How to Sharpen Your Business’s Financial Insight

As we head towards the end of the year, owners of start-ups and small businesses have the opportunity to look back on their achievements and plan how they can fuel success in the coming years.  

The most important element to get right is the company’s finances – with the right financial insights, you can reduce costs, and improve revenue and profitability.

Conversely, without a firm handle on your company’s financials, you could amass unnecessary costs and losses, miss out on exciting business opportunities, or run into trouble with tax authorities.

Here are a few suggestions to sharpen your financial insight and position your business for a successful year:

1. Invest in financial skills and knowledge

If you’re running your own business, you take ultimate responsibility for financial decisions and outcomes. Even if you can work with a trusted accountant, it’s in your best interest to understand how to read a balance sheet and income statement, manage cash flow, and generate forecasts and budgets. This will help you ask the right questions and make informed decisions. Also, you may consider taking an introductory accounting class to understand the fundamentals.

2. Use the right software platform

If you are still running your business on paper and spreadsheets, it’s time to look for automated accounting and payroll software to help you capture accurate financial records and save heaps of time gathering slips for your accountant.

Frequent software updates will keep you up to date and compliant. Cloud-based solutions can be purchased as a monthly subscription and make it easy to manage your admin and finances.

3. Plan and forecast

Before the end of the year, set your goals and strategies for next year. If you have an accounting solution in place, you can easily generate a cash flow forecast for the next 12 months to ensure you do some well-informed planning.

You will, for example, be able to forecast growth in the year to come and identify areas where you could optimise profit margins. You’ll be able to see whether you can afford to onboard new team members, whether you should invest in expansion or new product lines, or where to cut back on monthly expenditure.

4. Work with a professional accountant

If you’ve run your business in DIY-mode for a while, it’s likely you engage the services of an accountant only when you need to prepare annual financial statements ahead of filing your tax return. But it can be helpful to get professional financial advice to support your decision-making at critical moments in your business’s lifecycle.

Your accountant can help draw up a sensible business plan when you decide the time is right to embark on an expansion drive. Your accountant can also help prepare financial statements to present to a bank or investor when you want to raise capital. He or she can also help create realistic budgets and forecasts.

All small business owners can benefit from investing in systems, people and processes that help them make the right financial choices. Financial insight is the key to growing your business, improving returns on your investment, and ensuring your business’s sustainability.