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Every year about this time, a lot of companies and business leaders are completing their projections for 2007. You should be doing the same, especially this year when the industry cycle "stars" are swirling in the sky.

When we talk about projections, we're not just talking about the one-line summarized income statement you jotted down while watching the playoff games. We're referring to honest-to-goodness full projections that project profit and loss, balance sheets and cash flow. This is not as easy to do as the summarized income statement. But it is certainly a better management tool to plan your year, and it's a great indicator of how to make changes when necessary.

Keep in mind one thing: Sales have nothing to do with cash flow. You can easily sell yourself into bankruptcy. Don't take my word for it. Just put together the projections as noted above, and for one scenario, jack up the sales by 40% and see if you have enough working capital to pay your bills. Chances are you don't because every dollar of sales normally requires some amount of permanent capital to support those sales and fund the working capital needs you have created.

Many of you are thinking, "So what? I can just borrow what I need." In many cases, that will be possible, but remember that you have borrowing limits. Sooner or later - because you keep racking up billing requirements faster than you collect - you will exceed those borrowing limits when you can least afford to do so. It happens to businesses every day.

Find the right financial tools
Don't worry, there are resources available to help you create the necessary financial tools. Many of them are pretty user friendly, and as a manager or CEO of your company, it really is not a bad idea to try to do this yourself. It will teach you a lot about your industry and business. Your accountant may even have a program you can use so you can get it started. Then, if you need help, get him/her to look it over with you.