With new business opportunities a-plenty it is vital to be prepared. Why not hit the ground running with these tips for setting financial goals?
This is the perfect time to reflect. Consider the challenges, changes and improvements you made throughout your business, and what you may face in the new year. With help from your accountant, you can review how your business performed financially, then discuss how you can move forward.
Where do you want to be this time next year? Do you want to simply be breaking even or just above? Do you see potential in expanding your business or incorporating a new product/service? Work your way backwards; what needs to be in place between now and then? Consider the costs involved in growth, from plant and equipment to hiring of new team players. If your goals are in improving finances within the business set up a budget forecast that shows these changes over the next 12 months.
Many small businesses struggle to stick to a budget. Impulse and panic buys can lead to financial turmoil, and too strict a budget can put a stopper on business growth. It is vital to monitor spending and have a realistic budget in place that is in line with your future goals.
Cash flow is the money you have readily available to cover expenses. It is the lifeblood of your business as having no money could potentially result in your business shutting down. Talk to your accountant to work out a plan to control your cash flow that goes hand-in-hand with your budget.
Start off by comparing your profit margin to your industry’s average. This will assist you in determining where you stand and how you can plan to achieve this standard. Some of the ways to do this include reducing the cost of production/service or by raising product/service prices.
Saving money wherever possible will of course benefit you and your business. Being both price sensitive and alert when spending will allow you to consider new opportunities to save. Setting up a recurring transfer of funds to a holding account is a great “out of sight, out of mind” way to save; have this amount included in your cash flow forecast and create an automatic, set and forget transfer- a small amount each week will go a long way.
Debt is a major factor for small to medium businesses so if you haven’t created one already, discuss with your accountant a financial plan based around eliminating or reducing your debt. Be aware of interest rates for each of these debts and ensure that your plan allows for debts with the highest rate to be cleared out first.
For more information on setting financial goals and creating a cash flow forecast, contact PROTRADE United today.
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