The financial new year is as good a time as any for resolutions and setting goals for your small business.
Like your new year resolutions, it is easy to start off strong with a pledge to do better and fall away. This year, instead of making big declarations, work on some smaller changes to make things easier next time June 30 rolls around.
Financial resolution #1
Review your budget
Did your business spending creep up over the last 12 months? Many organisations fall victim to ‘subscription creep’ or rising supplier costs without realising how this is affecting their bottom line.
The key to a successful business is having more money coming in than going out. Your first financial new year resolution, as recommended by a Sunshine Coast accountant, is to make sure money isn’t falling through the cracks.
You may be able to renegotiate with suppliers or cancel the subscriptions that aren’t bringing genuine value to your business. There may be expenses that you can cut completely or switch to a different provider so you can save. Don’t be afraid to negotiate!
Financial resolution #2
Take control of cash flow
Speaking of having more money coming in than going out, this is always a balancing act for business owners. But there are ways to take control.
If you often have invoices going unpaid or being paid late, revisit your strategy. You can set shorter payment terms (it’s perfectly acceptable to give 7 day terms or even less, depending on how you operate) or start requesting payments upfront.
For larger jobs, get an initial deposit then arrange to be paid in monthly installments. You can stop work or wait to provide products if the regular payments don’t come in.
To stay on top of cash flow, you could also set up monthly direct debits with your regular suppliers, which makes planning and forecasting easier. Another tip from a Sunshine Coast accountant is to talk to your suppliers about a discount for paying early or on time. This can help minimise your expenses and boost the amount of cash you have to hand.
Financial resolution #3
Try Profit First
The idea behind Profit First, created by entrepreneur Mike Michalowicz, is that you only spend money when you have it there to spend.
Instead of paying all your bills then giving yourself what’s leftover, put aside a reasonable amount of your revenue for profit every time money comes in. Then you can budget according to what is left.
A lot of small business owners have switched to this practice and said it has made a world of difference to their financial outcomes. Instead of wishing they could earn more, the habit has made them more strategic about what they are spending. As a result, there is money kept aside for a rainy day.
Financial resolution #4
Organise your accounting
If you’re not doing so already, make this the year when you transition to digital accounting.
You don’t have to manage it all yourself but going digital and connecting your bank accounts with software like Xero or MYOB makes it so much easier to track where your money is going. You can also get at-a-glance updates on your financial progress, compare different time periods and send professional-looking invoices using these programs.
Overwhelmed? Get a bookkeeper or Sunshine Coast accountant to walk you through the setup process then find someone to take over the daily management for you. You’ll recover hours in your week to spend on your business so the investment will be worth it.
Financial resolution #5
Plan for the future
Once you are able to track your business’s current and past finances, you can start to think about what’s going to happen next.
Will you borrow to expand? Hire more people or start thinking about preparing your business for sale? When you have a goal, it is easier to make a plan so think about what you want and work towards it.