With the clocks now having sprung forward and the new tax year upon us, what better time to give your business finances a ‘spring clean’?
There are several steps you can take to ensure that you make the most of 2017-18 and to set yourself and your business up for future success.
- Review your business forecasts and cash flow projections for the next year; it’s perhaps wise to assess whether they are realistic in the current climate, if there are certain costs that can be trimmed back, whether there are opportunities to enter new markets and if your cash flow is currently behaving as you would expect.
- Consider whether you are producing management accounts regularly and, if not, what financial data you can easily extract from your accounting system that would facilitate improved monitoring of the business. To extract meaningful figures, it’s imperative that your accounting records are kept up to date.
- If you are selling a product, it is important to know what your break-even level of sales is and more specifically at what point the business is generating a profit. With pressure on prices the break-even point may be higher than you realise and you need to be aware of this.
- If you are selling a service, consider the number of hours you are invoicing out a month; though you may feel busy, it’s essential that you understand whether this is resulting in billable income.
- Do you know which of your costs are fixed and which are variable? In the short term, most costs are likely to be fixed however, should you need to implement a period of cost reduction, you need to know which costs can be varied and when.
- Monitor your debtors carefully; a big bad debt could be disastrous, so make sure that you talk to your debtors regularly, resolve disputes quickly and, if they are having difficulties, discuss options and potential solutions at an early stage. Be wary of debtors making round-sum payments on account as this can often be a warning sign.
- Where you have banking facilities which are coming up for renewal, ensure you have up to date financial information to support your requests for renewal/increase.
- Consider whether the financial structure of your business appropriate; are you relying on short term finance to fund long term projects? If so, you must get the balance right.
- When making provision for your tax payments, if you are self-employed and the business profitability has declined you may be eligible for a reduction in the amount due, has this been considered?
- For business owners, relationships with suppliers are fundamentally important. It is a good idea to periodically review whether you are getting the best from your suppliers.
Here at George Hay we work with businesses of all sizes, across a range of industry sectors. We understand the challenges that businesses face on a day-to-day basis and that is why we support our clients throughout the whole year and not just at year end. To find out more about what we can do for you, take a look at our audit, accountancy, taxation and business advisory services here.