The first step towards getting your finances on track is to take a look back at the previous year and analyse your financial performance. Whilst this can be a daunting and time-consuming task, it is worthwhile as preventing similar mistakes and unnecessary expenditure will help improve your performance in the new year.
How to analyse your financial data
If you’re a business owner, you don’t have hours of spare time to spend analysing your finances. You need to be able to identify the key points, make decisions and move on.
Xero is an online accounting software, designed to simplify the reviewing process. All your bank account and credit card information is in one place, so you can easily cross-check and look at the bigger picture. You can also track your spending, with categorised lists so you can easily see where in your business you might want to cut back.
Learn more about tracking your spending with Xero, by clicking here.
Identifying financial trends
The best way to analyse your financial data is to create relevant graphs, which show fluctuations in your cash flow through the year. Xero does this automatically, so all you need to do is log in on your computer, tablet or mobile device and you will see up to date data, which considers your inventory levels too.
Identifying where money could have been saved
Take the time to review where you may have spent unnecessarily this year. Perhaps you went over on advertising spend or maybe you took on more temporary workers than was needed. Carefully considering these factors will mean in the new year, you can make smarter decisions and cut back on spending without compromising business growth.
Identifying opportunity for more investment
Look for successes from last year, which can be built upon or repeated next year. Maybe a new product sold far more than any other or one service performed above and beyond expectations. Take the time to analyse this and plan how to grow it further. It may be something you hadn’t considered before, but the new direction it takes you in could offer great rewards!
Once you’ve identified these opportunities and decided to expand or improve them, be clever with how you choose to invest. The right investment will mean you spend less in the long run and get more reward than if you choose to invest without analysing your performance first.
Importance of financial planning
Business owners have seen this year, more than any other, the importance of planning for the unexpected. Many in January would never have considered a worldwide pandemic, but those who planned their finances to be able to cope with unforeseen downtime will have fared better in 2020 than those who didn’t.
Use this year as an example; if something like COVID-19 were to happen again, how would you cope? Having these plans in place before an unexpected event means you can put your plan B into action straight away and reduce any downtime spent figuring out how to rearrange spending.
How to set goals you can achieve
A great method for setting out your goals is to make them SMART. Set goals which meet all of the below criteria to ensure they are practical, achievable and, importantly, measurable.
- Specific – Include quantified goals, this allows you to meet specific targets.
- Measurable – Make sure you can track your goal, tools like Xero make this simple.
- Attainable – Is your goal realistic for the year ahead? It should be challenging but possible.
- Relevant – Does your goal benefit your specific situation? Does it move the business in the right direction?
- Time–bound – Set deadlines through the year for when you want to reach this goal by, and stick to it!
Writing out your SMART goals will help you to stick to them, especially if you refer back to them later in the year when it comes to reviewing your progress.
Plan to save
Start as you mean to go on by having a plan in place to save. This goes for both personal and business financial management. Carefully considering where you can save through the year and committing this to writing means you are more likely to uphold the good habit. Make sure that savings are included in your monthly budget.
Why find a business accountant?
As a business owner, deciding to look for a specialist business accountant is a key decision for your company. It’s also an exciting step for your business when it comes to growth.
Whilst an additional expenditure, think about how much time you currently use completing monthly payroll and tax tasks. Plus, if you were really to carry out all the items listed above to the level of detail they require, you’ll need all the free time you can get. Having an accountant will free up your time and allow you to focus on what you do best in your business, not the administrative tasks.
A business accountant also means tailored advice for your specific business. Maybe your local area has a very competitive retail market, or your industry has seasonal fluctuations. Your accountant will take all this into consideration when helping you manage your finances, meaning smarter financial decisions in the long run.
Take control of your finances
At Tim Taylor and Co, we are Xero partners, meaning we are experienced in helping you get the most from this revolutionary software. Xero is proven to be a strong choice for the SME market. We can help you forecast your finances for the future and plan a strategy which works for you. Having an expert who is on your side, but able to give you impartial advice, means you can make informed decisions.
Cloud-based accounting means you can access real-time cash flow information and send invoices and quotes from anywhere. Reduce the burden on you and your accounting bills with increased efficiency. Xero allows us to work more quickly through your accounts, reconcile payments, chase overdue invoices and assist with bookkeeping accuracy.
Learn more about our bookkeeping and accounting services by clicking here.