Does the end of your financial year cause you to break out in a cold sweat at the thought of pulling your finances together for your accountant?
There are some key elements to keeping in control of your business finances:
- Have a clear idea of your proposed sales forecast for your financial year.
- Work out your intended budgets for education and development, marketing, product development, employees/outsourcing, infrastructure and any other key areas. Many businesses work blind in relation to this and it can cause some major problems moving forwards. The important part of this is then to try and stick to these budgets as closely as possible – unless there is good reason to deviate.
- Bring all of these together into a profit and loss (P&L) forecast for the year and keep a track on how this develops.
- Most importantly, track you monthly incomings and outgoings via a cashflow statement. This will give you an honest view of your business performance on an ongoing basis. You can then make adjustments to keep you on track.
- Keep a close eye on how much you owe the taxman in all areas too as this can cripple businesses where the planning has not been done.
It is also a good idea to have a range of separate accounts or buckets where you can allocated money appropriately to each of the funds, as discussed previously.
When it comes to our personal finances, how many of us have a real idea of where are trying to get to?
It has been said that there are “stepping stones” to the varying levels for your financial position:
- Financial stability – when you will have enough saved to cover your financial needs for three months (along with basic insurance).
- Financial security – where you have enough money invested at 5%+ to provide an annual income to cover basic needs.
- Financial freedom – will be attained when you have enough invested at 5%+ to cover your current lifestyle without having to work again.
- Financial opulence – where you have enough invested at 5%+ to live the life of your dreams without having to work!
Where are you on this path and what is your financial goal?
Whatever your level of ambition it is good to know where you want to get to and then look at the how – whether that be via business growth or investments.
And finally on finances, it continues to be important to be frugal – both within your business and personal financial worlds.
Look at even some of the most basic expenditure – a regular cup of latte from the coffee shop, a subscription to a business magazine and such like and total up what this actually equates to across a year. You may well be surprised as to how this can add up.
We sometimes cut corners in areas that will have a significant impact on our business and personal success, but we don’t focus on areas that are dispensable.
I recently stopped buying the Sunday Times (for a number of reasons) and it will save me £114.40 a year (plus the petrol I spent driving the 4 mile round trip to pick it up each week!). This may seem insignificant, but total up some of these areas and it could make a bigger impact. You can apply this frugality to your personal life and your business.
If you need support in how to take control of your business finances as part of a broader business strategy, please give me a call to arrange a free consultation.