It may well have felt that January was the longest month ever, and we’ve only just tip-toed into February feeling tired and lacking in vitamin D! Whatever you may feel like doing, don’t put off thinking about how you can help your business in 2022, whether you want your business to grow or just to maintain the status quo.
Here are our top quick and easy tips to move your business forwards.
Make the most of your Xero account
Xero is an amazing piece of accounting software that runs in the cloud and connects to your bank and any other apps that you may use, such as Dext Prepare, which allows you to take a photo of a receipt and upload it to your Xero account. Xero’s aim is to help you to keep up to date with your finances in a really straightforward way. You can log in whenever you have some free time, either on your computer or your mobile phone, to check what has come in or gone out of your bank account, enabling you to see in real time what is going on with your finances. This gives you a clear understanding of your company’s financial position and cashflow and which will give you the confidence to make good decisions about your business.
Xero can be used to get in money faster by plugging into payment systems such as GoCardless or Crezco. This will (hopefully) mean that you can waste less time chasing payments as you can collect by direct debit. Other apps such as Stripe allow you to take credit or debit card payments and connect straight into Xero.
The advantage of using Xero is that it frees up your time, giving you more time to think about your business (or your family, your dog, your hobbies!). Having a greater understanding of your business and its financial position, receiving payments in a more timely manner, and being able to see clearly where your money is going, will empower you to make better decisions.
Think about the future
Once Xero is up to date you can use your accurate data from the past to help you to plan for the future. The last couple of years may have been a bit slow at points due to the numerous lockdowns so you may have to look back at data prior to 2020 to see seasonal trends and how they affect your sales.
You can prepare a monthly budget using your P&L which you can produce in Xero. Then you can forecast forward each month using your knowledge of seasonal trends, as well as factoring in any known costs which are increasing such as heating or transport. Add in any additional staffing costs, for example if you always take on more staff in the summer to help with the busy period. You can also budget for increasing turnover if you have a new product which you think will take the world by storm! You can see how these changes will affect your bottom line, and whether you may need to take different decisions this year.
Speak to your accountant to see how you can better manage your profit
There are many ways that you can take profit out of your business, not just salary and dividends. You may be able to pay contributions into a pension for example. Or there may be some reliefs that you’re currently not claiming. We don’t expect you to keep up to date with tax laws but that is where your accountant can give you advice to help you to bring down your tax bill and give you more money to spend.
Don’t forget your own expenditure
Do you have an idea of where your personal income goes each month? It would be pointless for us to give you tips on improving your business position without us recommending that you take some time out to consider your own personal budget. There have been a lot of changes due to Covid – some of us may have lost our jobs, or been furloughed, making money tighter. Some of us may have saved a packet without the costs of commuting, lunches, drinks after work, the annual holiday and smaller (or non-existent!) parties for the kids.
Get a handle on where your money goes and think about what you and your family need. If you are spending less could you increase your savings for a rainy day? If your income has fallen could you reduce some of your costs? Maybe your business has been struggling, if so could you reduce what you take from the business? Or if your family has grown, have you now got the knowledge at your finger tips to decide to increase what you take out of the business? Our personal and business lives aren’t mutually exclusive, so think about all aspects of your life in unison to ensure that all bases are covered.
Most importantly think about your family needs as well as your business goals. Use Xero to get and to stay up-to-date. Plan for your future both personally and for your business. And ask your accountant for help if you need assistance with planning for the year ahead! Together we can make 2022 a good year!