With the Federation of Small Business reporting record levels of business confidence for UK SMEs it’s vital that owners understand the health of their business, so they can respond rapidly to take advantage of the improving economic conditions.
Peter Trimm, product manager at Sage One Accounts, provides some tips on what business owners should be doing after the first few weeks of the new tax year.
Check progress against your business plan
Review where you are against the targets and budgets you set at the beginning of the year. Try to make this a monthly habit, so you’re regularly checking how your business is performing, allowing you to spot problems and identify opportunities swiftly, and then react accordingly. This means understanding your key performance indicators and how you can measure them.
Setting realistic and measurable goals to aim for is an essential aspect of any business, but it’s not enough to just develop targets at the beginning of the financial year and then ignore them from then on.
Successful businesses of all sizes – from sole trader upwards – should be continuously checking their performance throughout the year. Without measured goals a business can end up sitting still, or worse; spiralling out of control.
Review the plan itself
Think objectively if you need to alter any aspect of your business plan at all. Six weeks in, have you done all that youd planned to do by this point Are you on course to deliver against your plans by the end of the first quarter Are you setting yourself up for success
Perhaps most importantly, as you move through the year, is the plan you started with still relevant for your business If you’re looking to secure funding from banks or investors during the year, youll need to keep an eye on your progress, and your figures must add up.
Understand your cash flow
Closely manage your cash flow by tracking who owes you money and who you owe money to. Are the same people who owed you money last year still proving troublesome If so then work out now what you’re going to do to change this situation and make sure you avoid future late payments.
Always prepare for what money you have coming in and going out account for the non-financial as well as the financial, i.e. usage of assets and stock. Take credit when you can, but ensure you are able to pay when it becomes due.
I would recommend never giving credit unless you understand the risks and built in the cost of credit in your pricing, and whatever you do, dont spend VAT that belongs to the government.
You need money to pay your bills. Businesses that dont pay their bills may end up out of business. Mitigate this risk by making sure you’re always aware of who you are extending credit to, that your VAT return is up to date and you are in control of your costs.
Talk to the right people
Get realistic advice from your network and market demographic – not just from the experts – as often as you can. Having reviewed your business performance for the year so far, identify any products or services that arent doing as well as youd like, and then speak to their target audience directly.
Test your ideas and offering as you go. Tap into entrepreneurial communities online, where you can get inspiration and guidance from others – often the best way to learn about running your business is from those whove done it.
Have the right tools for the job
Take advantage of the huge array of business tools available that are designed to improve the efficiency and productivity of your organisation. Find the right tools to meet specific business needs, and then use them to drive the kind of streamlined, profitable operation you want to run.
For example, if your business health check reveals that you’re constantly on the move then you need to look at cloud-based tools that allow you to keep track of your finances and business online, from anywhere.