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Get your business finances fit for 2013

POSTED: 21st June 2013
IN: Guides
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As we approach the halfway point of the year, it is a fitting time to conduct a review of your financial position and put in place any actions to get your business primed for the rest of the year.

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To get your business finances fit for the rest of 2013, the first thing to do is summarise and review your financial position for the year so far.

Review your finances

Once your business management accounts have been finalised and agreed, analyse them and find out if you have reached your financial targets that you set out at the start of the year.

Sales ledger review

Referring back to budgeted sales at the start of the year, take a look through your sales ledger to identify that you are getting in the right level of sales for major established customers.

Also, refer back to targets for new customers to check that new business is coming in at the required rate.

Review your credit control to ensure cash is collected in a timely manner and to see if there are any ‘problem’ customers that are not paying or disputes over sales and services that could impact on revenue.

One other option is to consider using an invoice financing company to manage your credit control or to offer discounts for prompt payment.

Purchase ledger review

Check your costs to ensure that you are not spending over budget. Check how many days after receipt of goods or invoice date you are paying your suppliers. Could payment dates be pushed out to help with cashflow?

Identify problems and review assumptions

From the analysis of your firms’ finances, potential problems can be identified such as whether sales need to increase, costs need to fall or a problem with a supplier or customer needs addressing.

The review will also provide insight into whether your assumptions for the remainder of the year need to be reviewed.

Are your sales targets realistic or has there been any changes to the business environment that means they need to be changed?

Has a new business started that is taking trade away from your company or are you likely to see a rise in demand for any reason?

Both of these factors could mean a change in sales targets is required and could mean that you need to hire or let go staff members which will impact on the costs to your business.

Similarly has there been a big rise in costs, such as fuel or one vital component of your production process which will raise purchasing costs.

Address financial gaps

The review will pinpoint the areas in your finances that need attention.

Sales are the key areas for any business, so it makes sense to prioritise this area. Review the rate at which new business inquiries are turned into actual sales and look at whether key customers are buying at the expected level. If not then speak to your sales team to find out why and what you can do to remedy the situation.

Sales levels also dictate much of the costs to the business because a firm needs to pay for supplies, staff and other costs before they receive payment.

After sales, the next priority should be a thorough review of the costs incurred by the business. Are there costs that can be completely cut out or at least reduced?

Look at the interest your business is paying on debts or loans and see if there is a cheaper way to refinance them.

Adapt your budget and cashflow forecast

Once you have agreed which areas of the business need addressing and what actions you will take and what is the priority you can update your financial statements in an informed manner to accurately reflect the up-to-date position of your business.

Update your budget and sales targets to reflect the changes you will make in a realistic way to try and reach your new financial targets for the year.

Produce a new cashflow forecast that accurately and realistically reflects the expected costs and receipts coming into the business for the rest of the year.

Produce action points

The review will bring up a number of improvements that can be made to the business to help performance and improve finances.

Draw up a list of action points for different parts of the business that each have a financial objective and will contribute to getting your finances fit by the end of the year.

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