top financial planning tips for a prosperous 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.
So, forget the wildly ludicrous far-eastern travel plans, learning to paraglide or taking up meditation, we have some real hints and tips for business owners that will set you up for a more prosperous 2020.
• Make financial reports your best friend and review targets
Don't be afraid of financial reports. Basic reports such as your profit and loss account, sales forecast and cashflow analysis, should be your best friend and will help put you in control of your business finances.
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.
• Monitor your finances regularly
The best financial reports in the world are useless if you don't review them regularly. Take time to monitor your finances at least monthly. This will allow you to identify any potential problems in advance and take steps to avoid bigger problems later.
• Call in professional help
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 with - seek external advice.
If you have them, the first port of call should be your own investors, who can 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.
Don't avoid professional advice because you think it’s going to be expensive. Good advice often more than not pays for itself.
• Review business finance options
Whatever your plans for 2020, there are an increasing number of financial options available to help strengthen your current position, and to fund growth.
If you need to borrow money to get the business back on track or boost growth, consider all your options and check whether there is any financial assistance available, such as grants. Don't blindly accept the first offer you receive. Always read the small print and get advice if you are not sure.
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.
• Plan to succeed, but be prepared for any eventuality
Every business needs a backup plan in the event of a downturn. Take some time now 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.
• Control cash flow and get paid faster
Cash flow is the backbone of any successful business. 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 2019, make revising your invoice payment terms and conditions a priority for 2020. Reformat and edit your invoice template to ensure it has clear due dates and easy-to-follow payment instructions.
One solution which avoids all the unpleasantness of chasing outstanding payments is to use Direct Debit. Encourage all existing accounts to move to Direct Debit, insist that all new accounts pay by Direct Debit and introduce a surcharge for all customers who continue to pay by other methods.
Direct Debit has several advantages; not least that it makes cash flow much more reliable. If a payment is missed, the problem is flagged up immediately and action can be taken straight away. ‘The cheque is in the post’ excuse is also a thing of the past.
There’s no doubt that 2020 will bring 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.
Luisa Grey is a director of Eazipay Ltd, one of the UK’s largest and fastest growing automated payment processing companies. Eazipay provides regular Direct Debit and automated payment collection and processing services to thousands of SMEs and corporate organisations in a wide range of market sectors throughout the UK, Europe and beyond.
For more information visit www.eazipay.co.uk