It’s the start of the New Year and no doubt, like many others, you have promised yourself that you would do a few things differently or a little better this year. So why not make a few New Year’s resolutions about your business? Entrepreneurs face many business and financial management problems as they manage their business affairs – here are a few promises you should be making this year!
1. Promise to prepare a budget this year – a budget for your business is your plan of action. It holds you, your sales and operational staff and everyone else involved in the business, accountable for sales and expenditure targets. Take the time out at the beginning of the year to carefully create a budget and then monitor actual results against your budget. Remember, your budget needs some careful thought; otherwise the whole exercise loses value.
2. Promise to better manage your cash flow – a profitable company is meaningless if there is no cash flow to support it. Your firm will fail if you think only of the bottom line and ignore cash flow. Proper cash flow management does not happen of its own accord – it requires a disciplined approach. Why don’t you resolve to set time aside every day, preferably first thing in the morning, to:
A. Monitor your debtors – debtors become more and more difficult to collect the longer they are outstanding. The first day the account becomes overdue, they need to be called. Better still, get your debtors person to phone two days before payment date to remind them that payment is due.
B. Plan your cash flow – on a daily basis you want to know what you expect to collect in the next week or two and what payments need to be made. This way you will know in advance if there is going to be a squeeze and plan for this in advance.
Formalise this process – have a worksheet that monitors daily, weekly and monthly expected inflows and outflows. The most important thing to recognise about this process is that it is a discipline. Once you are into the discipline of planning your cash flow on a daily basis, it becomes second nature. You will be amazed at what a change to your cash flow this can bring about.
3. Promise to learn to better understand financial information – many business owners are too busy to check, or just don’t understand their financial statements. Make a commitment to learn what the profit and loss, balance sheet and cash flow statements mean to your business and use them as a guide for future action. Do not delegate that action to your bookkeeper or accountant. We can help you in this process.
4. Put some time in for YOU in the calendar – as an entrepreneur, it is easy to get yourself “lost” in the day to day detail of running a business. Pre- arrange time in your calendar to get away to:
A. Think about your business and its direction. Give yourself space to get the “helicopter view”. Work on your business; not just in it
B. Learn something new and keep yourself up to date
C. Do things that will keep you motivated and inspired
5. Consider ways to protect your business and personal assets – as an entrepreneur, your business wealth and personal wealth are often intertwined. Take some time to step back and see whether the business structures you have in place are still appropriate. Some things to consider are:
- Do you need to consider incorporating your business?
- Do you need a trust to protect your assets against creditors?
- Do you have any sureties in place that may need to be re-visited?
- Do you have an estate plan in place?
- Is your will up to date?
Sticking to 5 resolutions is a lofty goal. Stick to the tips above and you and your firm will prosper in 2014!