So, you sat down and made this amazing plan at the beginning of the year. Right?! You projected your income, set a budget, updated your financial statement, and ran some possible scenarios. Well, now that the crop year has begun are you following the plan? Is there a reason why you can’t? Has something changed? Why go to all the trouble of making a great plan if you are not going to update it to track your progress along the way?
In order for all your hard work that you put into making a bulletproof plan payoff, you have to update it throughout the year. No matter how solid the plan is there is bound to be changes. You may be over or under budget in some categories or you may now be expecting a different price on a certain crop. A number of things could happen that were unexpected and that is precisely why you have to monitor your plan and reforecast your budgets.
Every year I will have clients that wonder what happened during the year that made them end up losing money. They can’t figure out why they don’t have enough funds left at the end of the crop year to make ends meet. Well, if they had been monitoring their plans throughout the year they would have known precisely when things began to go awry.
Sometimes you just have to spend more money than you anticipated and you go over budget. Stuff happens. The key is to not let these events that you spend money on throughout the year come back to bite you at the end of the year. When you go over on one category (just say repairs) then you should take a look to see if you are under on any other category (possibly labor) to see if this may end up balancing out. If you are at capacity or know you will definitely not be under in another category that is when you need to examine to see how much this overage will impact your bottom line/ability to pay debts. By addressing this as it happens you are more likely to find a workable solution. The longer you let it “work itself out” the more likely you will be one of the puzzled ones at the end of the year.
You didn’t make that awesome plan just to say you made one. Yes, you may have needed it for the bank, but you also need to use it! It can only help you, planning is the best risk mitigation tool on the market!
This past post emphasizes the importance of planning as well, because as I (and Mike Tyson) say -“Everybody has a plan until they get punched in the mouth.” Link – Everybody Has a Plan Check it out to see why your plan needs a back up plan!