We’re coming up to an entirely new financial year. That means businesses are often frantically racing around juggling their accounts and preparing for the next financial year. From cash flow management to budgeting for new business approaches, it can be a hectic time.
So if you’re frantically calling your accountant every 30 seconds, or you’ve got no idea what to do about the new financial year, here’s our quick guide to what you need to know. This doesn’t have to be a stressful time of year and could even become one of the calendar dates you look forward to the most.
Cash flow forecasting
It’s not all about the taxman. The end of the financial year is a great opportunity to prepare your finances for a new financial year. Improving your business performance management is all about making changes and fine-tuning how you do things. When it comes to budgeting, the new financial year is an excellent opportunity to prepare your cash flow forecast.
Look at your expected outgoings for the year ahead, and update your cash flow forecast so that you have an indication of the revenue you can expect to earn. The aim is to spot where there may be threats (and opportunities) to your business finances in the year ahead. A well-thought-out forecast will prevent overspending, make it easier to plan seasonal trends and make any business more secure.
Design your budget
Designing your annual budget isn’t the same as performing a cash flow forecast. Instead, it’s one of the most challenging actions you can do for your business. It’s also one of the most important. Using your cash flow forecast lets you turn that cold data into real-world objectives. Your budget for the new financial year helps you to ascertain precisely what your business intends to accomplish in the next 12 months.
It’s important to be as accurate as possible but also to be realistic and flexible. After all, who knows what global disruptions will affect your business in the near future? With the right budget, you can predict profitability and ensure that your finances don’t spiral out of control. Use your budget to recognise potential investment opportunities, such as new hires, better products or new resources to use. For larger companies, be sure to include every department when designing your budget for the next financial year.
Organise business relationships
The finances of a business will tend to rely on your business relationships. From your suppliers to your shipping firms, a lack of reliability can stop your business growth in its tracks. Late payments, a lacklustre approach to deadlines and ambivalence about paying invoices can all be a death sentence to businesses, particularly SMEs.
So the run-up to the new financial year is the ideal opportunity to review your current business partners. Look closely at how they’ve performed in the last 12 months, and make changes if those performances have been less than expected. Every business has competitors, and if your partners aren’t up to scratch, then it’s time to look elsewhere. Consider using the 10 types of innovation framework to encourage you to think outside the box.
Update your accounting resources
If there’s one thing that’s transformed business performance management in recent years, it’s the use of accounting software. If you’re still using Excel to monitor your finances, you’re likely missing insights and opportunities. After all, everything about your business is geared towards profit. By using outdated and ineffective accounting resources and methods, those profits can quickly become very limited.
If you currently use an accountant or bookkeeper, talk to them about the technologies that they use. If they aren’t using some form of accounting software, then it’s very likely that your finances aren’t being managed as well as they should be. Update your accounting processes for the new financial year, and you’ll find that by the time next April rolls around, you’ll have a much more accurate and useful view of your bottom line.
You’ve paid your taxes, carried out your cash flow forecast, updated your budget and your finances are under tight control with your new accounting processes. None of that will boost your business if your team doesn’t buy into your yearly plan. If your marketing team has pain points you don’t know about, then overspending (or underspending) will be a risk that limits your growth. Likewise, you should address the pain points and productivity roadblocks of your sales team, your customer-facing employees, and your delivery drivers and include them in your financial planning.
Get the necessary insights from every department or member of your team. Keep your budget close to hand at all times so that you don’t make promises that your finances can’t meet. Here, the goal is to make everyone’s role easier, boosting productivity and profitability. Communication with your team (or your only employee) is an essential part of preparing for the new financial year.
Get ready for the next financial year
Follow these steps, and the performance of your business will improve. Your finances dictate so much about your potential to grow that leaving it to chance and hope is only ever going to limit you. It’s a bit like school, where the kids who did the homework well in advance always did better than those who tried to write an essay on the school bus.
Too many people look at the end of the financial year as a stressful time that’s all about making sure the taxman is happy. While it is (of course) vital to ensure that your taxes are all paid and up to date, the new financial year is an opportunity. Make the necessary changes, carry out your cash forecasting and ensure that every member of your team has a stake in your growth. It could be that by the time next April rolls around, you could have grown your business beyond your wildest dreams.
If you need help with your business finances, talk to the friendly team at Big Red Cloud about how our cloud-based accounting software can help you run a more profitable business.