Nobody loves your business like you do... but what is it hiding?
Love is in the air today…
And when you have your own business, nobody loves your business like you do. After all, wasn’t that why you started it in the first place – because you have a real passion for it?
But as with any relationship, how well do you know your partner, in this case your business?
Do you really understand what’s happening in your business?
What deep dark secrets might it be hiding?
Are there more rich seams you could tap into in your business, but at the moment you don’t know they are there?
This is where having reliable financial information can help you.
And I’m not just saying that because I happen to be an accountant. No, honest. I’m not pretending here.
You can look at different areas of your financial information to uncover core facts and fundamental truths about your business.
Here are three examples.
1. How profitable are your projects?
When you find a new client and are asked to carry out a large piece of work, you will – justifiably – be thrilled to pieces. And as the work goes on, and the money comes in, it just goes on getting better and better. You see the project progressing as more work is completed, and, literally or figuratively, you get ready to crack a bottle of bubbly!
Hold it for a moment, though, and put that Moet back on the ice. How much profit has that project made?
Sure, your client has paid you. But have you kept track of all the time you’ve actually spent on the project – not just the time the client will pay you for? What about research time, administration time, the time you spent on hold to HMRC while you checked whether or not this project would be affected by IR35 legislation?
And what about all the costs? This doesn’t just include costs that the client has agreed to pay you back for. What about hidden costs, such as train fares to attend meetings? What about that additional bandwidth you needed to buy from your broadband provider in order to download a large file for client research?
Suddenly, as you record these hidden time and money costs, you see that the project, while it brought in a lot of cash, didn’t make much profit.
Perhaps next time you quote for that client you need to make your prices higher? Don’t be afraid to charge what you’re worth!
Use FreeAgent’s project profitability graphic, together with its ability to track unbillable as well as billable hours and to link costs to projects whether or not you rebill those costs, to help you see a true picture of how profitable your projects are.
You may not always be gaining as much out of a relationship as you may think you are!
2. Are you paying too much tax?
All – well, nearly all – business owners want to keep on the right side of HMRC and pay the right amount of tax at the right time, to avoid penalties and interest.
Certainly nobody wants to hand over more than they should to Mr Osborne.
Are you claiming as much tax relief as you can?
FreeAgent has a ball-park tax projection which is calculated in real time, so that you can literally watch your tax bill go down as you put your expenses in.
3. Are your customers paying you what – and when - they should?
When you’re newly in business, it’s easy to be too nice to your customers – just like when you’re in a new relationship, you’ll go out of your way to please your new partner.
Have you heard yourself making these excuses for why you can’t charge your customers too much, or why you don’t chase them for not paying you?
“I’m new to this whole business game”
“I don’t have so many expenses to meet as a large organization, I can’t justify charging my customers as much”
“I’m not worth as much as a large organization, I’m on my own”
“If I charge them too much / chase them for payment then they’ll go elsewhere”
But sometimes it’s necessary to have a difficult conversation with our relationship partners – and that includes your customers.
Customers will respect you if you charge what you feel your product or service is worth. There’s a well-known and very true expression – “reassuringly expensive”.
Let’s take an example.
If I buy a cheap box of Value / Economy / Basic / whatever-the-cheap-brand-at-your-local-supermarket-is vanilla ice cream, then I have to expect it to taste synthetic and watery, and not to have specks of vanilla seed in it.
But if I buy a tub of Ben & Jerry’s or Haagen-Dazs vanilla ice cream, then I would expect it to taste rich and creamy, and have real vanilla in it. Why? At least partly because it’s more expensive than the basic supermarket brand.
If you have a good product or service, charge what it’s worth.
And don’t always feel you have to be Mr Nice Guy when it comes to not chasing customers for payment.
Sometimes customers do have a genuine reason for paying late, such as an unexpected household bill for roof damage in the winter storms. We’ve all been there. Be sympathetic and supportive and you’ll earn customer loyalty in spades.
But sometimes customers just take the mickey and don’t pay you.
That’s where good credit control comes in handy.
In the latter case, because you can choose which invoices you attach the reminders to, you can be nice to customers who really are in difficulties – and less so to those who are always slow at paying!
When you understand your partner better, you can have a more fulfilling and meaningful relationship.
In the case of your business, when you understand that better, you can make it work better for you – make more profit, keep more of what you have earned, and have a better handle on the cash.
FreeAgent can help put you in control of your business so that you run a better business!
- Commercial savvy: what small businesses can learn from this year’s Christmas ads
- Staying on top when you’re under the weather: tips for small business owners
- Five things we’ve learned about UK micro-businesses in 2017
- Customer stories - Village by Village
- Autumn Budget 2017: business as usual for small businesses