By Bivek Sharma, Head of Small Business Accounting at KPMG
Financial year-end is one of the most important points in a business’ financial calendar – providing a key opportunity to re-evaluate overheads, costs, turnover and profit, in line with industry economics and performance rates. But this shouldn’t be reserved to big blue-chip companies, it’s also essential that smaller businesses in the trade are in the know when it comes to their finances – not least at year-end, when a business owner has the opportunity to evaluate performance and plan for the year ahead.
No matter how large or small your company, and what sector you’re operating in – looking ahead to the new financial year with a clear, fresh and up to date plan will help to keep your business on track and heading for success. Financial strategy needs to form an overarching framework in any business and is necessary to guide key decisions. With a clear strategic plan in place from the offset, businesses can set about executing plans safe in the knowledge that outgoings and turnover are 100% accounted for. So, what can those in the trade do to ensure they’re on track with their financial schedule ahead of year-end?
The first touch point is tax and allowances, which usually end with the financial year. As a small business, it’s important to use allowances effectively so that you do not incur charges. It is also useful to make notes of tax deadlines to make sure that you are ahead of the game and will not face penalties – really, the key is to ensure you’re aware of the financial schedule; meaning you’re always in the know when it comes to upcoming outgoings, taxes and charges.
It is also essential to continuously re-evaluate any plan that is in place – falling into the trap of making a big elaborate strategy, but not checking one, two or even three months down the line is all too easy; you need to ensure that your predicted turnover and profit is on track. Reviewing your set targets each month will be much more effective for your business and will help you to monitor trends and changeable economics – ensuring your year-end results don’t hold any nasty surprises.
Once you’ve got your head around the figures, market trends that impact on your profitability month-on-month can be accounted for – which will allow you to reserve funds from peak trading periods and help with cash flow when demand is quieter. Businesses can also benefit from external help – and it needn’t be costly. An investment into a resource that allows you to monitor your finances in an easy and accessible way could mean the difference between failure and success.