The pandemic has meant that 2020 was a year of survival for many businesses.
With the new year and a vaccine rollout around the corner, the outlook is improving but not yet won. More importantly, now is the time to regroup and get your budget back to health to ensure operations can maximise your business’s survival and success into the future.
Here are some crucial and often overlooked financial pointers for thought.
Tracking expenses is more important than ever
Even tiny expenses – coffees, stationery or boosting social media posts – add up quickly. Yet these small purchases are easy to lose track of. Train your team to get tax receipts for every expense, no matter how small. Embrace technologies that make it easier to log expenses and set clear policies on what the business will and won’t pay for. Having visibility gives you control over where funds are going and means fewer nasty surprises.
Be vigilant about smarter spending
Some spending is essential, but that doesn’t mean it can’t deliver a better return on investment. Some quick wins include reviewing subscriptions to ensure they are still essential (and cancel ones no longer needed), and relieving staff of the administration burden by digitising or automating processes to keep them focused on revenue-generating activities. Also look for ways to get more value. Ask suppliers for a better deal – they may offer a loyalty discount or discounts for early payments. Review loans, insurances, credit cards and utilities to see if there are cheaper alternatives.
Encourage financial wellbeing
Wellbeing is increasingly coming to the attention of employers; it impacts everything from attendance to productivity and performance. Don’t overlook the importance of financial wellbeing. Better money management and retirement planning will go a long way to helping staff live and work better. That could be through providing them with reading materials on how to build better financial foundations and avoiding mistakes to facilitating presentations and private consultations with qualified advisers and accountants. As a result, your business should enjoy fewer sick days, stronger performance and ultimately happier customers.
Always claim entitlements
Surprisingly, many businesses overpay on their taxes and don’t claim legitimate entitlements. Tax deductions, especially depreciation and mileage, are often overlooked because of poor recordkeeping or simple oversight. Get a logbook – either digital or physical – for everyone who travels for work and log every car trip. Speak to your accountant about depreciation on assets, which can include office furniture and business fit-outs. Don’t pay the taxman more than you have to.
Never underestimate cash flow
Cash flow peaks and troughs are a part of doing business. Most can be forecast ahead of time. It can save considerable money and stress to plan ahead for these. Write down the regular expenses – wages, tax, subscriptions, utilities, stock etc. Then add ad hoc expenses and likely one-offs. Next, plot out projected revenues. Looking at them side by side, you’ll be able to see where your cash flow will be weakest and devise a plan for how to address these gaps. Planning ahead means you won’t be forced into high-cost, last-minute means of covering those lulls.
Always expect the unexpected
COVID-19 is the perfect example of an unexpected shock. That’s why your accountant, business coach and even your mother have long warned you to always put money aside for a rainy day. As the economy improves, now is the time to start rebuilding your emergency fund. Allocate money each month or pay cycle to go into your savings. Re-examine your insurances. Everything from business interruption, asset protection, key person to professional indemnity are designed to support your business should the unexpected strike. Ensure they are fit for purpose and offer the best value. While you’re at it, revisit your personal and your business partner’s insurances too – after all, where would the business be without its leader?
Helen Baker is a licenced Australian financial adviser and author of multiple financial growth books with proceeds that go directly to charities supporting disadvantaged women.
Note this is general advice only and you should seek advice specific to your circumstances.