In times of continued high inflation, rising interest rates and the current cost-of-living crisis, all businesses need to be taking a hard look at their finances and the systems they have in place to monitor their results. Cash is always king. But you can’t control other areas of your business if you are not monitoring them. By Alison Jones, Partner of Kreston Reeves
Here are some thoughts on areas that you really need to focus on:
Retention of staff
Your staff are your most valuable asset so do ensure that you are looking after them. As well as providing flexible working, there are many little extra things that you can do to improve their lives during this current crisis which will help you retain them. It does not cost much but providing breakfast for example can have a huge impact on your staff.
Do you raise interim invoices or are your clients on standing orders? This is a good tool to ensure that cash is still being received on a regular basis.
Is this up to date in the current market and have you added an inflationary rise to your prices? You need to be aware of your competition to ensure that you do not price yourself out of the market but do keep an eye on them to ensure that you have not been left behind. Some of our clients also consider the risk of each sale/product and they will add a premium when this is considered to be high risk.
When was the last time that you checked your product costings and is the markup still what you are expecting? Does this markup then enable you to cover your overheads, or do you need to be either increasing your prices and/or cutting costs?
When was the last time that you reviewed all your processes for efficiencies? Could AI be a useful tool to help you improve this? Most of our clients now use Xero to record their financial information and this uses AI which has significantly reduced time, keeping their accounts up to date. There are lots of other pieces of software using AI that could help with other areas of your business.
Can anything be automated? Dext, for example is a piece of software that automates recording expenses and uses AI to post them into Xero. Is there any other part of your business where automation could help?
It is very tempting to reduce expenditure in this area, but this is not always a good plan as you can quickly be forgotten if your competitors are continuing with their marketing. Are you marketing in the right way and in the right place? Would your business benefit from being on TikTok or YouTube? You may be surprised by how much these platforms can generate more business for you by reaching a different market and increasing your profile.
Do you monitor how much business this creates? Does this need refreshing? Do you ask for testimonials or recommendations, including on Google, as these are powerful tools for encouraging new clients. Don’t be shy, you are good at what you do, and the world needs to know!
Review your contracts
Review your contracts to ensure that you are paying the best prices. Do you need to change your utilities supplier? If you do not have the time or experience to review these in detail, there are firms that will audit your contracts and can suggest cheaper alternatives.
You should also review your financing arrangements, including your loans. We can perform an audit for you including suggesting alternative providers which could help you reduce your costs in this area.
Eliminate all wasteful processes
It is estimated most businesses waste the equivalent of 20-30% of their turnover each year. Regardless of the type of business you run, a waste audit includes looking at overproduction and over-servicing, waiting times, transportation, inappropriate processing, unnecessary inventory and motions, defects, and mistakes. Reviewed collectively, these can lead to some significant cost savings as well as better service for your customers and clients.
Do speak to your accountant? They have a wealth of knowledge and experience in many of these areas and they can help you by monitoring your results with you and providing a sounding board to help you make decisions.
And finally, this is a stressful time for everyone but please don’t forget the acronym – TEAM – together everyone achieves more. And you are not alone with the right team of advisors working with you.