5 ways to avoid financial horror this Halloween
Halloween is fast approaching and everywhere you look has orange pumpkins, ghosts and zombies.
It’s also the time of the year that many SMEs and Directors are submitting their year-end accounts to Revenue. It can be a daunting time for some.
However, let’s not get spooked. Here are five top tips for managing your finances as you come closer to Halloween time and beyond.
- Know your Breakeven Point
Every business has a break even point. This is the point at which your total revenue equals total costs or expenses.
At this point there is no profit or loss, in other words your ‘break even’. How much can you survive on to just get by.
This figure/point needs to be very central to your business. Every business owner should know that when they put the key in the door that they need to charge x amount to breakeven that day.
While seasonal variations and even unexpected items affect your cash flow, you need to know on a month by month, week by week basis how much you need to cover expenses…the very minimum you need.
- Invoice Quickly
We know it sounds simple but you’ll be amazed at how many businesses don’t invoice quickly enough.
Invoicing quickly is the best way to manage your cashflow.
Just as you arrive at the till of a restaurant or shop, you should invoice straightaway.
When you deliver a product or service, prepare the invoice and send it.
Cloud accounting software helps with this as you can access your accounts system online.
Your supplier’s name and address are stored in it, codes of services or products are saved so it doesn’t take much time to draft the invoice.
You can even send it from the system.
However, whatever system you use, do not wait to send an invoice. The sooner you send it, the sooner you’ll get paid.
- Start Using Accounting Software
Good accounting practices take time. Using accounting software can help business owners get a handle on their finances simply and with minimum effort.
You can save a lot of time and money using accounting software.
Add up your hourly cost and you’ll soon see how much you can save and how much you can earn by investing in accounting software.
- Understand your Debtor Days
Understanding debtor days is crucial to cashflow.
Cashflow is at the heart of a business. Many profitable businesses have gone bankrupt because of cashflow.
Keep an eye on your debtor days. Ensure you are setting due dates for payment and chasing as soon as that date is passed.
If it’s taking too long, make changes. Today.
- Set KPIs
It’s never too late to set key performance indicators, or KPIs.
How do you know if you’re ahead, behind or staying the same? Benchmarks like these need not be complicated at the outset.
They can be as simple as managing Debtor Days (like point no. 2 above).
Another one to set is to tell you whether you are pricing your goods or services correctly.
Your gross profit margin should be enough to cover fixed expenses, your costs associated with making the product or delivering the service.
What gets measured gets done. Avoid financial horrors with these five top tips.
If you’d like to discuss anything in this article, please get in touch with us here at The Hollies Bookkeeping Services on 01743 790086.