Reassessing the Finances: 6 Areas to Reexamine for Better ROI
When the time comes to evaluate your business’s finances in order to find ways for increasing revenue and cutting waste, your bookkeeper and accountant can provide a wealth of information: both for getting your financial records organized and centralized, and then for analyzing the reports for better strategic planning going forward. Small businesses in the process of reassessment have a lot of areas to look at, including the heavy costs for inventory, advertising, overhead, and payroll. Don’t forget these six areas, as well, to get the complete picture and make the most productive adjustments to earning, budgeting, and spending.
1. Competitive pricing
Pricing and pricing models change frequently. The last few years have introduced various unpredictabilities, such as supply chain issues, unreliable availability of materials, shifting customer demand, and inflated prices. Taking a look at what your competitors charge is exactly what your customers are doing—and you should too so that you know your products and services are optimally priced for the market.
2. Prompt invoicing
Late and outstanding invoices are one of the biggest challenges for a small business cash flow. While a late payment here and there may not seem like a big deal, overdue payments will add up over time and prevent your business from maintaining an adequate, predictable cash flow and, in turn, from creating accurate, reliable budgets. Online tools are widely available to help automate the creating and sending of customer invoices. If you work with a bookkeeper—onsite or virtual—he or she can assist with invoice responsibilities, including polite but persistent follow-ups to make sure your accounts receivable is up-to-date.
3. Expense tracking
Accurate expense tracking is fundamental to so many aspects of good business bookkeeping: managing available money, budgeting correctly, forecasting accurately, cutting wasteful spending, preparing proper tax filings, and analyzing your company’s overall financial health. At the same time, tracking expenses is time-consuming and monotonous, which is why it is a task that can be so easily neglected. Accounting software that tracks expenses automatically and syncs the data with other financial data saves time and drastically reduces the possibility of overlooked spending. Bookkeepers typically have access to a multitude of online, cloud-based tools that work in tandem to keep expenses paid, recorded, and organized.
4. Marketing returns
Marketing campaigns can get expensive, and it is not uncommon for some types of business to allot up to 30% of the budget (or more) to marketing. At the same time, some of the most effective marketing is practically free. When you can harness social media and online reviews and referrals to promote your business, you can capitalize on methods that are low-cost, but credibility-building. Before you spend a lot on a marketing campaign, make sure you know its specific goals and that you have in place the tools and methods to assess its ROI.
5. Emergency fund
No one knows when a sudden emergency or crisis may befall your business, or when a slowdown or shutdown may put a sudden halt to your ability to generate revenue. It is advisable to have some money set aside so that an unexpected challenge does not turn into a financial calamity. If you file your own taxes, it is also beneficial to have some money set aside specifically for tax purposes—especially if your cash flow varies throughout the year and is difficult to forecast far in advance.
6. Multiple quotes for supplies
Your customers all shop around; so should you. Taking the time to research market prices for the supplies you need can save you money in the long run and prevent you from entering into a costly contract or lease when other economical alternatives are available.
Good bookkeeping is vital to ensuring your business’s financial future. There are countless ways to waste money and overspend, and you may already be engaged in some of them. Careful expense tracking and prompt invoicing, as well as frequent analyses of financial reports and consistent account reconciling, can all help keep a business afloat. Online tools to aid bookkeepers in creating invoices, issuing payments, and recording expenses are more available and more affordable than ever before and are widely utilized to help even the smallest business stay financially organized.