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Simon Willmett, Financial Director, Nucleus Commercial Finance.

Mopping around the back of the sofas, cleaning the compartments in the fridge, finally getting around to sorting out the ever-expanding cupboard of junk in the hallway… a change in the weather is a prompt for many to have a good tidy around – prompted by the sunshine into a Spring clean and freshen up, restoring some order after a cold dark Winter. SME owners would be wise to extend any inspiration for home-based improvements to their business finances. Forget those failed New Year’s resolutions and instead concentrate on forming new habits for your business – then stick to them with new vigour!

Here are the six most efficient ways to clean up your books:

  1. Analyse and Set Goals
    A quarter of the way through the year, you’ll find you are much better equipped to make business forecasts. Take time now to look back at the whole of the previous year. You have more historical data now to analyse whilst making this year’s important decisions.

Take a look through the first three months of the year and last, quarter by quarter, including cash flow statements, balance sheets and a profit and loss breakdown, then use this data to get an idea about patterns your business is following so far. Where can you see patterns? Is there seasonality?

These insights will not allow you to become totally immune to financial business stress but will help safeguard you for the future and should help you predict the financial outcomes of this year. Treat them like the business blueprint to live by if you are to avoid any unexpected hurdles over the following months.

  1. Think about renegotiating Payments Terms
    Negotiation is a key skill across all aspects of business – and payment terns should be no different. Never be tempted to settle with something just because it has become the norm for your business.

It will take a little time, but have a look at all of your payment terms, including insurance policies, rent and loans. Are there any changes you can make? Think about how you can spread your outgoings to match your incoming payments, helping you to close cash flow gaps where possible. If these dates can’t be moved, you may want to consider using external finance to bridge those gaps.

  1. Take a proactive approach to finance

Too often, external finance is seen as a ‘cure for a problem’ rather than as a ‘tool for growth’. Aside from the legacy stigma associated with borrowing money, understanding how to approach external finance providers, and which type of finance might be best for them can feel a daunting task for many.

As a result, small businesses are not always strategic with the timing of when they seek finance and often only end up putting the feelers out on this when the need is urgent. Make sure you seek financial assistance before you need it, so you can make an informed and considered decision about the finance that will be the best fit for your business.

  1. Embrace Technology 

With technology at our fingertips, it’s now quicker and easier than ever to find and secure finance. Investing in new systems might seem expensive with up-front costs being high but long-term it will save money and help you take control of your business finances. Cloud accounting software can track your incomings and outgoings incredibly easily; whether it be looking at expenses or income, it will save timeby automating traditionally time-consuming tasks.

This isn’t a replacement for an external accountant, but will give you immediate – and remote, if you desire – access to the numbers. This will help you tune into any issues before they become problematic, and help you to become familiar with the natural peaks and troughs of your business from a financial perspective.

  1. Chase chase chase!

You will need to take particular care if you are a business that does not charge customers up front. Not only this, but all too often, the payment terms that businesses give to their own customers exceed those given by suppliers – which of course, can result in a cash flow problem.

Stay on top of due payments and try to send invoices to your customers with plenty of notice so that they do not end up in hot water with late payments arising unexpectedly. If your business does not receive payments immediately, do your due diligence and make sure that your customers understand your late payment terms beforehand.

  1. Is the price right?
    The market is more competitive than ever, so having prices that are too high is a big no-no. Equally, having prices that are too low can also be damaging – synonymous with poor quality, it can affect your brand and profit margins.

    Knowing how to price a product will set you apart from your competitors, so make sure you are getting it right if you are to generate the most revenue. The best way to ensure you are spot on with your prices is to conduct market analysis. As a business owner, you should be regularly keeping up to date with competitors in your industry and that includes being aware of any fluctuations in the market.

    Check out what your competitors are charging, decide on a price and then work out your business’s profit margin to determine whether your prices will bring in enough money to cover the overall cost of running your business. Remember, ultimately it is all about the bottom line

So out with the duster! The pounds you save from getting your finances together now can be spent on growing your business further.

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