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Dec 13, 2022

3 Ways to Improve Your Finances While Things are Slow

As business owners, searching for ways to get more clients is part of our job. Rarely do we think about diving into the books to improve finances.

As business owners, we are always thinking about ways to improve operations or get more clients. Rarely do we think about diving into the books and improving our finances. Doing that, however, will help make your business more resilient and more profitable.

The perfect time to work on your finances is when operations slow down.

When we say “improve your finances,” we are definitely not referring to late-night commercials telling you how to get cash quick. We are talking about getting organized, implementing processes, and getting to know your numbers better.

I know, that doesn’t sound insanely exciting. You might prefer redesigning your website or planning the next company gathering – but as ProAdvisors, we know that analyzing your finances is what separates average businesses from exceptional companies.

Preparing for the Next Slowdown

In general, there are two types of business slowdowns:

  • Seasonal or other predictable sales fluctuations are common among many types of businesses. Sometimes things are hopping, other times you know things will be slow.
  • Then there are unforeseen slowdowns. These could be due to business operations problems such as inadequate marketing or inventory management, or they could be due to marketplace issues that business owners cannot control such as Covid-19 or market recessions.

Maximizing the slow periods your operations face will help your business not just endure during downtime, but to thrive.

Here are 3 ways you can improve your finances while things are slow:

Analyze Your Expenses

Look into your expenses! You likely hear this a lot in personal finance blogs or from finance gurus, and for good reason. Review the past (24) months of expenses and determine what was truly necessary for your business during that time. Did these costs help to grow your business? Did they maintain or strengthen your business relationships? If not, these might have been unnecessary spending and might need to be cut or paid closer attention to during the upcoming year. Maybe some of those expenses on your business credit card are actually personal costs Maybe you notice you are spending a lot on marketing with little return?

Those are some traditional ways to analyze your expenses, but something else to consider is your current contracts. Are you paying for a subscription or service but not using it to the fullest extent? Could you negotiate the price down?

For example, let’s say you have a premium subscription for your website hosting and design. The subscription includes a long list of features, many of which you are not even using! Consider downgrading to a better-fitting (and lower cost) plan. You will be surprised by how many software programs have scalable plans.

Invest In Business Applications

Gone are the days of entering every transaction into Excel. With general bookkeeping alone, there are plenty of programs out there that cater to your needs. Today that has expanded even further to AR/AP management, cash flow management, secure file storage, and the list goes on and on.

Automation saves time and improves accuracy. A good rule of thumb is that if a $100/month software can save you one hour a month in time or employee satisfaction, it is generally worth it.

Look into software applications beyond Xero. Some of our favorite financial applications for business include:

Also, review the programs you are already using to manage your finances, and consider upgrading. There are so many options available that it makes no sense to stick with one that does not serve you well.

Create a Process

Creating step-by-step processes to manage your finances and accounting will make everything more efficient. If your Accounts Receivable turnover is a bit troubling, Return on Investment (ROI) on a new project is low, or it takes too long to reimburse employees, following a consistent process will allow you to quickly see when something is going wrong, ensure nothing is missed, and identify outliers as they occur.

If you are experiencing communication issues with people who are still working from home and that is slowing down a finance process, consider our article on how to improve your communication with employees.

While things are slow, you have time to work on improving your finances. There is a lot to think about, and your accountant can help. By keeping in touch with your accountant at times like this, you can get professional guidance (or hands-on assistance) to improve your processes, business applications, or expenses.

Talk to a ProAdvisor Today

Originally published in 2020, updated for accuracy in 2022.

 

 

Disclaimer:

This publication is designed to provide information on federal tax and accounting laws and/or regulations. It is presented with the understanding that the author is not rendering legal or accounting services.

This text is not intended to address every situation that arises or provide specific, strategic tax and/or accounting planning advice. This text should not be used solely to answer tax and/or accounting questions and you should consult additional sources of information, as needed, to determine the solution to tax and/or accounting questions.

This text has been prepared with due diligence. However, the possibility of mechanical or human error does exist and the author accepts no responsibility or liability regarding this material and its use. This text is not intended or written by the practitioner to be used and cannot be used by a taxpayer or tax return preparer, for the purpose of avoiding penalties that may be imposed.

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