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Time to spring clean your finances

Updated: Feb 21, 2022

As we're now well and truly into the new financial year, it's a great time to take stock of your finances and leave costly habits behind in FY2020. While there are a variety of strategies you can use to gain greater control over your funds, here are four simple steps you can take right now. Step 1: Assess your starting financial position As the famous expression goes: If you can measure it, you can manage it. Start by analysing your financial performance. A good way to do this is to look at your statements for the past few years. This will give you an honest indication of how your business is performing. Be sure to include all expenses and consider categorising costs to see where you could be overspending. Software such as Xero or MYOB have tools to report your revenue streams and expense sources. Step 2: Set your financial goals As most financial advisors will tell you, the key to achieving success is to set specific goals. For most businesses, profitability and revenue are good starting points. Then there's the gross margin (revenue minus cost of goods sold divided by sales) and the net profit margin (net profit divided by sales). Both are excellent ways of gauging how a business is evolving and performing in comparison to other companies. Decide on the regularity you want to assess your progress towards your goals. A monthly basis may be too frequent to see noticeable improvement, but it's a good idea to check in at least quarterly to make sure you remain on track. Step 3: Cut unnecessary expenses The third step is to start working towards your financial goals. Reducing your unessential costs is one of the fastest and easiest ways to improve. Here are some simple ideas that can save you money:

  • Mobiles only: The role of landlines is fast becoming unnecessary, as the use of mobiles has largely replaced them. Go wireless for an easy saving with minimal effort.

  • Leverage technology: Whether it's teleconferencing software like Zoom or project management tools such as Asana, technology offers a vast array of money-saving opportunities. Be mindful, though, of your subscription costs which can quickly add up. A platform like Hudled can help monitor your applications.

  • Adapt your marketing plan towards low-cost online strategies: By using a business blog, social media marketing or online advertising, your marketing costs can be lowered. Indeed, blogs can be a great DIY way to enhance your search engine optimisation (SEO) and attract traffic.

  • Lower your rent: More businesses are asking if they really need to rent a full-time office, or if they need an office as large as they previously had. As we've learned over the past year, hybrid or remote workers can be just as productive at a lower cost.

Step 4: Stay focused There are concrete ways to maintain clear objectives. Use a finance tool (such as MYOB or Xerox) to analyse trends over time. Are the above metrics heading in the right direction? If not, why? If an expense ticks up or your cash flow dips, dig deeper and determine whether it is a one-off blip or if there is an issue you could improve upon. These four simple steps will help improve your finances, but remember: You are not alone on this journey. It can be helpful to work with experts who can tailor a finance strategy to your business needs. Consult your broker or financial advisor for specialist advice based on your business needs. This information is for general information purposes only. The information contained herein does not constitute financial or professional advice or a recommendation. It has not been prepared with reference to your financial circumstances or business and should not be relied on as such. You should seek your own independent financial, legal and taxation advice as to whether or not this information is appropriate for you

Original post by Bank of Queensland



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