With 2019 upon us, why not step back and consider if your small business could do with a financial workout? If there is room for improvement in any of the following areas, what will you do this January to make a difference to your business?
Budgeting is an important financial discipline because, done correctly, it encourages you to assess the financial implications of your plans and objectives. It also forms the benchmark against which you then track how you are actually doing, and reforecast periodically to determine any additional actions that may be necessary. If you’re in the cloud, applications such as Futrli offer new ways of creating budgets and forecasts in more intuitive and visually appealing ways.
Key Performance Indicators
Key Performance Indicators (KPI’s) are the specific things (financial and non-financial) you need to be monitoring to make sure everything stays on track. What are the most important things that must go right if your business is to achieve its goals? Fundamentally, these are the things you need to be monitoring. Be careful when defining your KPI’s to distinguish between outcomes and what actually drives those outcomes. It’s the underlying drivers that matter.
Internal financial controls
Internal controls provide the means for you to manage your business activities effectively and reduce the likelihood and/or impact of things going wrong. Internal financial controls are controls that relate specifically to your business’s finances - for example, the regular scrutiny of management accounts; reconciling control accounts (to help demonstrate that the financial records are free from error); or segregating important financial duties in order to reduce the risk of financial loss through misappropriation or error. Building effective internal controls requires a sound understanding of the risks (financial and non-financial) threatening your business and its objectives. Members of our team have extensive experience in risk & control advisory work - contact us today.
You and your business will have a series of legal and regulatory obligations on the financial front; typically these manifest in the form of deadlines to file documents and returns of one kind or another (company accounts, confirmation statements, corporation, VAT and payroll returns are just the most obvious examples). It may also have further important requirements stemming from contractual arrangements such as loan covenants or grant agreements. Having a disciplined approach to managing those requirements is important for many reasons. For example, filing company accounts late may result not just in financial penalties; it may also impact a business’s credit rating. Filing tax returns late may result in the cost and hassle of extra scrutiny from HMRC. Even if you outsource your accounting or tax return work to your accountant, the primary responsibilities for legal, regulatory and contractual compliance still rest with you as the business owner or director.
Financial skills and resources
Does your business have the right team in place to effectively manage and control the business’s finances? As a small business, employing a full finance team in-house may not be an option, so consider how you can best deploy the resources you do have - and figure out who will pick up the slack. Does your team need some finance training? Would it be better to outsource your bookkeeping and payroll? Do you need someone independent to review your quarterly management accounts and challenge you to do better? These are a few examples of things your accountant should be able to help you with.
Just because your business is small does not mean it cannot benefit from improving its approach to managing its finances in each of the above areas. If you are serious about driving your business forward, these ideas can help. If you’d like to discuss how Scholes CA can help you, contact us today.