Businesses have numerous unexpected challenges over the past year, with the coronavirus pandemic having an unprecedented impact on our lives. With the Government’s roadmap out of lockdown and the Budget now setting out the picture of the road ahead, it’s essential that you and your business are prepared for 2021.
To ensure that you are set for the year ahead and the challenges it may bring, there are several key factors to consider, including budgeting, forecasting, financial modelling, cloud accounting, cash flow and business planning, which can all help you cope with the challenges of lockdown and move forward through the rest of the year.
Budgeting is one of the key components of any business and you must monitor monthly incomings and outgoings to provide a solid foundation for your business.
Typical outgoings include rent, taxes, vehicles, daily expenses, emergencies & repairs, energy and utility bills, insurance, payroll, marketing & advertising costs, plus any one-off expenses, planned investments, upgrades and professional fees.
Having either less money coming in and more money going out, or a chaotic cash flow is one of the most frequent factors in business insolvency.
Recent research has even revealed that late payment of invoices is the cause of one in five company insolvencies, and during a particularly challenging economic period, it is more important than ever to ensure that you are managing your cash flow effectively.
Despite larger companies being the sole cause of cash flow problems among the small and medium-sized enterprise (SME) community, how they conduct business is out of your control. This is why SMEs need to think efficiently about business decisions, such as who you do business with.
Obtaining a contract with a larger company, who has a reputation for late payments, may not be the optimum use of your resources. It may instead be more prudent to consider acquiring several contracts with reputable contacts.
These will be smaller individual contracts, but importantly, the risk is spread and this also enables the development of more business relationships to ensure a good, consistent flow of cash.
The impact of forecasting and management accounts
Forecasting for the unexpected, such as the events of 2020, is an essential step that an advisor can help you with, as the forecast will need to be as accurate and comprehensive as possible to create a precise cash flow model.
Successful businesses are only as strong as their strategies, which is why monthly management accounts should be a key consideration for any business.
Whereas a business plan states your goals, strategy and key activities, the value of the forecast lies in testing your plan ‘on paper’ before you make any costly changes or investments.
Management accounts are like a monthly “health check” for businesses – and the information they provide is crucial for keeping on top of cash flow. A strong set of management accounts should include all types of information, such as:
- Profit and loss reporting
- Balance sheets
- Cash flow statements
Management accounting enables cost transparency, flexibility and freedom, helping you to stay on track and achieve your business goals. By outsourcing this service to us, it releases your accounting team’s time and allows you to gain the benefits from management accounting without the burden of preparing them.
An effective strategic planning process
Stepping back and taking time to agree on a way forward with your management team means you can all move ahead together, with each member of the team understanding the plan to achieve your goals.
As a business owner you have no doubt been reminded on more than one occasion about the importance of business planning and no doubt you agree that planning is important.
Without sound analysis, clear projections, and well-thought out strategies, businesses tend to become hostages to market forces, rather than being a driver of its fortune. This is why we encourage our clients to schedule regular planning sessions. We can help you:
- Formulate and implement long-term strategic goals
- Set concrete operational objectives
- Monitor performance and adjust plans accordingly
How can Thomas Coombs help me and my business?
We offer a range of services to assist your business and ensure that you are set for 2021.
Your goals and objectives are unique to you, and when you’re running your business, you need accurate, up-to-date financial information to make informed decisions and plan for the future.
For help and advice, get in touch with our expert team at Thomas Coombs today.