Why Businesses Should Be Monitoring Financial Fitness In The New Normal


By Kirsty McGuckin, Director at Bracey’s   •  5 min read   •   


Given the wide-reaching effects of COVID-19, it’s natural to think about the financial health of your business. Now we’re entering the new normal, the way many businesses run will change. Understanding where this leaves you and your staff is vital for your future success. 

Understandably, businesses are also concerned over the lasting effects of the pandemic. Will customers return? Will they be able to keep their staff employed?

Bounce Back and Business Interruption Loans are one option to help you get back on your feet. But here you also need to understand your financial projections to see how much you can, and how much you should borrow. 


Why it’s important to know your financial position


It’s always important to know your financial position. These unprecedented times make this more relevant than ever. While you may be exceptionally good at knowing your craft as a business owner, the financial side may feel confusing. It’s important, however, to understand the financial side. That way you can make good business decisions.

If nothing else, recent events have taught us that even a successful business can become unstuck if things happen outside our control. So, we all need to be looking for tools to navigate times of disruption, so you have a robust plan in place.


What are the basics of financial fitness?


At the least, every business should continually review these three things:

  1. Profit and loss
  2. Balance sheets
  3. Cash flow 

This will tell you how your business has performed to date, your liquidity situation and where your money is going. This information can help you identify trends and to pull together projections. 

You should also review these extra three areas:

  1. Customer debts 
  2. Sales invoicing procedures 
  3. Supplier terms 

This will impact your financial fitness overall. For instance, if you have debt and invoice terms greater than 30 days, you may need to consider factoring customer debts to help with cash flow. Similarly, you may be eligible for a credit account as a supplier although you’ve been paying upfront. 

You will also need to take your debts and financial commitments into account. Ultimately, you need to be sure you can fulfil the commitments on credit cards, bank loans and other debts. Regularly reviewing these to ensure your cash position is healthy and those repayments are covered will enable you not to breach the terms set. 


Key things to look out for 


As well as getting a clear picture of what’s happening now, you need to look to the future. For example, a drop in turnover of 10% or 20% could have an impact on your business. This is where we need key performance indicators in place, so we can always keep an eye on the present and the future. 

Tools like sensitivity analysis can reveal what effect fluctuations may have on your business and the steps needed to adjust to those. You may also need to look at areas like stock levels, asset utilisation, staffing, overhead spend and business procedures. All these things have an impact on a business. As every business requires different levels of planning and information it’s important to get the right financial advice. An advisor will be able to help with this and point you in the right direction. 

Now is a good time to plan too. The new normal could mean a change in how you work. Spending habits are changing, and this may mean you need to look at moving your business online or creating new products or services.  

You may need financial help to get going, whether that’s investing in online platforms or new products. A Bounce Back or Business Interruption Loan could be ideal here, as there are no repayments or interest for 12 months.    


Additional help and resources 


Technology provides solutions with automated reports on things like profit and loss. At Bracey’s, we’re proud Gold Xero partners, which has features like short term cash flow and business snapshots. Each of these two particular features uses the information populated in Xero to give you information such as projected cash flow based on invoices input or the average time it takes customers to pay.

A good testament to how we work with Xero is that a large proportion of our clients already use the software and feel comfortable with it.  


What Bracey’s can do to help you


We’re here to help in any way you need during these changing times. Our team can either support you across all areas if you’d prefer to outsource the whole function to us, or across specific areas. 

Our expertise covers things like complete bookkeeping, payroll, and management reports from which we can either feed this information back to you or show you how to manage the system yourself. A comprehensive training session on the software by our team will enable you to take over yourself or do a mix to suit you. 


The positive of all of this 


The big positive is that most of our clients have survived the pandemic. At the start of lockdown, there were lots of panicked business owners wondering how they’d get through this. But, with the right financial planning and support, they’ve pulled through. 

As we come out of lockdown and get back on track, there’s a real sense of businesses needing to do things differently. The need to improve and understand our financial position as a business comes hand in hand with this. 

Now, we have a new opportunity to reshape our future. The key is not to exit lockdown the way we went in. Come back with a different approach and a refreshed mindset and build the best version of your business.  

So, ask yourself now, How financially fit is your business, and if you don’t know, give us a call and we’ll take you through your options. 

 


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