, the roadmap and the courage to press onto your destination. So said Earl Nightingale. Creating and following your financial story plan is a massive step to taking control of your business and your business finances. However, if you're like most business owners, you know that it's important to have that financial plan in place. But you may not know how to use it effectively. In this week's I Hate Numbers podcast, I'm going to be sharing four tips as to how you can effectively use your financial story plan. Those four tips are targets, information, frequency, review and action. So whether you're just starting on your own or working on your financial plan for some time, listen to find out more.

You're listening to the I Hate Numbers podcast with Mahmood Reza. The I Hate Numbers Podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi, folks. My name is Mahmood. I'm an accountant, educator and now proud author of the book I Hate Numbers, available in all good bookshops. And I'll give you a link in the show notes for a book that will change your life and change your relationship with numbers. Let's crack on with the podcast now. Creating and following your financial plan is a massive step to taking control of your finances. However, there are four things that you really must do if you want to stop that financial story plan that you've crafted, that you've created that's going to help you guide and reduce the anxiety that you feel in your business, give you more decisiveness,

give you more clarity, give you more control, and help set that path towards your Northern Star, your destination. These four tips, these four steps are absolutely critical. You don't want your financial plan gathering dust. You don't want it to be a document that just sits in the ether, never touched, never used. That's symptomatic of a lot of wasted effort and we don't want that for your business. Tip number one is the idea of targets. Not only choosing the right targets, but choosing the intensity that you want those targets to have.

Let's go backwards on this one. Now, in terms of intensity, your targets can either be next to impossible, really ambitious and unlikely to be achieved. They can be the other extreme, considered to be quite soft, not really taking outside of your comfort zone, not really comforting you and pushing you towards achieving your objectives. Soft targets can be as demotivating as very tough, very impossible targets. There we sit in that comfort zone, and we have lots of weighted opportunity there and we're not really doing much to actually realise our ambitions and our aspirations here.

It's understandable why individuals would not set tough targets. Nobody likes to fail. Failure is not really a word we should be using in business. It's more about learning from what we're doing. Impossible targets if we've had a good positive year, then maybe the temptation to say, the trend continues, we're going to double what we did next year compared to this year. Well, if you've got the resources, if you've got the route map clearly defined, if you've got the skill sets and you've got the money and the resources to make that power forward, and it looks realistic and it's a smart target, then fine.

Normally it isn't. And if your targets are too tough even, you're not likely to realise them and that can be really demotivating and you'll give up very easily. Whether it's yourself or your team, tough next to impossible targets are a waste of time and the plan has no real meaning. What we're looking for are targets that stretch you, take you outside of your comfort zone, give you that opportunity to develop and build on what you've done historically. And if you want business as a startup here, then remember you've got that history on which to guide you.

But think realistically that aspiration that trying harder is what we want. The second thing we're going to mention in terms of targets are the type of targets you should choose. Now, quantitative, numerical, financial targets are always a definite must in there, but choose a blend of non-financial targets as well. So whether that be customer conversions, retention, conversion of inquiries into sales, whether it's employee engagement, employee satisfaction, whatever they are, make sure you have a blend of the important objectives in your business, the important measures that sit behind them, as well as the numeric targets themselves.

Remember, targets and KPIs as they might be called in other circles, can be observations, numeric surveys or opinion. Obviously opinion has less weight to it, but they still have some merit. Having looked at targets, the toughness intensity and the time, let's think about the frequency. How often should you be monitoring? How often should you be reviewing the plan you've set yourself, your accountability buddy. Now, on each train you can check these figures once a year.

Obviously you're going to miss a trick, a long period of time has elapsed before you've actually managed to see where you are going compared to your expectations. The other extremes, you can monitor these things on a daily basis and that's probably appropriate to do it that regularly and perhaps daily or weekly if your business operates in a fast moving environment, if you've got things like inventory turn, if you're a manufacturer or a retailer, that would make a lot of sense. For most businesses, looking at the overall plan on a monthly basis, monitoring against your reality, against your expectations, what is the level of profits that you're generating, against your expectation at that point, what's the milestone progression that you're making? Monthly is a good time frame. There may be other metrics you're looking at on a more regular basis, perhaps weekly,

but decide what's important for you and your business and your team, how often you should be looking at them. From experience, typically as a bare minimum, you should be looking and reviewing these results on a monthly basis. So we've looked at targets, the type of targets, how tough they should be, we've looked at the frequency, how often we should review our reality against where we thought we would be. The third thing we need to think about is the information. A plan to monitor, to review is pointless unless we can grab hold of the information.

Now, that information will flow through a number of different sources. In an ideal universe, you have something called a management information system, which is not only your accounts and financial data, what you're invoicing, the level of profitability that you're making, how much profit you're making for each resource group, each product and service in terms of targets, cluster groups, but also the non-financial data. In an ideal universe, they should be sitting under one umbrella.

And there is no excuse not to have a digital impact and imprint, an ecosystem in your business. So when we talk about digital accounting systems, they are an absolute must, irrespective of the size of your business and the type of business you have. So if your business is a not for profit, if it's a private business, if it's a charity or social enterprise, if it's a startup, if it's an established, whether you've got a team or otherwise, it's an absolute critical aspect in your business is to have a digital accounting system.

Don't think of it, just something to satisfy your accountants for once a year when they file your accounts. But if you don't collect data, if you don't review it, if you don't monitor it, if you don't have that at your fingertips, relatively speaking, then you're missing a trick. And digital systems such as Xero are really powerful mechanisms not only for capturing financial data, the financial transactions, and helping turn that into information, but it also connects with other ecosystems you may have, like your websites, your ecommerce platforms, any shopping carts that you may have, and it can pull in a variety of data.

Check out the show notes, folks, by the way, and there's a link to a guide that we've got on releasing a power of view, which is talking about digital accounting. So we've dealt with three things here. We've dealt with the targets, the type and the intensity, we've dealt with the frequency. How often should you be looking at the actual reality of your business, footprints, the progress against where you thought you would be. We're looking at the information, the gathering of that, and that's really critical.

If you don't have information, which is that data that's been processed, then largely you will be resting on instincts, and that's not good enough to power your business forward. The last thing is the actual feedback analysis. Ultimately you need to make decisions you need to take action. If the results of your review are showing you that profit is underperforming, you need to understand why the profit is underperforming. Is it a factor of the gross margin? So if you're a manufacturer or a retailer, are you wasting products? Are you spending more time in manufacturing? Are you buying the product in a higher rate? Is that degrading levels of scrap? Is there an impact on these selling prices?

If you're a service based business, if you look at the level of profitability you're generating, is it more than you expected, less than you expected? Is it a seasonality thing? Is it because certain things aren't being executed in your plan that you're expecting? And you then got to take action. Focus that action on the things that you can control and influence. And what you're trying to do is to write your business ship so it heads towards your destination point. When things go off course, whether as positive or negative, you need to take remedial action to put that ship back onto the course that you set it.

So folks, let's wrap up where we are. There's four key things that you need to do to make that financial story plan you created come to life. To give it meaning, to act as your accountability buddy, and to be a good, effective roadmap - get into your end destination. Targets, how often you should be looking at your reports, the information that's gathering the information, and even if you haven't got a complete system, by the way, set these things in motion and you can always supplement and make them more robust as time goes on. Review analysis, and ultimately you need to make decisions and you need to follow things up.

Your financial plan is a tool for accountability, for monitoring your progress. And if you can do all of that, it's one of the most valuable tools in your arsenal. Folks, if you've got some value out of this, I'd love it if you can share with those who’ll benefit. And I'd love it if you guys could give me a review. Apple iTunes. There are some links in the show notes to all the different platforms. This podcast is broadcast. Give it that thumbs up, give it that love. That will help me boost and share the podcast with those who will increasingly benefit. Until then, folks, have a good week.

We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.