Spring Clean your books
Here at FreeAgent we’re thinking about spring cleaning - how can you brighten up your books and make sure your business is ready for lots of fresh new growth? Watch below for five tips to spring clean your business books.
Chase up old debts
Look at your list of invoices that you haven’t yet been paid for. Accountants call this your “aged debtors report”.
Who hasn’t paid you yet but should have done? Contact those customers, by phone or by email, and make sure that payment is on its way. Make sure that you take advantage of FreeAgent’s automatic email reminders for invoices so next time the invoices will chase payment themselves!
Weed out non-paying customers
Do you have customers who regularly pay you late, or even not at all?
Is there a good and genuine reason for this - and even if there is, are you happy to keep on working with them? Make sure your terms and conditions include a clause to say you “reserve the right to refuse admission” or similar. Remember, it’s your business and you shouldn’t have to deal with anyone if you don’t want to.
Review project profitability
Look at how much profit you’ve made on each of your different projects, and divide that by the sales figure for that project to get the project’s profit margin. Profit margin shows you how much profit you’ve made for every pound of sales.
Now do the same calculation for your business as a whole.
Is your project’s profit margin lower or higher than that for the total business? If it’s lower, are you being too nice to that customer and do you need to put your prices up? If it’s higher, could you do more work for that customer or on that basis? Make sure your growth is targeted and profitable.
Go through the major costs in your business. Are you paying more this year than you did last year? Have any of your suppliers put their prices up? Should you do the same to compensate?
Could you save money without compromising your brand? It can be a mistake to cut costs to the absolute bare minimum, by, for example, not employing the best people, or printing your business cards at home on cheaper paper. Make sure your cost savings are sensible.
Correct the fiddly little errors
We’ve all got an odd small anomaly lurking somewhere in our business bookkeeping. That might be a penny overpayment from a client that’s never been written off, or a bank transaction that’s been sitting unexplained for months because nobody can remember what it was.
Take some time now to clear that error out of your books. If you don’t do it now, your accountant will have to take extra time to sort it out when they prepare your final accounts, and that will push your bill up. You would be surprised just how much time this can take your accountant, so save your money by doing it yourself now!
But if you’re really stuck, do ask your accountant for help - a quick call to them could save you a lot of time.
Following these steps will mean your records will feel cleaner, sharper and better fit to give you useful information about your business.
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