New Year is of course the time for making resolutions, some of which can be much more successful than others! However, it is also the time of year when business owners can make lasting changes that will improve profitability.
What New Year’s resolutions should you consider making for your business?
Tighten up your credit control
Late paying and of course non paying customers create considerable cash flow problems, so we would recommend that you carry out credit checks on all new customers. If possible, only grant credit when your relationship is well established and make sure that they agree to your credit terms in advance. You must avoid granting too much credit, it may be possible to request part payment upfront when dealing with higher value orders, or staged payments for long-term contracts.
Make sure that customers receive your invoices as soon as possible, because delays will affect your cash flow. Your credit control system should tell you when an invoice is paid or overdue, so you can chase late payment.
Review your prices on a regular basis
Your prices should allow you to maximise your profits, but at the same time they should remain attractive to your customers. You should review your prices at least every quarter, so that they remain competitive. You might be reluctant to increase your prices for fear of losing customers, but your business will become less profitable if your costs increase.
Knowledge of your customers and of your competitors prices is essential when deciding whether to increase or decrease your prices.
Work with cash flow forecasts
Many business owners fail to address cash flow problems, because their financial records are not up to date or because they don’t work with cash flow forecasts.
Creating reliable cash flow forecasts, based on realistic monthly costs and sales estimates, allow you to identify periods when your business risks running out of cash. After implementing this, you can take steps to avert a cash flow crisis before it’s too late. You might need to cut costs or arrange finance to get you through a short-term cash flow problem but doing nothing isn’t an option.
Update your business plan regularly
Many owners create a business plan when starting their business, only to leave it to gather dust. In other cases, businesses create or update a business plan when seeking funding or finance. However, having a well-produced, regularly updated business plan can keep you focused on your long-term development strategy and key business goals, so can help keep your business on track.
We would strongly recommend that you update your business plan and commit to keeping it updated. Looking at your business plan regularly allows you to remind yourself of what you’re trying to achieve and by setting targets and objectives, you can judge how well your business is performing.
These really are New Years resolutions that are worth making, changes which could make a big difference to your business in 2019 and beyond.
Author – Alister Biggar, Partner JRW CA