6 steps to getting your business financially fit
Adopt these financial habits and practices this year and a lean, mean business is within reach – no excuses
Come February, your gym aspirations may have fallen by the wayside, but there’s still plenty of time (and incentive) to get your business financially fit in 2018.
You don’t even have to lift yourself out of your desk chair to put these good habits into action if you want your business to be more efficient, stable and financially healthy in 2018.
Follow these 6 steps to financial fitness:
1. Learn from last year’s business mistakes
Learning from your mistakes is a practice often preached but seldom put into practice.
Mistakes are all a part of the business journey – what matters is how you respond to them.
But what are the practical steps to improving your business of the back of errors:
- Review last year’s statements – Scrutinise 2017’s financial statements including profit and loss, periods of high and low sales and identify the causes and how you could address them in the future
- Conduct a thorough analysis – Analyse stock and turnover to get your inventory management in order
- Compare spend to revenue – Find out where you wasted money last year so you can ensure you’re more economical this year
- Did you achieve your goals? – Look over your business plan for 2017 and check whether you achieved the goals and ambitions you set at the beginning of the year. If you didn’t, were they too ambitious or did you make mistakes? Adjust this year’s goals accordingly
2. Identify where you could cut your business costs
Getting your business lean in 2018 is manageable after conducting a thorough audit to identify problem areas. After that, it’s just a matter of cutting the fat. What are those problems likely to be?
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- Energy contract – Many UK small businesses are spending far more than they need to be on their energy because they never hunt around for a better tariff. You don’t even need to go out of your way; there are plenty of comparison websites that will help you find a better contract
- Energy use – Your business could also be wasting money on energy by failing to follow basic energy efficiency guidelines such as turning off unused equipment
- Rent – Just as it’s worth hunting around for a better energy contract, you could also try renegotiating your contract with your landlord
- Bank charges – Banks are not known for their transparency and you could be paying unnecessary charges. You or your accountant could assess whether this is the case and put a stop to it
3. Get to know your business competition
Rather than just taking part of your market, the successes and failures of your rivals can actually be a great source of useful information for your business. So, what should you look out for?
- What are they selling? Conduct an analysis of your competitions’ offering: products, services, marketing, to compare where you are weaker and stronger and how can you be better
- Who ranks higher? Search for the keywords that relate to your business and see who performs better in search rankings. If you are lower down, you can improve your SEO and marketing to get ahead and win more customers
- Who offers a better service? Just because you’re a smaller business doesn’t mean you have to offer a worse service to your competition. You can be more nimble and responsive than they can be
- Who has stronger marketing? If you’re still spending on the same marketing strategies and not seeing results, it might be time to change it up and do something different
4. Get ready to go for growth
Despite the ongoing uncertainty surrounding Brexit and the economy, it would appear the UK small business community is irrepressible with more than half (55%) predicting that they’ll increase their revenue by 50% or more during the next year.
Capitalise on uncertain times as customers and clients search for better deals and new suppliers in a shifting world:
- Take the search to them – Look for new market opportunities opening up, diversify your offering to meet new demands and change the way you promote your products
- External funding – Could this be the year you finally take the plunge into funding? There are now more options than ever before for small businesses to access funding. If you’ve struggled with a bank loan you could always look into invoice finance, asset finance, or crowdfunding for example
5. Fuel your business with a healthy cashflow
If you don’t want your business to be running on empty then you need to be thinking seriously about sorting out your cashflow. It’s a common problem amongst start-ups, and one that can have lasting implications for growth and success.
- Get paid on time – Use accounting software to manage you invoices and credit check potential customers to spot any late payers
- Forecast your cashflow – If you want to project your income and expenses you should do a cashflow forecast annually, monthly and possibly weekly. Use accounting software to conduct automatic, regular forecasts so you don’t have to
- Act fast if working capital is lacking – You could slow the growth of your sales and take other measures to shore up until your financial situation improves
6. Make sure you’re getting paid on time
According to the Federation of Small Businesses (FSB), about 50,000 small businesses fail every year because of late payments.
Chasing late paying customers can be a drain on energy and resources that could be better used for the day to day running and growing of your business.
But what measures can you take to ensure you get paid on time? Follow these steps:
- Credit check potential customers
- Use electronic invoicing
- Review your payment terms and practices. Shorten them if necessary and make sure all your customers are aware of your terms
- Adopt an automatic payment solution such as direct debit where the customer authorises you to take payments from their account
A lean, mean, business machine is within reach if you follow these fairly accessible six-steps to financial fitness.
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