As we head into the warmer spring months leading up to Christmas, it’s not just our homes and gardens that benefit from a good clean-up. Spring is a great opportunity to take a closer look at your small business finances and give them a thorough refresh too. Just like pruning shrubs and removing weeds to prepare your garden for summer, now is the perfect time to tidy up your financials to set your business up for success in the busy months ahead.
Here are four key steps to help small business owners get their finances in order:
1. Set Aside Time to Review Your Expenses
Just like any good spring clean, you need to dedicate time to sorting through your finances. Set aside a few hours to go through your expense records and analyse where your money is going. Are there any subscriptions or services you’re paying for but not using? Are there areas where costs have crept up without you noticing? Reviewing your expenses regularly can help you identify these areas and take action to eliminate unnecessary spending.
By pruning back unnecessary costs, you can free up cash flow and reallocate funds to areas of your business that will generate growth and add value. This could be an investment in new technology, hiring additional staff, or enhancing your marketing efforts.
2. Evaluate Your Essential Spending vs. Non-Essentials
After reviewing your expenses, the next step is to categorise them into essential and non-essential spending. Essential expenses are those that keep your business operational—rent, utilities, payroll, inventory, etc. Non-essential expenses might include things like premium software subscriptions, high-end office supplies, or excessive travel.
This doesn’t mean that all non-essential expenses should be cut entirely, but it’s a good idea to evaluate their value to your business. Are they contributing to your bottom line, or could you do without them, at least temporarily? Cutting back on non-essential spending can help you maintain a leaner operation, which is particularly important if your business experiences seasonal fluctuations or if you’re preparing for an uncertain economic climate.
3. Create a Budget for All Priorities
With a clear understanding of your essential versus non-essential spending, it’s time to create a budget that aligns with your business priorities. A well-crafted budget not only helps manage your cash flow but also ensures you have a financial roadmap to guide your spending decisions throughout the year.
When creating your budget, include all your anticipated expenses and set aside funds for unexpected costs. Don’t forget to allocate money for growth initiatives and emergencies. A budget is a living document that should be reviewed and adjusted regularly to reflect any changes in your business environment or strategy. By proactively managing your budget, you can avoid financial surprises and stay on track to meet your business goals.
4. Set Goals and Seek Accountability to Stay on Track
Finally, set clear financial goals for your business and develop a plan to achieve them. These goals could range from increasing revenue and cutting costs to building an emergency fund or paying down debt. Whatever your objectives, make sure they are specific, measurable, achievable, relevant, and time-bound (SMART).
Once you have your goals in place, seek accountability to stay on track. This could mean scheduling regular check-ins with your accountant, setting up automated alerts to monitor spending, or even joining a business network where you can share your progress and get advice. Accountability partners can provide motivation and ensure you don’t veer off course.
Additional Tips for Financial Spring Cleaning
In addition to these steps, consider the following strategies to further refine your business finances:
- Review Spending Habits: Regularly evaluate your spending to identify patterns and habits that could be adjusted to save money.
- Check Your Emergency Fund: Ensure you have sufficient reserves to cover unexpected expenses or downturns. Aim for at least three to six months of operating costs.
- Consolidate Debt: If your business has multiple debts, look into consolidating them for a lower interest rate or more manageable repayment terms.
- Track Your Progress Toward Long-Term Goals: Regularly review your progress towards goals such as saving for expansion, paying off loans, or investing for future growth.
Spring is the perfect time to rejuvenate your business’s financial health. By taking these steps now, you can position your business for a successful year ahead and enjoy the peace of mind that comes from having a clear financial plan. So, roll up your sleeves, dive into your finances, and get ready to enjoy a prosperous spring and summer season!
We can help
If you need advice and guidance about your business financials, please contact our team on 03 9888 3175. We will get you sorted.