As we enter the New Year, owners of small and startup businesses have the opportunity to look back on their achievements in 2019 and to look ahead to how they can fuel business success in 2020. The most important element to get right is the company’s finances – with the right financial insights you can reduce costs and improve revenue and profitability in the years to come.
Conversely, without a firm handle on the company’s financials, you could amass unnecessary costs and losses, miss out on exciting business opportunities, or run into trouble with the tax authorities.
Here are a few ideas about how you can sharpen your financial insight and position your business for a successful year:
1. Invest in developing financial skills and knowledge
If you’re running your own business, you’re the person who will take ultimate responsibility for the financial decisions and outcomes. Even if you can work with a trusted accountant, it’s in your best interests to understand how to read a balance sheet and income statement, manage cash flow, and generate forecasts and budgets. This will help you to ask the right questions and make informed decisions.
Why not consider taking an introductory accounting class to understand the fundamentals? There are a range of short, basic finance courses on offer from South African business schools and online platforms like Udemy. Payroll and accounting software vendors like Sage also offer seminars that enable you to learn about the latest tax laws and regulations.
2. Put the right software platform in place
If you are still running your business on paper and spreadsheets, the beginning of a new year is an ideal time to shop for accounting and payroll software. Automated software will help you to capture accurate financial records and save heaps of time on gathering slips for your accountant.
Plus, it will help you track financial metrics in real-time, so that you have a better handle on cash flow, revenues, and costs. Look for a solution that is easy to use, yet can grow alongside your business. Cloud-based software can be purchased as a monthly subscription and makes it a snap to manage your admin and finances.
3. Take the time to plan and forecast
The first week or two of the year is a good time to set you goals and strategies for 2020. If you have an accounting software solution in place, you can easily generate a cash-flow forecast for at least the next 12 months. This will equip you to do some well-informed planning.
You will, for example, be able to make forecasts for your growth in the year to come and identify areas where you could optimise profit margins. And you’ll be able to see whether you can afford to on-board new team members, whether you should you invest in expansion or new product lines, or where to cut back on monthly expenditure.
4. Work with a professional accountant
If you’ve run in DIY mode for a while, you may engage the services of an accountant only when you need to prepare your annual financial statements ahead of filing your tax return. But it can be helpful to get professional financial advice to support your decision-making at critical moments in your business’s lifecycle.
For example, your accountant can help you to draw up a sensible business plan when you decide that the time is right to embark on an expansion drive. The accountant can also help you prepare financial statements to present to a bank or investor when you want to raise capital. He or she can also help you to create realistic budgets and forecasts.
Closing words: Getting on right the financial track
All small business owners can benefit from investing in the systems, people and processes that help them to make the right financial choices. Financial insight is the key to growing your business, improving returns on your investment in your company, and ensuring its sustainability.