Creating a strategic plan for your company’s finances is important for many reasons. It can help you get the most out of your money, grow your business and avoid financial problems down the road. A good financial strategy can also make it easier to get financing from investors or lenders.
You don’t need to be a financial expert to create a solid plan for your company’s finances. However, there are a few important things to keep in mind when developing your strategy.
1. Know your tax obligations
The last thing you want is to fall behind on your taxes and end up owing the government a large sum of money. You must register your company with the tax office and submit a statement every year.
You have to pay VAT if your company’s turnover is more than £85,000 a year. VAT is charged at different rates depending on the type of goods or services sold. The standard rate is 20%, but there are reduced rates for some items, such as books and children’s clothing.
You may also have to pay other taxes, such as corporation tax, if your business is a limited company. Depending on the size and profits of your company, you may pay a lower rate of corporation tax.
2. Understand your financial statements
Your company’s accounts show how much money comes in and out of your company. The three most important financial statements for small businesses are the balance sheet, income statement and cash flow statement.
The balance sheet shows your company’s assets and liabilities at a specific point in time. A company’s income statement shows income and expenses. The cash flow statement shows how much money flows into and out of your business.
You should review your financial statements regularly to track your business’s progress and look for areas where you can improve. If you are not sure how to interpret your financial statements, you can hire an accountant or bookkeeper to help you.
3. Create a budget
A budget is a roadmap for your company’s finances. It can help you track your expenses, manage your cash flow and make sure you don’t spend more than you bring in
Creating a budget can seem like a daunting task, but it’s actually quite simple. Start by listing all your sources of income and expected expenses for the month. Then track your actual income and expenses. And don’t forget to factor in unexpected costs, such as repairs or new equipment.
If you find that your expenses exceed your income, you need to make some changes. You may need to cut some costs or increase your prices.
4. Create a plan for growth
Every business should have a plan for how it will grow its revenue and profits. This may involve expanding into new markets, launching new products or services, or increasing your marketing efforts. Whatever your plans are, make sure they are realistic and that you have the financial resources to make them happen.
You should also invest in knowledge. Learning about new trends in your industry can help you make better decisions about how to grow your business. And staying up-to-date on changes in the business world can help you see opportunities for growth.
You can find plenty of resources to help you develop a growth strategy, including books, websites, and articles. If you’re not sure where to start, CPD courses for accountants can help develop an awareness of the latest thinking and approaches in business strategy.
5. Keep track of your credit score
You should check your credit score regularly to make sure it’s accurate and to look for any red flags that could indicate identity theft or fraud. You can also take steps to improve your credit score, such as paying your bills on time and using a credit monitoring service.
A good credit rating can save you money on loans and make it easier to get approved for new lines of credit. A bad credit rating can make it harder to get a loan and can even lead to higher interest rates.
You can get your credit score from any of the major credit reporting agencies: Equifax, Experian, and TransUnion. You can also get your credit score from some banks and credit card companies.
6. Reduce your consumption
From the price of goods or services to the fixed costs of things like rent and utilities, it’s easy to let spending get out of control. Even if your business is doing well, saving a cent here or there can make a big difference.
Review your expenses regularly and look for ways to cut costs. You can save money by renegotiating contracts with suppliers, switching to cheaper office supplies or automating invoicing and payments.
It is important to be proactive about your company’s finances and take steps to improve your financial situation. Take the time to understand the basics of accounting and finance, and don’t be afraid to seek help from professionals if you need it.