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Spring Clean your Finances
29 February 2024

Who doesn’t love spring? The flowers start to bloom, the animals come out of hibernation and the days get brighter. Spring cleaning your finances is a great idea to ensure you’re on track with your financial goals. Your finances are the centre of your business and can help you forecast your financial future and make better decisions, so Spring is a perfect time to declutter your finances.

 

Here are some steps you can take to spring clean your finances:

 

Keep your finances at the top of your priorities

 

As a small business owner, you have a million and one things to do so it can be tempting to push your financial tasks aside to focus on running your business. But if you want to keep your business on track for success and keep your financial ducks in a row, we suggest you prioritise this. We suggest setting aside some time either weekly or monthly to help you keep your finances up-to-date and organised. Making time to review and update your finances means you can avoid accounting tasks piling up and the less of a chore it will be.

 

Forward planning

 

There is nothing worse than getting a fine from HM Revenue & Customs. We would suggest you bear in mind potential future expenditure such as VAT and other tax payments. We advise business owners to try and set aside funds in a separate bank account, so that when it comes to paying those bills there is money available and no need to panic.

 

Set a budget

 

Now that we’re a couple of months into the year, you will find yourself better equipped to make business forecasts for the rest of the year. You can compare month on month, quarterly or yearly figures for cash flow statements, balance sheets and a profit and loss breakdown. You can use this data to get an idea about patterns and trends that your business is following so far. Then use your up-to-date financial information to set a realistic new budget. Allow yourself enough spend to grow – cutting costs too far will stifle growth – but be strict, keep track of your spend every month and stick to your budget.

Xero has its own built in budget manager which will help you to analyse the data to be able to predict the financial outcomes of this year and make any important decisions. Only budgeting will allow you to successfully plan for your short- and long-term business goals.

 

Look back at your cash flow

 

A clear view of cash flow helps to inform better business decisions, without it even the most profitable business can fail.  If you do not keep track of your cash, you could find yourself unable to pay bills and wages on time, which will damage your relationship with suppliers and employees.

 

To make sure you’ve got enough cashflow to keep your business running, follow these steps:

  • Stay on top of bookkeeping. It’s the single best way to understand all the financial transactions in your business, and you can’t do the rest of the steps without it.
  • Analyse your cashflow. Take the information from your cashflow statements and use it to understand how money is moving through your business.
  • Cut overspending to increase cashflow.
  • Speed up your accounts receivable (i.e. money owed to you). The faster you get money in your pocket, the more cash you’ll have. 

 

Check your classifications

 

What happens when you don’t classify your spend correctly? If you haven’t been consistent when choosing your spend categories, then your financial reports won’t make sense. It will also be impossible to track if you’re missing anything. You wouldn’t believe some of the items we see posted in the wrong category!

When you’re deciding which category to put your costs into, you may find that some costs could easily go into more that one category. For example, a monthly subscription could be computer software or subscriptions. While there may not be clear cut guidance about which category to choose in these situations, we would advise that you allocate these costs consistently and then if they do need moving it will be quicker to do so. Also, its much easier to track how much you’re spending in each category if you the costs are always in the same place.

 

Get help before it’s too late

 

If you’re feeling overwhelmed or unsure about your financial situation, consider seeking guidance. Small businesses are not always strategic when they access their finances and as a result, often only end up seeking it when their business is struggling. The best way to tackle this is to plan better and seek financial assistance before it becomes urgent. If you need access to funding, we have a network of companies that we highly recommend who can help you to understand your goals and funding requirements.

 

Outsource

 

It can be very easy to try and push through and keep trying to manage everything on your own but unfortunately, as we have seen recently, this not only leads to mistakes but to bigger problems in the long run.  The best way to spring clean your accounts is to hire professionals that you trust to do it for you, freeing up your time to focus on running your business.

Putting the time and effort in now to Spring clean your business finances will ensure that your business has the best chance at thriving in the future.

Your Support Team are happy to help so if you need any advice please get in touch.