Running a growing business presents many challenges, financial and otherwise. Here are ten financial New Year’s resolutions to help you grow your business in 2017.
1. Create a financial forecast
Christmas, New Year, and the days off they bring are a good time to reflect on your performance this year, and see how you can apply these learnings to next year. That’s why our first tip is to create a financial forecast for 2017.
A financial forecast should be firmly grounded in reality, ideally with three sets of figures that represent the best-case, middle ground, and worst-case scenarios for your business in the New Year.
2. Embrace your true expenses…
If you find you’re constantly adjusting your budget to work around occasional costs, the chances are it wasn’t realistic in the first place. If you’re guilty of ‘reactive’ budgeting, it’s time to reassess your actual expenses to give you a clearer picture of the capital you’ll have available after all the necessities have been paid for.
3. …and adjust your budget accordingly
Once you’ve got a better picture of your real-world expenses, make sure that your monthly budgets and your financial forecast reflect this reality. It’s sometimes surprising how the small running costs can add up and affect the bottom line — if your budgeted spending never aligns with your projections, something is amiss and needs to be rectified.
4. Manage your cashflow more effectively
It’s a common cliché that cashflow is the ‘lifeblood’ of any business, and it’s a hugely important thing to get right. If you’re regularly reaching the limits of your working capital, it could be a sign that your cashflow management isn’t doing a good enough job. There are lots of ways to improve your cashflow, including negotiating new payment terms with your customers or spreading larger spending over time using a business loan.
5. Implement (or improve) accounting software
There was a time when business owners would spend hours every week going through their transactions with pen and paper, or employ a bookkeeper to stay on top of their ledger. These days, anyone can take advantage of technology to make this process not only much faster but also more accurate.
There are various software packages available for your sales ledger, payroll, financial forecasting, and more. Many of these providers also offer all-in-one solutions, so all your business financials are in one place. If you don’t currently use financial software, it’s well worth investigating — and if you do, the New Year is an opportunity to assess how well it meets your needs.
6. Get ready for pensions auto-enrolment
This resolution might not apply to every business, but many will have to have a pension offering in place by 2017 or 2018. The specific rules differ depending on the size and age of your business, but the general requirements are that you’ll have to choose a pension scheme, automatically enrol eligible employees, and offer a match contribution in some cases.
The Government’s new rules mean that many businesses will start offering a pension scheme for the first time — adding this new operating cost into the mix will have a significant impact on overall financials for many firms.
7. Regularly check your business credit score
Like a personal one, your business credit score can have wide implications, particularly for things like loan applications and credit terms with suppliers — but many businesses simply aren’t aware of theirs. If you regularly check your score, it should help you prepare for any finance applications in the future, and also better understand what you’re doing to make it move up or down.
8. Keep up-to-date management accounts
At Funding Options we work with many lenders who need to see management accounts as a standard first stage of their application process. If you’ve shown good profits in the last few months, but only have accounts that are a year old, the lender will only have your word to go on.
Although many firms don’t file accounts until nine or ten months after the financial year end, if you do it sooner and keep things as up-to-date as possible, it’s much easier to show a lender the true picture of your business’s recent history — meaning you could potentially get a loan faster if you apply for one.
9. Put money aside for tax bills
The type of tax you’ll have to pay depends on your business, but whatever it is, it’s an expense that should be factored in. VAT bills are due quarterly, and corporation tax is due annually, so you’ll want to be putting money aside every month to ensure you can meet these important obligations.
HMRC has recently been coming down hard on firms that pay late — so it pays to be proactive on this front. If things haven’t gone to plan, many lenders offer funding for tax bills, so there are other options if you’ve been caught short.
10. Give yourself time to apply for finance
If you follow some of these financial resolutions, you’ll be in good shape to approach a lender for business funding. However, it’s still very important that you give yourself enough time to apply for funding before you need the money — rather than waiting until the last minute and suffering the stressful rush to get the deal done.
Running a growing business presents lots of different financial challenges. Keeping these resolutions in mind, and perhaps choosing one or two to focus on, should help you continue growing your firm into the New Year.
Conrad Ford is chief executive of Funding Options, recently described by the Telegraph as “the matchmaking website for small businesses and lenders”. Funding Options has been selected by HM Treasury to help businesses find finance when they’re unsuccessful with the major banks, as part of the Bank Referral Scheme that launched in November 2016.