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Your new year business financial resolution
Be financially ready for the new year
Forget joining the gym, giving up smoking, or taking up meditation, we have some hints and tips for business owners that will set you up for a more prosperous 2018.
One of the traps business owners can fall into is believing that having a great product or service is all you need to succeed. The unfortunate reality is that managing your business carefully and planning the next steps in your business journey could make all the difference between success and failure this year.
For many businesses, the new year is a time to take stock of what’s happened in the past 12 months, and to make some decisions for the year ahead. Whether it’s planning to improve your cash position, take on new staff, or simply to improve relationships with suppliers, a fresh look at your business finances can help you along the next stage in your business journey.
Business finance tips for 2018
1. Review financial targets, budgets and processes
Make sure you’re fully prepared for the new financial year and schedule time to speak with an accountant or financial planner, or your regional growth hub.
Start the new year by revising your financial goals, sales targets and short-term and long-term business vision. Taking time to re-examine your business from a bird’s-eye perspective can enable you to identify key priorities and inefficiencies that you will need to tackle in the new year.
Take time to simplify bill payments, invoice payments and consolidate debts to improve cash flow management and efficiency. Also think about the nature and scope of your business, which may have changed considerably over the past 12 months. Review your business, product and public liability insurance policies to ensure they are still relevant for the changing nature of your current business practices.
2. Call in professional help
Business finances are never static, and complacency can potentially lead to the failure of any business. Just like an athlete who is regularly training, revising and improving, business owners should constantly revise and review finances, identify weak spots, refine, tweak and improve. Over time, small changes can lead to drastic improvements in business efficiency and commercial viability.
And if accounting, understanding your business finances, and general cash flow management are giving you nightmares, then don’t lose sleep over something an experienced financial expert can help you tailor and streamline, and seek external advice. If you have them, the first port of call should be your own investors, who offer an incredible source of financial expertise and support. Your bank manager, accountant and any other financial advisor can offer help, as can regional growth hubs across the UK.
Depending on the stage you are at in your business journey, you may also wish to consider bringing in expertise in-house. Even small businesses can benefit from a non-executive director with strong financial acumen, for example, so consider all your options.
3. Review business finance options
Whatever your plans for 2018, there are an increasing number of financial options available to help both strengthen your current position, and also to fund growth. Whether you are looking for debt or equity options, or are unsure of what finance might be right for your business journey, the Business Finance Guide Journey Tool can offer suggestions as well as linking you with relevant authorities on many forms of finance. For example, you can find out more about angel finance, leasing and hire purchase, venture capital – or even how to list your company on the stock market.
If you already have business finance in place, make sure to review all your debts, and consider consolidating these to get a better deal, perhaps from one of the less traditional lenders. Look after your investors, and you will find that in many cases they can offer more than just money.
4. Plan to succeed, but be prepared for any eventuality
Every business needs a backup plan in the event of a downturn. Take time in the new year to consider whether you have enough savings to cover any potential business losses or to protect you when things don’t go as planned.
As well as your normal business overheads – rent, salaries, etc., your PAYE, corporation tax and VAT payments come around regularly, so make sure to keep a buffer in reserve, and know exactly what your liabilities are.
Whether you’ve been in business for one year or ten, chances are you’re ready to forecast the times big expenses come around. Planning in advance for the larger expenses can help reduce the financial blow and ensure your cash flow stays strong even in the tightest months.
If you have less than 3 months’ cash flow available to cover future overheads, salaries and tax liabilities, then it may be worth considering a financial buffer such as a loan or overdraft, to ensure your business is in a strong position for the year ahead.
5. Invoice quickly, and get paid faster
Cash flow is the backbone of any successful small business to ensure that you’re always covered for your expenses and the unexpected. Issue invoices for goods or services as soon as possible to ensure that you’re paid promptly, and your healthy cash flow will thank you. If your business relies on contractors, or you have significant costs incurred in advance of sales, it may be worth considering an asset-based finance option such as invoice finance or factoring to allow you to strengthen client relationships, and improve your cash position.
If chasing up late invoices was your downfall in 2017, make revising your invoice payment terms and conditions a priority for the new year. Reformat and edit your invoice template to ensure it has clear due dates and easy-to-follow payment instructions.
6. Make the most of new technology
Many small businesses are too time poor to think about good bookkeeping, but with the latest in automated cloud-based systems available, it has never been easier to get your accounts more organised. Using new and innovative technology can offer immediate access to your businesses data, allowing you to amend or drive forward plans that could see your business boom.
With the proliferation of cloud-based business tools and mobile apps, it’s easier than ever for small businesses to organise everything on digital platforms. A paperless solution can also enable you to keep tighter and more efficient records come tax time.
Cloud based solutions offer cost-effective solutions, across both point-of-sale and accounting, and may even allow for deferred payments to be made on a monthly basis, which is much better for cash flow. However, a small word of warning – small businesses that leverage technology, e-commerce platforms and electronic payments need to pay close attention to cybersecurity issues to ensure data is protected at every client touch point. Regular software updates and anti-virus tracking can help ensure both you and your client’s data is protected from any cyber threat.
As the Rolling Stones song says: “You can’t always get what you want but if you try sometimes, you just might find you get what you need”. Be clear about what you need as opposed to what you want. The new year will bring with it a wealth of opportunities for some – and challenges for all. Start the year as you mean to go on, with a strong financial understanding, and the right tools in your financial toolkit to support your business finance journey.