How Our Accountants from Leeds Can Help You Set SMART Goals
Author: Russell SmithOctober 6, 2015
Heard of the term ‘SMART goals’ but not entirely sure what they mean, or how they can be applied to your business? Our accountants from Leeds explain.
If you’ve ever wondered about how to set SMART goals for your business, you’ve come to the right place. On a regular basis, our accountants from Leeds are asked about this financial management concept, so today, we’re going to look at what they are, how to work with them and how they can benefit your business.
SMART goals are a powerful financial management tool that can be employed by both newcomers to the business world and those who are already well established.
The methodology behind SMART goals is simple.
The term is an acronym that is used to define certain parameters which assess the potential effectiveness of a financial goal. The idea is that you use it to test whether your goals stand up to scrutiny. If they work within the SMART goal, your chances of success are high. If they fail to pass the SMART goal tests, they are more likely to fall flat.
What Are SMART Goals?
So far, our accountants from Leeds have been fairly cryptic about the meaning behind the acronym. What exactly does SMART stand for?
- Specific — Is your financial goal targeted and focused on a specific agenda? An example of a specific goal is that you would like to increase profitability by 10%. An example of an unspecific goal is that you would like to make more money.
- Measurable – Can you measure the progress of your goal? Are there bank accounts, financial records or transactional data you can refer to, or are you just guessing?
- Achievable – Does your financial goal result in a goal which is actually achievable? For example, our goal of raising 10% profits is technically achievable, but only if we make changes to facilitate it.
- Realistic – Raising profitability by 10% is definitely achievable for any business, in technical terms, but is it realistic for your company? Analysis of your company’s historical data, competitors, the market and your business model will define how realistic your goals actually are.
- Timely – Goals are pointless without a time-frame within which to achieve them. You might set a goal of earning £100k. That means very little unless you define how long you are giving your company to reach this number.
These five criteria make up the SMART goal assessment model. Business owners can use this methodology to work out if their financial goals are genuinely worthwhile, or totally missing the mark.
If you’d like to learn more about how to set realistic goals, we’ve already written a detailed breakdown of the subject. Head over to our article to find out more.
5 Top Benefits of SMART Goals
Setting SMART goals is one thing, but why do our accountants from Leeds recommend using them? We believe that, by following this assessment concept, you’ll see a number of powerful benefits.
- Targeted — Using the SMART criteria ensures your financial goals have clear, definable targets.
- Monitor Progress — Having clear and defined targets means you can monitor the effectiveness of your goal. The use of time-frames also allows you to check the progress of your financial goals and analyse their potential success, allowing for additional planning if needed.
- Bet on the Right Horse — Failing to use the SMART criteria means you may not consider how realistic and achievable your goals actually are. The result is that, further down the line, you could find you’ve wasted time, energy and resources on financial targets you cannot hope to achieve.
- See Potential Pitfalls — There are plenty of pitfalls to watch out for in the accounting world, and the best way to see them coming is to be proactive. Creating a SMART goal plan helps give you a clear picture of not only what is going right, but what could go wrong.
- Ensure Clarity — When you work in a team-based environment, having everyone on the same page is important. To have financial goals that meet the criteria of the SMART method means having detailed information, plans, and records that denote all aspects of your goals. This information, in turn, ensures that all members of the team know exactly what is going on in terms of financial goal setting.
How to Set SMART Goals
We now know what a SMART goal is and why they are important to use, but how do you set them? Let’s use the example we’ve referenced previously of improving profitability by 10%.
Now, this is already specific, but let’s make it more so. Net profits or gross profits?
Next, we need to establish how we are going to monitor our progress. Profitability is fairly simple to monitor. Set up good systems of financial record keeping and establish regular intervals at which you assess the progress of your SMART goals.
Before we go any further, we need to devise a plan that ensures this 10% goal is actually achievable. Let’s search financial records and see what our usual profitability growth is. If we only ever increase by 1-2%, or have recently been losing profitability, we need to work out how we are going to make this achievable. A new marketing strategy, investment or potentially a smaller goal of 5%. At this point, you have to look at your business’ unique standpoint and work out how your goal is achievable.
So, we’ve now got a target, a system for monitoring progress and a plan, but is it genuinely realistic for us to do this? Do we have the time to invest in the goal? Can we realistically expect to see the boost in marketing or investment we need to succeed?
At this point, we would recommend you get advice from a financial expert. Our accountants from Leeds can help you work out how realistic and achievable your goals are.
Finally, we have to look at time-frames. For profitability growth, we’re likely looking at annual targets, although you may be thinking more long-term.
Once you’ve established all your SMART goal criteria, you’re ready to finalise your financial plans and move forward with your company’s development. Good luck!
Editor’s note: this post was originally published in 2015 and has been updated for accuracy and comprehensiveness.
Russell Smith is an award-winning accountant and founder of RS Accountancy. With over a decade of experience running his company, he has worked with countless small businesses just like yours, helping them grow profits and manage their finances. Russell is also a prolific financial writer, having contributed to such publications as The Guardian, The Telegraph and The Daily Mail.