Small business accounting: Best practices for the new financial year

/ Posted By - Bradleys Accountants / Categories - Business start-ups

As we have stepped into the new financial year, it is the perfect time to take stock of things and chalk out a plan for how you want your business to keep growing. Whether your business had a bit of a downturn, enjoyed a growth spurt, or just stayed steady and you are looking to improve your numbers, here are our favourite small business tips to help you get off on the right note this financial year:

1. Start with your goals

As a first step, take stock of your goals for the previous financial year and how they went. Which ones did you meet? Which ones did you not meet? What were the reasons you could not meet them? Did you exceed any of the goals that you did meet?

Then, conduct a quick SWOT analysis of your business (i.e. Strengths, Weaknesses – these are the internal factors affecting your business, some of which you may be able to change, and Opportunities, and Threats – these are the external factors affecting your business that you will have little if any ability to change) and see how that may impact your goals.

This is an important exercise to see whether your goals are appropriate for your business. And the next step further helps with this.

2. Deep dive into your finances

Take a look at your balance sheet, income statement, and cash flow statement. Ask your accountant any questions you might have – it is vital for you, as the business owner, to know exactly where the money is coming and going in your small business, how much money you can afford to spend at any point, and where your money would be best spent.

If you are not currently working with an accountant (although we highly recommend it), there are software tools that will prepare these records for you. We understand that running numbers may not be your favourite activity, but do not skip this step – you need these records to know your financial position! Contact Bradleys Accountants to undertake this activity for you.

3. Settle all of your accounts

Make sure you have paid all your payables and have collected as many outstanding receivables as possible before the close of the year. This helps keep your books tidy and minimises the balances that carry over into the new year.

In this context, it is a good idea to examine your sales cycle and check how long it takes for a customer to pay you after you have sent the invoice over and have begun the work.

This metric is known as days sales outstanding (DSO), and if it is higher than 30 days, you may want to look at ways to revamp the process so that you are getting paid sooner, such as by offering a discount for early payment or charging a fee for late payment.

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    4. Invest in your business

    Investing in things that will propel your business growth is crucial. However, as a small business, you probably cannot afford to just throw money into things that “might” work. Take a close look at the four main investment areas for a business and see what makes the most sense:

    A. Business development

    This chiefly refers to your marketing and outreach plan to attract a steady stream of customers. Assess how well you could cater to your customers’ needs last year, how the market has changed this year, how customer demands have changed accordingly, and how your product can continue to delight customers, given their changing demand patterns.

    B. Skill building

    The people you have on board should be adequately equipped to deliver their best in their assigned roles. Ask your team whether they are struggling with anything, and check whether there are any training programmes or products that might help with those.

    C. Technology

    Assess how well you are equipped technologically to service your customers rapidly and accurately. If you plan to grow your business significantly this year, you should check that your tech is scalable enough to grow with you. You should also check on the kind of data security you offer, as customers share their personal data with you.

    D. People

    As they say, your people are your biggest asset. Take a look at whether you have the right people filling the right roles, whether any team needs more manpower, and whether working with freelancers or contractors might be a good idea for specific tasks.

    The latter might be a good idea if there are any temporary or seasonal staffing needs – there are agencies you can work with who specialise in finding short-term hires for those needs.

    In addition, make sure to bring on any new employees a month or two in advance of when you need them so that they have enough time to settle in and get used to how your business works.

    5. Invest in yourself as a leader

    As the leader of a small business, it is crucial for you to regularly update your own industry knowledge, communication skills, and general business acumen. Invest in courses, books, podcasts, webinars, or one-on-one coaching sessions to up your know-how.

    Use a DIY accounting checklist to sort out small business accounting. Treat this as a priority by scheduling some time for it every week. If you are new to this, you could ask fellow business leaders for their recommendations or reach out to an industry mentor for advice.

    Over to you

    Which of these small business accounting tips do you already follow on an annual basis? Which do you plan to start this time around? While this list may seem intimidating, remember that you are already in the best position as a business owner to understand what it needs.

    Tap into the business vision and mission, set doable goals accordingly, and ask Bradleys Accountants for advice on how to make the financials work for those goals. With a little prep along these lines, you will surely have a fruitful 2023-24. Contact us today!

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