Halloween is fast approaching and everywhere you look has orange pumpkins, ghosts and zombies.
It’s also the time of the year that many SMEs and Directors are submitting their year-end accounts to Revenue. It can be a daunting time for some.
However, let’s not get spooked. Here are five top tips for managing your finances as you come closer to Halloween time and beyond.
1. Start using accounting software
Good accounting practices take time. Using accounting software can help business owners get a handle on their finances simply and with minimum effort.
I read a survey back in 2015 when 500 businesses were asked how much time did accounting software save them. While 25% of those surveyed said, they saved two hours a week, another 40% said they saved between three and seven hours. I see the same with our clients who use our software service, Clarity.
Add up your hourly cost and you’ll soon see how much you can save and how much you can earn by investing in accounting software.
2. Invoice quickly
I know it sounds simple but you’ll be amazed at how many businesses don’t invoice quickly enough. Invoice quickly is the best way to manage your cashflow. Just as you arrive at the till of a restaurant or shop, you should invoice straightaway. When you deliver a product or service, prepare the invoice and send it.
Cloud accounting software helps with this, as you can access your accounts system online. Your supplier’s name and address are stored in it, codes of services or products are saved, so it doesn’t take much time to draft the invoice. You can even send it from the system.
However, whatever system you use, do not wait to send an invoice. The sooner you send it, the sooner you’ll get paid.
3. Understand your debtor days
That leads nicely into my next point. I know I’ve said this before but understanding debtor days is crucial to cashflow. Cashflow is at the heart of a business. Many profitable businesses have gone bankrupt because of cashflow. Keep an eye on your debtor days. If they are too long, make changes – today.
4. Start receiving month-end statements
If you’re new to accounting or simply deal with your accountant on a yearly basis, here’s where you make a change.
Ask your accountant for month-end statements. Your accountant can give you an overview of your sales, expenses and stock levels.
This is the easiest change that you can make to get more control over your finances. You can make decisions for the rest of the year and make projections for next year with it. You should get the month-end statements by the first week of the following month.
5. Set KPIs
It’s never too late to set KPIs. How do you know if you’re ahead, behind or staying the same? Benchmarks are, in accounting terms, Key Performance Indicators (KPIs). They need not be complicated at the outset. They can be as simple as managing debtor days, like point number two. Another one to set is to tell you whether you are pricing your goods or services correctly. Your gross profit margin should be enough to cover fixed expenses, your costs associated with making the product or delivering the service.
What gets measured gets done. Avoid financial horrors with these five top tips.
If you’d like to discuss anything in this column, please get in touch.
AG Associates Accountants is an accounting practice that specialises in affordable accounting and payroll solutions for the SME business owner. Its new service Clarity combines online book-keeping with offline accounting to provide an instant snap shot of how a business is doing right now.
For further information please contact Angela at Unit 11, Eastgate Way, Little Island, Cork. 021 482 4723 or firstname.lastname@example.org.