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EXTRACTS
FROM A REPORT ON Prepared by Alumni of the Wharton Small Business Development Center and the Graduate School of Business at the University of Cape Town Jeffrey S. Frick and Kevin D. Miller Strategic Planning " A strategic plan is not a static document that is written once and forgotten. The strategic plan must be constantly adapted and used as a point of reference. Most companies develop a three to five year plan, with detailed monthly projections for the first year, and annual projections for subsequent years. The strategic plan is used for budgeting purposes by comparing budgeted figures to actual figures. You should compare the budgeted profit and loss to the actual figures every month. Explanations for differences should be provided. The plan should be revised if the business strategy or climate shifts. Many firms have a rolling plan, where at the end of each month or quarter the plan is revised by adding another month or quarter of detailed projections and the rest of the plan is also revised. "It is pointless to compare budgets to actual figures if the budgets are unrealistic." Accounting & Control Systems "... Company has survived to date despite a sub-par record keeping system only because it is still a small company. However, ... Company is currently growing at a rapid rate and administrative needs will be magnified as this growth continues. "Several of the articles we included as part of this report stress the importance of proper administrative management and how the lack of it will put a ... firm out of business. What none of these articles expressly stated is that a good record keeping system and financial management system will actually save you time and money. "..Consult Mr. Gatz on this issue. General Control Procedures "Both Kevin and Mr. Gatz are financial managers and bring an accountant's viewpoint to this area. It is easy to understand why previously successful business people may scoff at the recommendations that accountants make on general control procedures. "Without proper controls, there will be major, business destroying problems." "THERE ARE TWO GOALS TO PROPERT GENERAL CONTROL PROCEDURES: ACCURATE AND TIMELY RECORD KEEPING AND THE ELIMINATION OF FRAUD". "Poor general control procedures provide an opportunity for fraud." "Considering our knowledge of proper control procedures, we have made some general recommendations. Mr. Gatz could also provide additional advice." Filing System "The goal of a good filing system is to create a trail that is easy to follow to save valuable time and money. Resource Management." Value Added Tax (VAT) "With the correct accounting program, in the future time spent preparing VAT tax forms should be minimal ... Remember the GIGO rule - garbage in garbage out ... Revenue are adopting a proactive approach to collecting taxes and VAT." How should .... Company utilise the services of Mr. Gatz? "Currently, we do not believe that ... Company properly utilises their consultant, Mr. Gatz. Managing cash flow and watching the bottom line is much too critical to ignore. Besides, once the systems are "up and running", ... Company will be able to pay Mr. Gatz for more higher value-added services...These functions should be subcontracted to an outside firm where current management lacks the knowledge. Cost Efficiency. We believe that Mr. Gatz should function as a business advisor. He should also advise ... Company on how to implement efficient accounting and control systems. ... Company will undoubtedly require his assistance in developing a costing system. "Mr. Gatz has a wealth of experience in advising SMME businesses and is qualified to offer strategic advice as well. "From conversations with Mr. Gatz, we believe he will be in agreement with most of this report." Budgeting & Costing System Given that he is in a professional services industry himself, Mr. Gatz has probably implemented a similar system for his consulting firm. Literature on best practices The Wharton Small Business Development Center's Business Planning Guide, Market Planning Guide, and Financial Troubleshooting CONCLUSION: "Many small businesses fail to reach their true potential because of poor administrative management." |