It’s time to ‘spring-clean’ your business finances
With the weather warming up many people turn their minds to spring-cleaning. But don’t restrict your clean-up to clearing out the spare room and sorting out the linen cupboard at home — take the opportunity to spring-clean your business finances, too.
Here are 6 things you can do at this time of year to make life easier for yourself and your accountant later in the year.
Look at your bills
A bit like junk, bills can pile up. While obviously it’s important to keep cash flow in mind, it’s good business to clear up your invoices well before the final demands come in. No business benefits from a bad credit rating — which in the long run is only going to make things like securing finance much harder. You’ll also feel much better once they’re paid; you don’t have them hanging over your head any more.
While you’re going through your bills, take a close look at them. Are those expenses necessary? Are you paying too much? When was the last time you renegotiated terms with that supplier? Can you get a better interest rate on that loan? Sometimes we get so stuck on having to pay our bills that we forget to check whether we’re actually in a position to reduce them.
Send out your invoices
While you’re paying others, don’t forget to pay yourself. If you have an invoicing backlog, now is a good time to clear it. Are there any overdue invoices? Hit the phones and give your debtors a friendly reminder to get that cash flowing.
Develop an accounts receivable spreadsheet so you have a really clear idea of what your debtors owe you. Which clients are regularly late or wait until the last minute to pay? When you’ve got it all laid out in a single document in front of you the picture becomes much clearer and you’ll know which clients you need to keep an eye on.
And think longer term. Is it time to change your payment policies? Tightening up your terms can really help your cash flow.
Reconsider your pricing
While you’re looking at incomings, take a close look at how much you’re charging your clients. Is your rate still right? Is your pricing reasonable? Or is it time to review it upwards? Are any clients receiving an out-of-date or discounted rate? What are your competitors charging? Take a deep dive into your pricing strategy and work out whether it’s time for some new price points.
Take stock with a stocktake
Obviously there are certain times of year for certain kinds of businesses where a stocktake is essential. But all businesses should take stock to get a clear handle on their inventory from time to time.
Are you holding enough stock? Too much? Are you holding unnecessary and unprofitable stock?
Re-read your business plan
All too often business plans sit in a drawer or on a shelf or in a rarely opened folder on our computer. Reacquaint yourself with it. How is business going compared to your expectations? Are you on track? Where are things going well and where are you failing? It does every business a lot of good to check their success against their goals on a regular basis.
Plan for the future
Better yet, turn your business plan into a “live” document. Talk to your accountant or your financial advisor and develop a new strategic plan — one where they can work closely with you. That way you can learn from their expertise and both grow your business and avoid unnecessary pitfalls. Work with them on your cash flow projections and expansion plans, and on ways to separate out your tax account. Create one-year and five-year financial plans and strategies so you know not just where you’re headed but how you’re going to get there.
If you’d like a simple way to make your spring cleaning both easier and more effective, why not try Reep? With live access to your business’ cash flow forecast anywhere at any time, Reep keeps you focused at a high level without being bogged down in the detail.