PWIM in ActionUse these resources in creating a PWIM plan
To play Video Clip, just click once on the play icon. (If you have slow internet connection such as Satellite or dial up then you may need to press pause for a minute to allow streaming of clip for a continuous viewing)Download your own copy of the Excel spreadsheet, click here Basic PWIM Plan model.xls
Note: (If you do not have Microsoft Excel installed, you should be able to open the file using Open Office software that is free to download from http://www.openoffice.org/)
Follow the steps in creating a PWIM plan
This is the first plan developed for Greenslopes Pastoral Co. It is the example we will follow. Note: Cells coloured ‘yellow’ in the model are ‘unprotected’ and you can enter data in them.
Step 1: After downloading the Excel sheet ‘Save’ it with an appropriate name (notice that the Header on the worksheet takes on the Filename you choose)
Step 2: In Cell B1, set the date the plan will begin, and in Cell D1 how many months the plan covers. The default is 12 months, and the sheet calculates the last date of the plan in Cell F1. Save!
Step 3: Enter the Income data. In Cells A4 to A9 place the name of the enterprise or source of money. In cells B4 to B9, enter details describing how the income will occur (eg Hectares x yield x price, or Head x weight x price).
In Cells C4 to C9 enter the planned Income for the enterprise. The sheet will sum all the figures and place the Total Income in Cell E9. This is the money available for all expenditures.
Step 4: In Cell C13, enter the amount of ‘Profit’ or cash surplus you plan to keep. Make this an amount that is ‘difficult but achievable’. Notice that the available funds shown in Cell E13 is reduced by the amount of planned Profit.
You calculate the Profit first, because Profit is almost certainly the reason the business exists. How you create the Profit is governed by your holisticgoal, so that the Profit is created as you enjoy the Quality of Life you desire.
Step 5: In Cells A17 to A19, enter the Type of Wealth Generation expense(s) you expect to incur. In Cells B17 to B 19, describe the detail of the expense you plan, and in Cells C17 to C19, enter the amount you expect to spend. This will be summed by the model in Cell D19. Notice that the available funds in Cell E19 will be reduced by the total of your Wealth Generation expenses.
Note: You need only enter more than one W expense if it really is required, and you have the funds available. Most people can only commit to one expense per year, especially when starting out.
Step 6: In Cells A22 to C27 enter all the relevant Inescapable expenses. These are the expenses you have a moral obligation to pay - the law says you have to pay them or you are contractually obligated to pay.
These amounts are summed in Cell D27, and the available funds is correspondingly reduced in Cell E27.
Step 7: Enter the Maintenance expenses (Maintenance expenses maintain the current level of business activity and Quality of Life, but do not grow the business).
Note: There are two sources of M expenses. They are the ‘Variable’ expenses you expect to incur in earning the Income shown at the top of the page, and the Overheads required to operate and administer the business (see http://www.holisticresults.com.au/brown-participant-area/holistic-financial-planning/5-9-4-maintaining-the-current-level-of-activity for more detail.
Variable expenses: Notice that Cells A31 to A36 automatically pick up the Name of the enterprise. You need only enter a description of the expected Expenses for each enterprise in Cells B31 to B36, and the amounts in Cells C31 to C36. To the right, for information only, Cells D31 to D36 show the Gross Profit of each enterprise.
Overhead expenses: Cells A38 to C62 hold all of the data for the Overheads of the business. Enter and modify as appropriate.
Cell D62 sums all of the M expenses (both Variable and Overhead), and Cell E62 highlights whether the plan is better (black) or worse (red) than required.
Step 8: What to do if Cell E62 is negative.
First: Look at the enterprise Variable expenses Cells C31 to C36. Are any expenses there treating symptoms rather than addressing problems, and is there anything you can change?
Next: Look at the Overhead expenses. Are there any savings there?
NOTE: Although it is the ‘usual first port of call’, recognise that there is a limit to how much you can cut expenses. If you cut them to zero there will be no business left, so “tightening the belt” is often a negative although widely adopted approach.
INSTEAD: Look deeply at your Wealth Generation expenses. Consider whether increasing you Wealth Generation expenditure might result in a handsome additional flow of funds into the business this year.
USE YOUR HUMAN CREATIVITY!
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