Butcher, baker, banker...

Financial planning and budgetary control are critical for any business. Successful planning can mean the difference between breaking even and making a profit. By simply taking proper control of your finances you can effectively steer your business in

When starting financial planning there are three main questions to consider - your current financial situation, future business needs (set goals), and what you need to achieve these goals.

According to the Institute of Financial Planning (IFP), one of the benefits of planning is that it focuses your financial decisions, providing a forward direction for the business. "Planning can also help you understand how each financial decision you make affects other areas of your finances," a spokesperson for the organisation says. "By considering each financial decision as part of a whole, you can consider its short-term and long-term effects on your business goals. You can adapt more easily to changes and feel more secure that your goals are on track."

John Mettrick, of JW Mettricks, backs this up: "I would say it's most important to keep a regular check on your accounts so that you have a clear picture of where you are going at any one time. We have a five-year business plan that is reviewed on a regular basis to ensure that we stay on track. Accountants come in every six months to make sure we are keeping control of our costs."

John produces regular graphs showing the cost and sales of each product, providing an instant overview of where profits are going. "We divide the business up into departments - cooked meats, fresh meats, pies etc. This helps us see which department is working most efficiently. We can nip problems in the bud before they get out of hand," he adds.

Joe Collier, of Eastwoods of Berkhampstead, advises staying realistic and keeping an eye on costs. "Close monitoring of trends is essential," he says. "It's imperative for businesses to take a wider view, not only keeping a close eye on their own spending but also keeping track of market trends."

Financial planning is all about balance, says James Newitt, of M Newitt & Sons, which services 37 deli counters for Budgens as well as running a separate shop. "It's a balancing exercise, between working progress and stock management," he argues. "You need to be able to read the market."

James's father Mike, who still visits Smithfield to buy bespoke items for customers and gauge market trends, adds: "You need to be able to take advantage of the market, play with the view you can buy materials a bit cheaper at certain times of the year. Follow the trends, look at price differentials and keep on top of supply and demand. It's important to get a handle of what is going on outside your business."

Although long-term plans are necessary, these need to run alongside short-term plans, as businesses need to be flexible to deal effectively with changes that may occur, such as price hikes - the like of which have recently been seen in energy costs - and price changes for raw materials. While a contingency fund for unforeseeable change is recommended, some businesses simply may not be able to have such a fund. However, there are ways to make sure that you keep your costs to a minimum, which could mean you have more leverage when it comes to the unexpected.

Financial planning should be a dynamic process. The IFP says that because financial goals may change over the years, revisit and revise your financial plan on an ongoing basis so you stay on track with your long-term and short-term goals. Developing good financial planning habits, and regularly reviewing your finances, will better prepare you to meet changes and handle emergencies, while goals need to be measurable, so that you can form a realistic idea of where you stand.

Joe comments: "You have to look at your profits and be careful that they are real rather than imagined. My father used to say 'gross profit is for vanity, net profit is for sanity', and they were wise words."

Keeping waste to a minimum can help ensure costs are kept down, as Joe continues: "It's a cliché but if you look after the pennies, the pounds will look after themselves. It's important that you are not being wasteful, i.e. if your staff are boning out are they doing it right? After all if you are leaving meat on the bone, not only are you losing out on your profit for selling that meat, but you are paying someone else to take it away."

John agrees: "Whilst it is inevitable that some costs will be passed on to the customer, businesses need to take responsible attitudes and make sure that they are not being wasteful with either the product or the energy that business uses.

"Anything as simple as making sure when your ovens are on they are full, not half empty, or moving your stock in the evening to the back chillers so you can shut the shop chillers off and save energy.

"We have all our fridges regularly serviced to keep them working efficiently. Even something as simple as using low-energy light bulbs can make a difference," he adds.

Building a good relationship with your supplier is also an advantage, according to Harry Coates, of H Coates & Son. He says: "We always look around to see who is doing the best deal on raw material and we have a great relationship with our suppliers, which mean they will often do a special price for us on stock. It is key to the success of your business to get on with your suppliers."

Good relationships need to be fostered all around, according to John, and one of the key relationships for any business is getting to know your bank. "We have a close relationship with our bank manager which means the bank understands our business and can therefore work with us. We've cut costs in simple ways such as paying our accounts by BACS."

While you can conduct financial planning yourself, it is often wise to seek the advice of an expert. John says he was lucky to be able to utilise the skills of Val Marsden, who effectively works as his financial controller. "Val used to work with a large company accountable to shareholders; her experience and knowledge have been invaluable to the business. She is very diligent."

He's not alone in employing some specialist help.

Joe says: "We have an accountant who keeps close control on our finances; I think it's really important to use specialist people to deal with financial affairs. They can keep on top of the accounts whilst we concentrate on other areas of the business."

Financial Tips

? Set measurable goals

? Understand the effect your financial decisions have on other financial issues

? Re-evaluate your financial plans periodically

? Take charge - make sure you are in control of the financial planning process, not the other way around

? Look at the big picture

? Do not wait until a money crisis to begin financial planning

? Cut down on waste

? Seek the advice of a professional

? Have a contingency fund

? Negotiate with your suppliers

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