The team at Accounting Clarkes has worked with hundreds of businesses like yours. We’re well versed in the common misconceptions and mistakes that are made, and we know the right solutions to put them right. If you don’t already, follow us on LinkedIn and Facebook where we regularly share snippets of advice each week.
In this article, we’re going to focus on why this time of year is ideal for giving your business a financial reality check. As humans, we naturally reset when the schools go back. Do you have a bit of a spring in your step this week? Are you feeling more energised and focused on tackling those goals again? Then this is a great time to check in on the numbers in the business.
Does your business need a financial reality check?
It’s easy for business owners to get caught up in the day-to-day operations of the business and overlook the importance of regular financial checks. Even if the business is trading well, keeping close to the numbers, especially what’s coming in and when, is vital to avoid a cashflow disaster.
Checking in with your finances is a bit like using GPS to work out where you are. Your goals are the direction you want to head. If you set them at the start of the year and start walking, how do you know how far you’ve reached without regularly plotting your current location? At the very least, using the halfway point in the tax year (or the halfway point in your accounting year) to mark where you have got to. In an ideal world, we recommend businesses do this on a monthly basis to have a solid grasp on their numbers.
Why financial awareness is essential for SMEs.
We’ve explained the importance of knowing where you are in terms of reaching your financial goals, but financial awareness will also:
- Help you to spot warning signs early. As soon as actual numbers don’t line up with budgeted numbers, there could be a problem. For example, you may notice that you’ve spent more than you’ve budgeted for and that’s easting into your profits. A noticed problem is one you can begin to address and remedy before it escalates.
- Help you to make informed decisions. We love it when our clients come to us with questions about how they can grow their business. The answers are almost always in the numbers! Whether it’s the opportunity to take on a new member of staff, invest in new equipment or launch a new product, your financial data will guide you.
- Help you to prepare for future opportunities. Some of you may be thinking further down the line – perhaps you need to attract external investment, or you want to sell the business and get the best value for it. In either circumstance, having a clear picture of the financial health of the business over time is essential.
How can you ensure your SME business is financially fit?
Here’s our recommendations and some helpful resources:
- Create a budget. Not sure how? Check out “How to effectively forecast your budget.”
- Monitor your cash flow. Do you understand the difference between accounts receivable and accounts payable pays? We explain it all here.
- Track profitability. Understanding your profitability is essential for measuring your business’s success. Do you understand the difference between a profit and loss and cashflow forecast? It’s a common question we’re asked and we answer it here.
Finally, you can ask your accountant! A qualified accountant can provide invaluable guidance on financial management as well as tax planning and compliance.
Don’t bury your head in the sand!
If reviewing your business financials gives you the jitters and you’d do anything to avoid it, you need a supportive, friendly accountant. One who understands the ups and downs of running a business.
We help our clients to better understand their numbers every day, and as a result they become more confident with them. It’s never too late. Book in for a initial meeting with Gillian and Chris by calling 01252 612484 or email gillian@accountingclarkes.com.
