Check the Forecast

By Michele Marrinan

Things may seem a little slow in Elkhart, Indiana. Richard Horner, a partner in the two-person financial planning firm of Hill & Associates, says pcAnywhere is cutting edge and anyone with a Palm must be Bill Gates. But Horner himself is ahead of the curve, using a budget-forecasting tool to estimate the cost and return of the direct mailings he does to prospective customers.

Analysts say that many small businesses use a Microsoft Excel spreadsheet to budget. While familiar and easy to use, it doesn’t provide the same functionality as budget-forecasting tools, which feature extensive reporting capabilities, what-if scenarios, and budget histories. Many also allow users to build several versions of a budget – projected, ongoing, and final, for example – as well as separate budgets for particular projects or clients.

There are 20 to 30 budget-forecasting programs on the market today, and they generally fall into one of two categories: budget-specific programs and general financial packages that include budgeting capabilities. Super Budget, eBudgets, and OutlookSoft Financial Planning and Analysis (FPA), and other budget-specific programs provide the ability to plan and analyze budgets, predict revenues, and track trends. General financial packages, such as QuickBooks from Intuit Inc. and Solomon IV from Microsoft Great Plains Business Solutions, offer extensive financial capabilities, including general ledgers and workflow tracking and billing.

These programs provide the tools necessary to improve the bottom line. ‘You spend less time processing data and more time in the analysis,’ says William Levi, CPA, manager in the consulting practice of Lang Group, Chartered, a group of business consultants and CPAs in Bethesda, Md. ‘The software will improve the reliability of the data because it will enable you to get real-time data updates. Owners can make better business decisions faster.’

Keep in mind, however, that you’ll make better business decisions only if you use the right tools in the right way. Getting to that point requires careful analysis.

Mind the Gap
Horner needed to get a better handle on the cost of direct mailings. Before he discovered ThinkDirectMarketing, he left the budgeting to his local printing shop. As a result, he had no idea how much a mailing would cost him until the printer gave him a quote. Now he gets an early estimate on the cost of each piece and the overall return on investment. ‘The tool for me is useful because it’s quick,’ Horner says. ‘It’s just a quicker, easier way to get an idea of what the mailing will cost you and what you can expect from it.’

Consider the type of information that would help you run your business more effectively. You may need a tool that can tie into the general ledger and allow you to compare budgets. Reporting functions are also important, as is the ability to export and import information from other financial programs.

Stay In Touch With the Data
‘A lot of small business owners say, That’s something for my accountant to do,” says Jan King, president of the Jan B. King Group, a business consultancy in El Segundo, Calif., and author of Business Plans to Game Plans: A Practical System for Turning Strategies into Action (Silver Lake Publishing, 2000). ‘They leave it to the professionals, but you can’t run a business without intimately understanding what goes into those numbers.’

Center Ice of DuPage in Glen Ellyn, Ill., used to outsource its accounting functions to a sister company. The arena, which has 10 full-time employees and several part-timers, brought the work in house about three years ago. ‘Our sister company did a great job accountingwise,’ says Ed Nickey, Center Ice’s vice president and general manager, ‘but they didn’t give us answers quickly enough for us to be able to know what the impact [of certain decisions] was.’

Today Center Ice uses the budgeting features of QuickBooks to make budget projections on a weekly, monthly, and seasonal basis. If the rink doesn’t meet its goals one month or season, Nickey and his staff can make adjustments. The arena, for example, takes in fees from each team that participates in hockey leagues. If fewer teams sign up than expected, QuickBooks warns Nickey of the lower revenues in time for him to shorten the season and start a new one sooner. That preserves the weekly revenue stream he originally projected. Nickey says this has enabled Center Ice to remain competitive and profitable in an industry that is seeing an explosion of new ice arenas.

Keep It Simple
Complicated programs can be overwhelming and, therefore, their full capacities are rarely used, says Mary Lou Pier, president of Pier & Associates Ltd., a Chicago-based accounting firm. ‘I have a client, a five-man law firm,’ she says. ‘They’ve acquired a software program – against my recommendations – that is so above the level of their business that it’s ridiculously difficult for a part-time bookkeeper to come in and handle. It’s really silly.’ She adds that the program cost her client $3,500, when a $250 program would have been adequate. Pier advises clients to match the sophistication of the software program to the sophistication of their business. If you’re using an Excel spreadsheet, look for a budget-forecasting program with an Excel-based interface.

Make It a Team Effort
‘Listen to what people are saying,’ Levi says. ‘Often, line managers know more of what’s going on in the day-to-day operations than the business owner. Use their recommendations as part of the decision-making process.’

This involvement includes giving them access to data and the ability to update it. Microsoft Great Plains’ FRx Forecaster Professional, an Internet-based application, allows companies to give employees selective access to particular areas of the general ledger. If you devote a column of your budget to salaries, for example, you can give your payroll officer access to salary information, while restricting other employees’ access to their department’s financial information, which they can input themselves.

Money in, Money out
Budget-forecasting software won’t change the numbers, but it can help you boost them before it’s too late. ‘If you don’t have the proper tools, you might not be budgeting properly,’ warns Lee Geishecker, research director of Enterprise and Supply Chain Management at Gartner Inc., a research and advisory firm in Stamford, Conn. ‘You don’t have benchmarks to compare against. Sometimes that’s intimidating. Budgeting is not going to solve all those problems, but it is certainly going to help.’

Getting Started


• FRx Software Corp.
FRx Forecaster Professional

• OutlookSoft Corp.
OutlookSoft Financial Planning and Analysis

• Intuit Inc.

• Super Budget Inc.
Super Budget

• ThinkDirectMarketing Inc.
ThinkDirectMarketing Planning and Budgeting Module

Michele Marinnan investigated purchasing through dynamic-pricing Web sites in the October issue.

Small Business Computing Staff
Small Business Computing Staff
Small Business Computing addresses the technology needs of small businesses, which are defined as businesses with fewer than 500 employees and/or less than $7 million in annual sales.

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