The COVID-19 crisis has reminded us all that we can never know what’s around the corner. We can’t predict the future, but we can be certain that – just when we’re least expecting it, something will come out of the blue to catch us off-guard.
It’s as true for business as it is for life generally, and although you can’t anticipate what form an upcoming challenge might take, you can make sure you’re as prepared as you can be to deal with it when it arrives.
As a business owner, you have responsibilities that extend beyond your legal obligations. You have a duty of care to all those who depend on the success of your enterprise, including your family, business partners, employees, clients, suppliers – not to mention yourself. Trading without a clear understanding of how your business is doing financially is not just irresponsible; it’s borderline negligent.
Crucially, this means being in control of your finances. Any challenge – or indeed any opportunity that presents itself is likely to require having to make quick decisions, and these need to be informed by a detailed knowledge of your financial situation.
Are you as informed as you should be?
Do you have up to date financial data at your fingertips? Will you be ready to take decisive action when the next challenge or opportunity arises? At the very least, you need to be able to answer some simple – but vital – questions at the end of each month, including:
- Did I make money?
- How much did I make?
- How much do I need to put away for my tax bill?
- How much is left for me?
- What are my outstanding debts?
- Do I have enough cash in the bank to pay for my upcoming commitments?
- Are any of my overheads higher than they should be?
- Am I on track against my business plan?
It’s remarkable the number of business owners we meet who don’t have any real insight into their finances. They’re content simply to send out invoices as projects are completed, pay bills as they arrive, and once a month check that their bank balance is still in the black.
Understandably, many entrepreneurs will have a limited knowledge of finance matters and accounting procedures. But trying to run a business with little or no management information is like trying to pilot an aircraft without having any flying experience or instrumentation to reference.
In our experience, business owners working this way usually say it’s due to one of three reasons – but none of them is a valid excuse:
- I’ve been doing it this way for years
Perhaps you have. But while this ‘ignorance is bliss’ approach might work while times are good, if things go wrong, you won’t have the information you need to take corrective action fast.
- If you’re not on top of cash flow, even a slight bump in the road – like a late payment, a bad debt or losing a client might trigger a cashflow crisis that could quickly spiral out of control.
- If your invoices aren’t being scrutinised, how can you be sure you’re not paying more than you need to?
- If you’re not allowing for tax, what happens when you get a demand and haven’t accounted for it?
- How will you grow your business if you’re not budgeting for the things you need to make it happen?
- I don’t’ have the skills
There was a time when managing accounts involved manually transcribing transactions into ledgers; when getting a snapshot of the financial position of a business or preparing a cashflow forecast took many hours and required professional knowledge.
But it’s not like this anymore. Accounting software makes it easy for anyone to produce simple management reports in a matter of seconds. Not having a head for figures or even a basic understanding of finance is no longer an excuse for being uninformed. Today, you can get solutions that integrate with your bank account and automate your bookkeeping, allowing you to allocate and track expenditure, produce invoices, run comprehensive management reports and much more – for less than £10 per month!
- I don’t have the time
Being in control of your finances and having access to vital management information needn’t be onerous or time-consuming. As a small business owner, you’re likely to be ‘time poor’. By using technology and automating financial processes, your business will be more efficient, and you’ll have more time to spend doing the things that inspired you to start your business in the first place.
Fulfilling your statutory obligations and understanding what’s going on in your business means having to spend time on mundane, repetitive tasks. However, with minimal investment in technological solutions, staying on top of these essential chores needn’t take you away from doing what you love and from earning money.
Using technology to automate processes will get tasks done more quickly and more accurately than you could ever do them yourself – and will give you back time you can use to focus on generating revenue.
If getting management information on your business is taking up too much time, or if you’re neglecting it altogether, we can help.
Are you using QuickBooks or Xero? We can give you cash flow forecasting software for FREE, so you can run a three-month cashflow forecast at no cost whenever you want.
Have you yet to adopt cloud-based accounting software? We can recommend the most appropriate solution for your business, and we have access to introductory and long-term discounts for all major products. Even if your requirements are very simple – for example, you may not need VAT reporting or integrated invoicing – there are solutions from as little as £5 per month that will still provide you with management information.
For more information on using technology to work more efficiently, read our blog Time Is Money: Use Technology to Work Smarter!
Remember, the Inca team are here to help and support your business throughout the COVID-19 crisis. Whether you have an accounts query or just want a chat, we’d love to hear from you!