Business Finances – is it time for a review?
Taking the time to review your business’ finances is really important. Now, more than ever, it’s a good idea give your business finances an MOT. It could make the difference between survival and going out of business. Your accountant can help in lots of ways, so make sure you involve them in the process too.
Here are our top tips for a successful MOT.
Have control of your business finances – cash flow
Cash is king for small business’ and in challenging times, having enough cash to see you through is important. But how can you make sure you have the necessary cash? Well, making sure you chase down all late payments from clients and customers.
This can be more difficult when times are tough for everyone, but having conversations with clients is vital. Ask if they can pay. If not, when they can pay. Perhaps they could pay half now and half later?
If you don’t currently have payment terms in place, get them set up for all future invoices. Be clear about when you expect an invoice to be paid. You can also add additional charges to invoices that are paid after the agreed date.
Where could you make savings?
As you can at home, you can reduce the outgoings and operating expenses of your business. In good times and bad, why pay more than you need to?
Rent – It’s likely that for most of the time, your rent is fixed. Global pandemics aside, landlords won’t usually reduce your rent. But, if you review your office or building space and decide that you don’t need it all, could you rent somewhere smaller?
Rates – Are you on the cheapest tariff for energy, phone line and mobile provider, for example? You might think that you won’t be able to save much for the time it takes to check, but you’ll be surprised!
Subscriptions – Perhaps you pay for fruit in the office, subsidised gym memberships or business magazines. Take a look at how much money each item costs the business per month or year. Is it giving your business value? If it is, could you get the same thing for less money?
Go green – Yep, it’s true. You can save the planet and money at the same time. Things like investing in LED lightbulbs, getting rid of the disposable cups and replacing them with reusable ones can save money over time. You can also encourage people to only print what they really need to. Less paper use and less replacing of printer cartridges.
Are you paying the correct rate of tax?
Speak to your accountant about the taxes you pay as a business. Would it be more efficient to change the structure of your business, for example? Should your business be using traditional accounting or cash basis accounting models? The amount of tax you pay and the amount you can claim as expenses will differ.
How could your business raise funds?
If you were looking to grow, it’s a good idea to give your business finances an MOT. Being clear on the amount of cash you have is vital, along with any savings you can make ahead of asking to borrow more money.
Your accountant should be able to advise you on the funding options available and their suitability. You can certainly ask your bank what they can do, but don’t assume that the bank will be the best option. A commercial finance broker will be able to talk you through a number of options and put your business first.
Is your supply chain working sufficiently?
You might think that your supply chain isn’t part of an MOT on your finances, but you’d be wrong. Having an effective supply chain and having a good understanding of it is key. If your business makes something, you probably have storage space. Storage for raw materials and storage for the finished products. Are you using that space efficiently? Could you reduce the space and save money?
Which part of your supply chain costs you the most? Could a change in storage location, save you more money on transport, for example? Is there a possibility to share transport costs with another business?
Multiple suppliers – If you only use one supplier, it could be costing you. Having multiple suppliers mean they will need to be more competitive on price. It also means that if one supplier runs into problems and can’t meet an order, you have other options available.
The COVID-19 pandemic has put many additional pressures on business. Making sure your finances are in good shape puts you in the best position to ride out this difficult time. But, working with your accountant to give your business finances an MOT is a good idea at any time.
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About Liz Cordell
I’m an experienced copywriter, with a great attention to detail. Having previously held positions at a global publisher, a top 100 law firm and a Big Four professional services firm, I now work with clients across a range of industries. Whether it’s new content for a website or creating interesting blogs for my clients, I can create engaging copy that doesn’t take a lifetime to read.