How to Secure Your Company’s Financial Health in 2020

How to Secure Your Company’s Financial Health in 2020

2020 has been a difficult year for many businesses. The COVID-19 pandemic struck out of nowhere, and many businesses have collapsed while many more are just hanging on. Taking care of your company’s financial health is always important, but it’s even more important when there is so much uncertainty around. Here are some ideas for securing your company’s financial health this year.

Improve Cash Flow

One of the simplest ways to improve the financial health of your business is to improve cash flow. Do your clients pay you on time? Delayed payments can play havoc with your cash flow.

This could be a good time to revise your invoicing process. Do you have a strict follow-up process in place when an invoice goes without being paid? This is something to consider. You might want to use specialist invoicing software that does this automatically. You could even consider giving small discounts to clients who pay on time.

Ensuring you are getting paid on time is especially important during uncertain times when cash flow can become a serious problem.

Create an Emergency Fund

If you haven’t already, make 2020 the year that you create an emergency fund. If you already have one, put a strong focus on increasing the amount in the fund.

An emergency fund allows you to deal better with unexpected situations that arise. Hopefully, we won’t be experiencing another pandemic anytime soon – but other unexpected problems can arise. An important client might go out of business, a crucial member of the team could leave, or a cyberattack could freeze your activity.

With an emergency fund in place, you can get back to business sooner. Start building a fund by putting aside as much as you realistically can. Worst-case scenarios may never happen, but it’s always best to be prepared.

Cancel Unnecessary Subscriptions

Now is a good time to look at your ongoing commitments and decide whether you really need to continue with them going forward. Start with the software subscriptions that you have signed up to and long-term contracts that need to be renewed soon. Do you actually need them? Don’t get stuck paying for something you don’t need.

Keep Close Check of Your Finances

One of the simplest things you can do is to take some time every day or week to monitor the financial position of your business. Keep a close eye on how much money you have right now, the sales you are making, your stock levels, and more by following good bookkeeping practices. Then make an effort to review this regularly and compare with your targets. 

Having a clear idea about your day-to-day costs will allow you to spot problems much sooner and take action before they become more serious.

Don’t Face Unnecessary Fines

When times are uncertain, you don’t want to be hit with unnecessary fines, and good financial organisation will help prevent this. This involves being extra careful about meeting your tax deadlines because failing to do so can lead to fines.

It also means keeping track of changes to regulations. For example, do you work with contractors? Are you aware of the changes in IR35 that came into place in April 2020? Failing to keep up with changes like this could lead you to face fines unwittingly.

Keep ROI Top of Mind

Whenever you make an investment, make sure you consider the return on investment. This is so important for businesses of any size, but especially small businesses, and it becomes even more important when facing difficult times. If the ROI is not worth it, you will be spending money unnecessarily.

Get Professional VAT Advice

Getting VAT advice is a great idea for businesses of all sizes. VAT can be complex, and there may be steps you can take to save money that you have not yet considered.

You may find that registering voluntarily has several benefits for your business. Or you might want to consider the Flat Rate VAT scheme. There are many potential savings to be made, so make sure you are not missing out.

Carry Out Proper Tax Planning

Tax planning is essential in order to make sure you are paying only what you need to but no more. Proper tax planning leads to better organisation in your business and can lead to savings. This includes considering options like tax-free benefits when it comes to treating your staff or holding annual parties.

Plan for Next Year

Now is the time to revisit your business plan – and if you haven’t got one yet, make sure you create one. Look at your business plan in detail and work out where you are going next year. Take a close look at how you will finance your business and how much you will need. Once you have a solid business plan in place, make it a habit to check it monthly and update is as necessary.

Get Help from an Accountant

There are lots of steps that you can take yourself to secure your company’s financial health in 2020. But it’s also essential to get professional help if you want to make serious improvements and plan more effectively for the future.

At Plummer Parsons, our experienced accountants can provide you with a range of financial services including advice and guidance on taxes, budgeting and more. Speak to us today and make sure your company is in good financial health going forward.