Get set for 2022: Is your business ready?

Businesses have faced many unforeseen challenges during 2021, with the coronavirus pandemic having an unprecedented impact on our lives.

But with the year drawing to a close, it’s essential to start thinking about 2022, and asking yourself the question: is your business prepared?

To ensure that you’re all set 2022, you must prioritise the following factors carefully in order to help achieve your goals:

  • Budgeting
  • Forecasting
  • Cash flow
  • Management accounts
  • Business planning

Why is budgeting important?

Budgeting is one of the key components of any business, ensuring that you stay on track by budgeting expenditure months and years to manage cash flow.

Typical outgoings include:

  • Rent
  • Taxes
  • Vehicles
  • Daily expenses
  • Emergencies and repairs
  • Energy and utility bills
  • Insurance
  • Payroll
  • Marketing and advertising costs
  • Any one-off expenses, such as planned investments, upgrades, and professional fees.

Why prioritise cash flow?

Having either less money coming in and more money going out, or a chaotic cashflow is one of the most frequent factors in business insolvency.

Research has even revealed that late payment of invoices is the cause of one in five company insolvencies, and at a particularly challenging economic period, it’s more important than ever to ensure that you’re managing your cash flow effectively.

Despite larger companies being the sole cause of cash flow problems among the small and medium-sized enterprise (SME) community, how they conduct business is out of your control. Which is why you need to think efficiently about business decisions, such as who you do business with.

Obtaining a contract with a large company, who has a reputation for late payments, may not be the optimum use of your resources. It may instead be more prudent to consider acquiring several contracts with reputable contracts.

These will be smaller individual contracts, but importantly, it spreads the risk and develops more business relationships to ensure a good, consistent flow of cash.

Why should you implement forecasting and management accounts?

Forecasting for the unexpected, such as the events of 2020/21, is an essential step an advisor can help you with. It will need to be as accurate and comprehensive as possible to create a precise cashflow model.

Successful businesses are only as strong as their strategies. Therefore, monthly management accounts should be a key consideration for any business.

By providing your business with a detailed breakdown of exactly how you are performing, management accounts allow you to set targets, foresee potential problems and shape your ideal business strategy, particularly in a changing business environment.

Naturally, a business with little knowledge of its strengths, weaknesses and how it is performing on a daily basis will struggle to react appropriately to any unforeseen challenges which may arise.

Equally, without a sufficient overview of the ins and outs of cash flow, the business could be at risk of missing the warning signs of any problems until it is too late.

Management accounts are like a monthly “health check” for businesses. The information they provide is crucial for keeping on top of cash flow. A strong set of management accounts should include all types of information, such as:

  • Profit and loss reporting
  • Balance sheets
  • Cash flow statements

At McGills, we offer a range of services that you can call upon, to support every financial aspect of your business.

We can offer our professional support for preparing your business for the next year of business challenges.

Interested? Let’s get set for 2022.