1. Cashflow is king (even more so than before)
Smart businesses always knew that cashflow is king, but now all business have had to adopt this mantra. Action taken by sensible businesses has ranged from tightening credit terms on sales to negotiating (and lengthening) payment terms to suppliers and re-examining margins. The effective management of cash can be the saviour for your business. Bank reconciliations should ideally be performed daily to give you a snapshot of your cash position each day. Aged debtors should be reviewed preferably weekly and an active credit control policy should be in place to follow up outstanding monies. If you’re too timid or time-poor to chase your debtors, then outsource it. Don’t underestimate the power of good business cash flow.
2. Keeping your books up-to-date is no longer a “nice-to-have”
Gone are the days when business owners visited their accountants once a year to have them produce their out-of date accounts for the previous year. Businesses have realised they need accurate financial data at their fingertips daily. When applying for credit, the majority of lenders now insist on recent management accounts. In any case, is it extremely good practice for any business to have management accounts prepared, analysed and reviewed at least monthly.
3. Constantly review processes
Just because you’ve done something the same way for five or ten years, it doesn’t mean it’s the best way. The recession has forced businesses to look long and hard at each step of their procedures and reassess them for efficiency and effectiveness.
4. Review your controls
Controls” What are they” Well, they’re the often-neglected checks that prevent costly mistakes caused by human error, procedural deficiencies, lack of training or experience, IT failings, or even fraud. Undetected issues can cost your business thousands or even millions each year. Take action now. Put controls in place to make sure your business doesn’t face the unthinkable – insolvency.
Catherine Davis is a chartered accountant and managing director of bookkeeping practice Urban Ledgers.