With the New Year now officially underway, there’s no better time to review your business’ financial position and commit to new goals for the year ahead.
Here are our top five financial New Year’s Resolutions to get you started on the right foot.
1. Plan for 2023
The beginning of the year is an ideal time to plan for the 12 months ahead. This may include revisiting your business plan for the year, cash flow forecast, sales forecast and more.
You should undertake scenario planning to prepare for both the good and bad situations which may occur throughout the year. Ask questions such as what happens if our revenue remains the same, declines or grows? How will inflation impact our operations? How are interest rate changes likely to impact business? How would we operate with either an increase or decrease to headcount? Are our production costs likely to rise or fall? Is customer behaviour likely to change, and if so, how?
Through considering a range of situations and forecasting your financial position, you can form strategies and plan ahead so you’re prepared when these types of scenarios arise.
2. Cut your costs
In an inflationary environment where costs are going up, it is especially important to keep costs under control. This includes wages, rent, and other business expenses
A good starting point is to review any discretionary spending and evaluate where these costs can be reduced. Any cost which is not essential may be able to be cut. Consider whether it is possible to encourage your team to occasionally work from home in an attempt to reduce internet and energy costs. Also evaluate whether signing a new office lease is a cheaper possibility. You could also consider renegotiating contracts with suppliers, reviewing software licences to ensure you’re not over-investing or cutting down on entertainment expenses.
3. Review your accounts receivable processes
One of the biggest barriers to ensuring you have adequate cash flow is not getting paid on time.
Ensuring you have a streamlined accounts payable process to follow up overdue invoices, or incentivise early payments will ensure that cash owed to you can be received promptly, preventing any cash flow bottlenecks.
Another option you could also consider is reducing payment terms, from, for example, 30 days to 15 days to help ensure you receive your payment at an earlier time. Linking your accounting software with third-party apps can also be useful to set up payment plans for customers who often struggle to pay their bills on time, or enable automated payments to ensure payment efficiency.
4. Review your pricing
When was the last time you reviewed your pricing? With inflation driving costs up, your profit margin may be getting squeezed. While cutting costs where possible will help, you may also find that market expectations for your product or service have changed and you’re undercharging.
If the market is signalling that the cost of your service or product is cheap compared to competitors, then it may be time for a price increase. Increasing prices for existing customers whom you have formed connections with may be scary. However, if your profit margin is being obliterated, it may be necessary to do so. The key is to be honest with your existing customers, and strategically model out your pricing to ensure that you do not need to increase prices again too soon.
5. Outsource your CFO, accounting and bookkeeping
If you’re not outsourcing your CFO, accounting and bookkeeping, now is a great time to consider this. Not only is it a great way to bring your costs under control, but you also get access to the right expertise to drive your business forward.
Compared to hiring your own CFO and finance team, outsourcing your financial governance will be significantly cheaper in the long run. Outsourcing means that an experienced third-party will take on the same responsibilities, but for only a fraction of the cost. Through this, you can control what you need from them and when, and thus, you will only pay for what you need. This allows you to scale up and down as necessary and stay within budget.
Outsourcing also means that you will have a team of experienced professionals working for you, who are able to identify financial opportunities and tackle challenges on your behalf. Having multiple minds work on your business rather than one means that you are receiving additional expertise and strategic advice for a much lower price.
Looking to take control of your business’ finances in 2023? We can help. Keeping Company can take your accounting and bookkeeping to the next level. Contact us today.
At Keeping Company, we’re not just accountants, we’re business people too. With our counsel, your business can reach its full potential.
We have a team of experts; Cloud Accountants, Business Advisors, Finance Specialists working together and ready to help, contact us today.
For all media enquires please contact Tracy Miller, CMO, Keeping Company 0414 898 452.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.