You will often hear accountants talk about getting your books in order as well as understanding your business's financial strength. What does that really mean in practical terms and how can a business owner quickly determine his/her business financial strength?
This short article aims to set out some of the practical ways it can be assessed by finding out the answers to five simple questions.
1.Are the business bank accounts reconciliations fully up to date?
If the answer is yes then this in effect means you have the most up to date cash position available. If the answer is no, there may be unposted income and/or costs which will distort your overall financial picture. It is critically important that your accounts are real-time so you know what cash is available, what is owing, and what is owed.
2.What help do you have in place at present in the form of government assistance, grants, loans, or any other support packages?
Do you know the extent your business is currently relying on this type of support, when does it run out or when is it due to be repaid?
3.What bank credit facilities do you have available that you may not as yet availed of?
If you have a business loan in place already when it is due to be repaid? Such loan repayments need to be factored into your financial position for the term they are due.
4.If vat registered, have you taken advantage of vat deferral?
If you have availed of this what is the amount of your vat liability and when do you expect to have to pay this to HMRC?
5.Do you currently prepare a cashflow forecast?
If so, how often do you review it and can you increase the frequency of preparation to give you more insight and reaction time.
Just by thinking about these five points, can help determine your overall financial strength at a time when there is overall uncertainty about future revenue streams and costs.
There may well be weeks or months in the near distant future where there is insufficient cashflow in which case it would be prudent to devise a rescue or survival plan in advance. This might take the form of deferring costs, innovating new revenue streams, or seeking additional borrowing.
At Ekstra Accounting Solutions we can help you with getting your accounts up to date, determining your overall financial strength, and forecasting your cashflow using real time cash management tools.
By taking action now will place you in a stronger financial position than if you do not. It could be actions that ensure overall survival.
If you are struggling with this particular issue, please reach out and contact me at the following email address janet.jensen@ekstraas.co.uk or better still telephone me to see how we can help you. My number is 07458 302 512
To find out more about our other services visit our website www.ekstraas.co.uk
Accounting with Foresight