Did you know that according to research from the Forum of Private Business (FPB) in 2012, around 50 per cent of accountants surveyed by ABN AMRO Commercial Finance believed that small businesses aren’t really in control of their finances? The survey revealed that many small businesses appear to plan only for the short term and weren’t prepared for emergencies and cash flow problems. This survey really highlighted the need for all business owners, however small, to keep an eye on how their business is doing on a regular basis. If you don’t know what’s going on, how can you deal with problems?
It doesn’t take a lot of effort to get your business finances under control, and spot any issues before they crop up.
All in the plan
Do you have a plan for your business? A well set out business plan with clear financial targets will help you stay on track, and you can measure your progress against the goals you set yourself over the course of six months, a year, and five years.
Planning also helps you deal with issues as they come up instead of having to fire-fight when something goes wrong. Make a record of all your business’s financial targets, budgets, profit and loss and cash flow forecasts and review them regularly against progress.
Know where you are – right now
It’s so vitally important that you always know the financial health of your small business. Make a habit of checking your business bank account often, daily if possible, and the same with sales and stock records. Review your results against your targets on a monthly basis and see how you’re performing.
Is there enough in the account to cover rent, payroll and bills? Do you have a minimum amount that you need available in the bank to cover the essentials? Have you got enough for stock? Work out exactly what your business needs to survive, including a bit extra for unexpected expenses, and never let what’s in the bank account fall below that level.
Don’t neglect the paperwork – it’s not just a case of keeping receipts and tracking expenses but invoicing needs to be carried out regularly, and if you miss an invoice that’s money you’ve wasted through not being on top of the accounts.
Know your tax situation
You absolutely must make sure that you’re on top of the tax situation at all times, so file your accounts regularly and as early as you possibly can so that you know well in advance that your return is filed, how much you have to pay and when you need to pay it by. That way, there will be no nasty surprises. If you miss a deadline for filing returns or payments you’ll incur fines and interest on those fines, all of which can easily be avoided.
Follow up late payments
It’s a bind but if you manage your invoicing you should be able to spot late payments early on, and deal with them accordingly. Don’t feel bad about chasing late invoices, it’s your money, and you have every right to expect invoices to be paid promptly. Keeping a close eye on when your invoices are due to be paid gives you a head start in spotting problem payers and hopefully enables you to get your payment sooner rather than later.
Control your stock
If you have stock as part of your business, managing it effectively and keeping a close eye on what you have can do a lot to improve your cash flow. Look at what’s selling and what isn’t. Don’t over stock, get into the habit of buying in only what you need so that your business capital isn’t tied up in stock you might not be able to sell. Shop around for good deals and look out for discounts and special offers from wholesalers to make the most of your money.
Do you need help managing your finances?
A good accountant can support you in knowing your financial position at all times. Knowledge is power and having control of your business finances allows you to make the right decisions to drive your business forward. Check out our Gold package for all your business needs.
All data and information provided in this advert is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Emma Stevens Accountancy Ltd makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information in this ad and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.