As Christmas fast approaches, businesses everywhere are likely to see a much quieter period as employees and clients alike take time off for the break. This also means that the revenue of small businesses is likely to reduce, and most likely will continue into January as people recover from New Year festivities returning to work slowly mid January. Plus, with staff and client celebrations, your business expenditure is likely to increase.
This is the time when many businesses lose out from not having planned their finances. If you think you could use some help, here are some expert bookkeeping tips to help you.
1. KNOW YOUR CASH FLOW
The first step is knowing exactly what is coming into your business and what is going out. Keeping your receipts is center to this – Ideally you have designated one online folder where all your receipts go rather than distributing them in random places such as email, desktop, cloud drive.
Or, better still we recommend using software such as Xero. You can use their receipts app or we recommend and partner with Receipt Stash, simply photograph your expenses and send them straight to your Xero account.
Cash is King (or Queen as we like to say) so knowing your cash flow is crucial to your business and does not just mean keeping track of your bills – it also means knowing precisely what products or services you have sold to your customers.
You can even use Xero’s built-in project management software - projects for this as well as track your expenses and income against jobs/departments.
2. TRACK YOUR BUSINESS EXPENSES
While it isn’t always possible to avoid unexpected expenses, you should try to forecast your business expenditure for the quarter or year as far as possible. One way to do this is by keeping records of all your expenses, including supplies, payroll, insurance, rent, etc. You should also budget for an emergency fund that you can use if any unexpected bills crop up.
We partner with RT Reporting which allows us to report actually with cashflows and to try different budget scenarios and this also links seamlessly with Xero.
3. CHASE LATE PAYMENTS
Now is the time to check and give your customers a friendly nudge about what they owe you. Remember, those who shout the loudest get paid first. Do not be afraid to follow up with customers who are behind on their payments, especially if they are in the habit of not paying on time.
If you use Xero, ensure you leverage its built-in invoice reminders and check your aged payables every week or month to ensure customers don’t fall behind. You can even add a late payment fee for overdues if this is in your terms and conditions to do so. At the same time, be sure that you pay off your creditors promptly – and if you are struggling to do so, reach out to them and arrange more favorable payment terms.
4. CHANGE YOUR PAYMENT TERMS
We recommend to all our clients to alter their payment terms to benefit you more. For instance, you can charge an upfront payment before a project begins, and even charge a deposit for materials, especially if there are some project expenses you need to cover at the start.
We recommend also that you reduce your payment terms from, the traditional 20th of the month following to 7 days or 14 days. Be sure to include all this updated payment information in your invoices to avoid confusion and your terms and conditions.
This way you get cash in to pay your suppliers, staff wages and other outgoings on a regular basis while paying your main suppliers on agreed terms monthly. This keeps the cash cycle going around.
5. ENSURE YOU GET THIS RIGHT- DEDUCTIONS ON EXPENSES
Some of your festive expenses might be claimable, and some are not. Before going all out on your Christmas celebrations, therefore, look up which expenses (including client presents, staff presents, office celebrations, and cash bonuses) have deductions and which have extra tax liabilities attached. This will help you plan your expense budget better so that you can have a good time without dreading the bill.
7. PRIORITISE TIME FOR ADMIN
Admin or Bookkeeping related tasks might be last on your priority list right, especially as they are not income generating, however in order to avoid having to wade through a pile of paperwork right over your Christmas holidays, it is ideal that you set aside some time for bookkeeping tasks every week. Or better still get some help with systems and outsource these tasks and ensure that you prioritise this so you can work more in your business not on it.
An experienced bookkeeper will be a life saver, will save you time and money and advise you on making the most of your expenses.
Thankfully, Beyond Your Numbers are ready to take care of you and all your bookkeeping and advisory tasks and enable you to get back to why you got into business for in the first place. If you are ready to chat, please contact us, and we will get back to you for an no-obligation chat.