How To Manage Your Business Finances Better In 2020
Finances can literally make or break a business.
When you’re not on top of your cash flow and a client suddenly doesn’t pay; it can mean having to shut the doors for good and going back to working for someone else.
2020 has been a rocky year for many business owners thanks to the global pandemic, so it’s more important than ever that you’re aware of your financial situation. While I know it isn’t easy (accountants and bookkeepers exist for a reason!), there are some small things you can implement today that’ll help you keep on top of your finances in the future.
That’s why I’ve put together my 5 top tips for managing your finances, I hope you find it useful.
1. Keep up with your invoicing
This is one of the most common issues I come across when working with other business owners; they struggle to get their invoices out. Some people hate asking for payment, some aren’t sure how to go about invoicing and some business owners simply forget.
The problem with not invoicing is that you can’t be paid if your clients don’t know how much to pay or when to pay (and you can’t chase overdue payment if you never sent the invoice out in the first place).
If you’re not getting money coming into your business, how can you take care of the money going out of your business?
I suggest setting aside a morning each week to send and review invoices. Even if you invoice as soon as a job is complete, make sure you’re taking time out to double-check everything and cross off the payments that have come in so you can spot any outstanding payments that are due to you. It’s far easier to do it this way than trying to remember everything a few weeks or even months down the line.
2. Regularly review your outgoings
I think one of the first things many business owners did when Covid-19 hit was to review their outgoings and expenses to tighten their business belts. But this is something you should already be doing on a regular basis.
Here are some things to consider when you’re reviewing your business expenses:
- Make sure you know what’s going out and when.
- Can you shop around for a better offer or an alternative provider?
- Are you really getting what you expected from the product or service?
- Can you negotiate for a better deal?
- If you have big expenses at certain times of the year, will you have enough to pay for it then? Do they offer a payment plan?
- Do you really need this product/service right now?
There’s a balance to be found here, ditching your web host for a cheaper provider could negatively impact on your SEO due to decreased page speeds that mean you’re getting less traffic and leads. This could ultimately lead to less revenue coming in!
So do your homework when making decisions over your expenses, some costs are worth it.
3. Use an app to track your expenses
Are you the type who stuffs your receipts into your glovebox? Or maybe you have a box file full to the brim with various bits of paper?
There are many apps out there, many from leading accounting software providers like Xero and QuickBooks, that will allow you to take a photograph of a receipt and upload the details straight to your accounts (or a Dropbox folder, etc).
You should retain the paper receipt in case HMRC need to see it, but it’s a great way to keep track of your expenses as you pay them, rather than at month or year-end.
4. Put money aside for key bills
There’s nothing worse than forgetting your £300 developer licence is due for renewal next week and you completely forgot about it, meaning you’re going to have to use the money you were hoping to spend on a new laptop instead.
Whatever your big expenses might be, if your bank account allows, consider creating pots of money for your key bills so you’re paying for them little and often throughout the year rather than in one big lump sum.
I have a spreadsheet I use to allocate the money in my account and update the balance regularly so I can see what spare money I have – usually none! I do this with my personal finances too and it really helps to save for specific purchases.
5. Move to an online accounting system
Tax will be made digital soon and requiring monthly updates, so getting a system that can feed into this will be really useful. There are various options out there including QuickBooks, Xero, FreshBooks and QuickFile, so do scope them out and see which one you like the look of or suits your budget best.
That being said, I still use spreadsheets and love doing so, and I’m really reluctant to move over but know I need to by next year to prevent the digital tax system from being a headache for me and my business!
Whether you’re ready to make the move to an accounting package now or later, make sure you’re tracking all of your incomings and outgoings so you can stay on top of your business finances.