… and make better business decisions.
We all make mistakes, every week, sometime every day.
The small mistakes usually have little significant impact.
The big ones do.
Avoid bad business decisions
Business owners can often avoid making bad business decisions by having a better understanding of their financial position and the financial impact of the decisions they are making or about to make.
The financial impact of some decisions is easy to see:
- The impact on your bank balance of not being on top of your credit control and making sure customers pay on time.
- Being put on stop by a key supplier because you don’t pay their invoices on time.
- Not having the available cash to pay vat or corporation tax on time because you haven’t been putting the cash into your tax account every week/month to pay your taxes.
- The drop in profits because you haven’t been measuring and controlling costs as well as you could/should.
Spot the issues early
All of these examples would have been picked up much earlier if you had a better understanding of your numbers – the financial position of your business and the financial impact on your business of the decisions you make.
In response to each of the points above:
- Your cash balance would be much better if you improved your cash management, invoices promptly, shortened payment terms, chased late payers, offered early payment discounts.
- Supplier accounts would be paid on time if invoices were entered in your accounts system when received and supplier statements were checked and agreed at the end of each month.
- If you set up a separate ‘tax’ bank account and transferred small amounts to it for VAT, PAYE and corporation tax each month you’d be able to your pay taxes on time.
- If you prepared and reviewed a profit and loss account each month or quarter you’d know how well your business was performing throughout the year, rather than waiting until the end of the year (or often 6+ months later) once your year-end accounts have been prepared.
Best performing businesses
What we see the best performing businesses doing is:
- Using cloud-based accounts software, like Xero, that enables them to access their accounts and keep them up to date, from any location with an internet connection.
- Keeping their accounting records up to date, sending customer invoices quickly, recording supplier invoices when received and reconciling the bank account (we recommend weekly).
- Being in regular contact with their accountant for support and advice.
- Knowing their numbers by preparing regular management accounts, quarterly or monthly.
- Having regular meetings with their accountant to get a better understanding of the financial impact of the decisions they make in their business.
- Using the information, advice and support to plan for their future and make better business decisions.
If you’d like to get a better understanding of your business finances and really ‘Know Your Numbers’, please get in touch.