Spring clean your finances

With spring time now officially upon us and a new tax year under way, there has never been a better time for businesses to spend some time spring-cleaning their finances to help get their firms into ship shape condition for a successful 2010.

 In the rush to grow, it is often the fundamental business practices – such as getting sound credit control procedures in place – that are left at the bottom of the ‘to do’ list. The following checklist is designed to help  businesses get their houses in order, to give themselves maximum chance of surviving and thriving.

Get back to basics

Get your paperwork in order. If your office is full of heaps of paper and collapsing shelves, sort out your filing systems. You need a system for storing all your purchase and sales invoices, a petty cash system and a cashbook to summarise all the information. Importantly, keep your bank statements safe, as they are a record of your payments and receipts.

Invoice on time

Do not delay sending invoices and statements out on time. If you don’t you can’t expect to be paid on time. To be effective you need to be efficient. Keep a record of all ongoing projects so that it will be easy to raise an accurate invoice. Always ask your customer for a purchase order number and quote that on your invoice. Finally, raise the invoice immediately after the job has finished making sure you send it to the right person at the right place and stating very clearly the date payment is due.

Take control of your credit control

Very few people enjoy getting tough on credit control but it is vital to the success of your business. Perform credit checks on new customers and set sensible credit limits. If your customers start delaying payment, call them just before payment is due. If they make a part payment, acknowledge receipt of this but ask for the balance. If your customer queries one item on an invoice, insist on full payment of the rest of the order. Finally, if in doubt, stop all credit until payment is received.

Look at new funding options

Is your business funded in a way that will carry you through temporary difficulties whilst allowing you to take advantage of growth opportunities? If you are stuck with a bank overdraft that is repayable on demand and not flexible enough to cope with the demands of your business then consider more innovative methods of funding, such as invoice finance. Invoice finance allows businesses to raise finance based on the value of their outstanding sales invoices, paying up to 85 per cent of the value of those invoices as they are raised. The invoice financier then chases payment for you – freeing up your time to get on and run your business.

Review your suppliers

The next step in your annual overhaul should be to review the prices your suppliers are charging you. Think what effect a five or ten per cent reduction in costs could have on your profits. Many companies get familiar with suppliers and forget to push them for bulk or loyalty discounts. Take a look at what new suppliers would charge you – you will soon know if you are paying a fair price.

Dust off your business plan

When you launched your company, chances are that you worked hard to produce a winning business plan. Have you ever looked at it since? Don’t forget that this was once the core distillation of your ideas. Review it now! If things have changed since you made your plan, ask yourself why. What have you learnt? Crucially, were your financial forecasts accurate and are you still budgeting effectively?

Call in outside resource

Use your own in house skills for the things they are best at. If you lack time and/or resouce, get outside help. You undoubetdly will get results far quicker.

Running a business is a constant juggling act. Many are severely under-staffed, which means that the business basics can be overlooked. When you consider that one third of new of companies fail in the first three years you start to appreciate how time invested in getting the basics right is time well spent.