So you have a business plan for 2014?

A business plan is an essential tool for managing your business. Ideally, a business plan should be prepared and in place at the beginning of the business year, but implementing it mid-year has benefits, as well. The business plan may be comprehensive or only a financial plan depending on the size and complexity of your business.

Here are some suggestions for forming a basic business plan and using it once it is in place. The process involves creation, implementation, monitoring, and revision.

Most accounting software programs have a feature which develops a business plan based on historical activity for recent years. If your accounting software does not have that feature, then use a program such as Excel, but check before you get started to see if the software has a feature that provides for uploading the spreadsheet you create electronically. If it does, developing your spreadsheet in a compatible format will save you time.

The business plan typically estimates revenues, expenses, and cash flow by month for one year (or uses actual data through the date you’re starting and uses estimates through the end of the year, if you’re starting mid-year). A five year plan by year will also provide many planning benefits.

Some categories of revenue and expense are easy to estimate, and others require effort, and possibly research, inside and outside of your Company. The basis for the estimates and assumptions should be documented to aid you in revisions and preparing a plan in subsequent years.

Decide which of your personnel you want to include in forming the business plan and their respective roles in its ultimate development and monitoring against actual results. Personnel are more likely to accept and have buy-in with a plan they help create. Monetary incentives offered to your personnel may be incorporated into the plan and its successful outcome.

Revenue categories are the most difficult to estimate; the plan may consist of multiple revenue projections with separate provisions for expansion or retraction or for specific personnel and other resources at various levels of attained revenue.

The goal is to ultimately have a viable and profitable plan. If the plan doesn’t ultimately result in a profit and positive cash flow, what chance do you think the actual business outcome will be positive?

Having a viable plan that results in a profit is only a start. Evaluate the following:

1. Systems and management in relation to the volume of activity.

2. Personnel levels and other resources needed to achieve the projected outcome.

3. Timing of, and needs for, equipment repair and replacement.

4. Facility and workspace.

5. Cash flow and financing.

After completing the plan, make certain it is reviewed with key personnel and it is loaded into your accounting software program. Monthly financial reports should show a comparison of the current month and year-to-date plan vs. actual results. A comparison of actual results for the same periods in the current and prior year should also be prepared and reviewed.

Look for significant dollar and percentage variations (monitoring). For those identified, look into what is causing the variance. Perhaps there is a problem that requires management attention, or the plan needs to be revised.

Timely use of the plan as a management tool will help you focus on problem areas or capitalize on opportunities. By doing this, you will avoid surprises and increase your chances for success. This is why it is critical to have operating reports monthly as early as possible, ideally no later than the middle of the following month.

After creating a business plan, implementing it, and monitoring it over several months, you will be more in tune with your business operations. Within the last two months of the business year, you should be able to project operating results for the year. Then, you’ll be set to review the expected results six to eight weeks before year end with your tax advisor to estimate your taxes and cash needs, and determine if there are any strategies that can be implemented to reduce or manage your income taxes.

This is also the time to start creating the following year’s business plan as well as adjusting your five year long-term plan.

A basic business plan outline prepared by the U.S. Small Business Administration is available on our website at the Resources tab.

Sue Price-Scott, CPA is a partner at Alegria & Company and specializes in business and personal income tax and is accredited in business valuation. She can be reached at

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