The new year is a great time to set yourself new goals and targets and although not the most exciting, sorting out your business finances may be one of the most rewarding resolutions you can stick to in 2016.
Here are five things you could do this year to improve your financial efficiency:
- Tackle bad cash flow
One increasingly popular way to deal with poor cash flow is to introduce more stringent payment terms. Try to negotiate shorter payment terms with those clients you have good relationships with to make up for any other customers who are slow payers.
An automated email prompting late payers can also be helpful, as it’s generated based on payment dates and lacks any tone of personal impatience and the offence that might cause.
- Prepare for auto-enrolment
One of the key issues currently facing small business owners is how to organise and co-ordinate pension schemes for their staff under the so-called auto-enrolment regime.
Employers not only have to find a suitable pension scheme for staff, they will also be required to pay contributions into the pensions as well – starting at one per cent of an employee’s qualifying earnings and rising to a minimum of three per cent in 2018.
Co-ordination is key: any payroll department must be kept up to speed for deducting contributions, managing the opt-out process, calculating contributions from both staff and from the employer, and changing them in line with government adjustments to qualifying earnings.
- Better manage your credit
Supplement your profit and loss statement with a sales and purchasing ledger to track outstanding debts and payments due for items bought and sold on credit. It’s all too easy to lose track of outstanding payments that you owe that are owed to you. A software system that incorporates credit and debit spending alongside your P&L is a great asset here.
- Cut back on unnecessary spending
Many SMEs only focus on cost cutting during tough times but good practice dictates this should be a permanent item on your agenda. Implementing a system to minimise printing/photocopying can save a small fortune over time, and so can measures to help with your own travel costs or that of staff. Monitor closely the effectiveness of any marketing activities – cut back on anything that isn’t working and focus more on those that are.
When business is good it’s easy to take a scattergun approach to spending but best practice means focusing only on the methods that yield the best results.
- Start using a financial management system
Financial management systems are a vital part of efficient business administration, easing much of the strain of a manual system and keeping on top of every financial aspect of your business.
One thing to check is to make sure it is compatible with other systems so you can transfer data to other people – such as your accountant – without any issues.
Finally, increasing productivity among staff is one of Britain’s key challenges and many companies large and small have found flexible working a great way to get better results. You may not be able to see them in the office every day but if you have staff with results-driven goals, you can always monitor whether they hit their targets. Study after study has shown that happier staff work harder.
To see how financial management software can improve your business in 2016, sign up for a free trial with Intuit QuickBooks.