With the start of a new financial year it’s a good time to review your business. The key is to focus on the ‘big picture’ rather than get bogged down in too much detail. Here is a five point checklist to kick you off:
1. Goals and strategic planning
Set your goals for the year. Be specific (but brief) so you can work towards them. What will be your strategic plan to work towards those goals and who will be responsible for implementing them? It’s also good to have a calendar that paces out this implementation with milestones as well as including other major events like holidays you are planning.
2. Budget and cashflow forecasting
Based on your goals, you should set up a budget to keep your financial outcomes accountable. Consider ‘backward engineering’ your budget where you decide on the profit you would like for the year first. Deduct this profit from your anticipated sales to determine the amounts of funds you have available for expenses. Then be disciplined to keep within this expense constraint.
Based on your budget, work out how your cash will flow throughout the year. Is an overdraft required at any time during the year when the cash is tight? If so, it’s best to sort it out before it’s needed. What will you do to maximise the return on surplus cash if there are times in the year this will happen?
3. Cost review
Are there areas in your expenditure that need tightening e.g. pick your five largest expenditure areas and see if they can be reduced. If you don’t control costs at the beginning of the year, it is harder to adjust as the year goes on to ensure you achieve your budget targets.
Review your pricing. Clients are more tolerant to price increases at the beginning of a new financial year as they acknowledge costs increase year on year. If appropriate let your clients know in writing that they should expect an increase before they receive their next invoice and outline the reason why. It’s also a good opportunity to remind them what additional services you can offer them.
5. Team performance appraisals and remuneration review
Similarly to reviewing pricing for clients, more so than any time in the year (other than their birthday if award-based) team members may be hoping and expecting to be reviewed and their remuneration adjusted. This could impact your review of your pricing noted above.
Of course seek professional advice with any of the suggestions above. Your accountant or financial adviser can provide worthwhile strategic advice and help keep you accountable to your plans.