If you own a business, why not use the data you’ve collected all year to give your business a health-check?
I suggest you start with your costs; some business owners will have the fancy accounting software that gives year-on-year comparisons for certain items and others will have simple spread sheets. But whatever you use, have a look at the items that have blown-out and find a reason for the size of the cost. Away from the largest items, it’s often the week-to-week costs that pile up and the end of year is a good time to bring them under control: mobile phones, taxi accounts, electricity, stationery, vehicle fleets and petrol/diesel bills.
They all count and if you can’t find a way to reduce them, get an expert adviser to help out. Once you’ve identified your reducible costs, focus on your revenues: some of your biggest earners for the year may have cost you money. If you don’t have the skills to analyse whether you are making money, get an accountant or consultant to measure them. And while testing your revenues, look also at your end-of-year receivables file: the largest clients are not always the most profitable, and a large cheque does not mean you made money on the transaction. Again, a good adviser will test your receivables book for average days and tell you what to do about the delinquents who are costing you money. Also, use this time to have a look at what debt is costing you.
Many small business people are slack when it comes to their costs of capital, and if you allow your firm to pay too much for overdrafts, company credit cards and loans, you are simply leaking money. Some of the worst cases I see are from vehicle and equipment leases, especially when the business has taken vendor finance. I urge business owners to use the end of financial year to get an accountant or finance broker to test their debt facilities and make sure they are paying the right amount. The end of the year is a good time to ensure you have a proper spread of business insurances.
Business insurance is also complex and the best way to make sure you have all the inclusions and are not caught in the exclusions, is to use an insurance broker. A good way to waste money is to be under-insured. Finally, what about you? Is the business yielding what you expected? It’s your risk capital in this venture and you must be paid; so grab an expert adviser, and put it to the test.