Is improving your financial health a goal for your business heading into 2022? If so, great! But have you thought about what it will take to reach that goal?
With an economy that seems to change on a day-to-day basis, knowing which areas of your finances to focus your attention on isn’t easy. And if your goal is as broad as simply achieving financial health, there are a lot of routes you can take to get to that point.
To ensure you reach your goal of financial health, we’ve put together a list of the top 12 financial tips for a healthy 2022. When you focus on each of these tips, financial health will be a byproduct.
Financial Tip #1: Create an Annual Plan and Use It
If you haven’t already started crafting an annual plan, now is the time. An annual plan is a helpful tool you can use to guide your finances through the year. It will serve as a reference point to help you make informed decisions as problems or questions arise.
Annual plans include everything from marketing strategies to revenue goals to budgeting strategies. When built correctly, it includes everything you need to know to grow and run a healthy business.
However, creating your annual plan isn’t enough. You need to use the plan as often as possible to see the benefits.
Financial Tip #2: Build and Stick With a Tax Plan
Much like an annual plan, a tax plan can be used as a guide throughout the year. Its focus, however, is creating a strategy for managing your taxes.
Building and using a tax plan gives you the best opportunity to save the most money. It typically outlines:
Deductions
Credits
Deferred or accelerated income
Retirement plans
Tax status
Businesses often push this task off or avoid it entirely, but building a tax plan is worth the time investment and places your finances in a much better position.
Financial Tip #3: Create and Use Your Budget
A budget is the backbone of your spending. It helps you stay on track and ensures you are making purchases within your means. Your budget should outline every purchase throughout the year, and ideally, you won’t have to spend anything outside of your budget. While this doesn’t always happen, it’s essential to have a guide.
A budget also aids in pricing because it outlines manufacturing and other costs for creating your products. Your products need to be priced above your expenses, which are included in your budget.
Remember, your budget is fluid. If you’re reviewing your budget and realize you have additional money, you can shift around funds to increase spending in other areas like marketing, employee benefits, or use it to lower debt.
Financial Tip #4: Increase Your Cash Flow
Cash flow is the lifeblood of your business. As a business owner, you should always be searching for ways to improve it.
Some of the best ways to increase your cash flow include:
Better tracking
With better tracking, you can see where money is coming in and out of your business.
Improved accounts receivable management
You can increase your cash flow when you collect your accounts receivable in a timely manner.
Low budget variance
Sticking to your budget will ensure your spending (the money going out) is on track.
Revisited vendor and partner contracts
The vendor and partner contracts you agreed to last year may no longer be the right fit for your business. Revisit them and do what you can to find a cheaper, more realistic option.
Accurately priced products/services
If your products and services are priced below what they are worth, you will be losing out on money coming into your business.
Financial Tip #5: Keep Up with Your Chart of Accounts
Using your chart of accounts throughout the year is the best way to stay organized. It tracks the money coming in and out of your business.
A chart of accounts categorizes transactions based on their type. Typically, these categories will include:
Assets
Liabilities
Equities
Revenues
Expenses
Next, they will be broken down into more specific subcategories, making it easy to find a transaction.
When you record each transaction in your chart of accounts throughout the year, you can quickly pinpoint mistakes as you go. This makes closing your books a breeze at year-end.
Financial Tip #6: Track the Right Data
It won’t be easy to build an annual plan, create a budget, and increase your cash flow with inaccurate or missing data.
At the beginning of each year, sift through your KPIs to figure out if you are still tracking data that is meaningful for your goals. These KPIs should provide valuable insight for reaching your goals.
For example, if you want to collect your accounts receivable sooner, track your accounts receivable turnover ratio. This metric gives you the average number of days it takes to collect your accounts receivable. Your goal can then be to lower this number.
Financial Tip #7: Use Your Data to Lead Your Team
The health of your finances is a direct result of how well you lead your team. There are plenty of different leadership tactics that result in success, however, using data takes a more explanatory approach.
Data gives you and your team a pulse on the numbers. You can directly explain to your team why you are making decisions the way you are and outline how the work being done is impacting the business as a whole.
Financial Tip #8: Smooth Out Your Bookkeeping
With good bookkeeping comes better overall control of your finances. Well-managed books throughout the year keep you organized and when year-end comes, make your closing process a breeze.
Here’s how you can smooth out your bookkeeping:
Stay caught up by not waiting to log expense records, income, or employee reimbursements
Reconcile your accounts on a regular basis. Try monthly, or at the very least, quarterly.
Learn your bookkeeping tool. Most systems provide tutorials on how you can take full advantage of their product.
Financial Tip #9: Set Goals and Check-In with Them
Like your annual plan, tax plan, and budget, setting goals does nothing if you aren’t actively checking in and measuring progress.
With the help of data and your team, you can determine whether you are close to hitting goals. This check-in (we recommend quarterly) helps you find mistakes and make adjustments before your goals become out of reach.
Financial Tip #10: Lower Your Debt
If you are like most businesses, you could benefit from lowering your debt.
Take this new year as an opportunity to lower your debt. Here are a few ways to do it:
Build it into your budget. Try factoring in a little extra money towards lowering your debt into your budget. Even if it’s just $100.
If you save on taxes this year, redirect those savings towards your debt.
If you bring in more money than anticipated in a particular month, take the opportunity to lower your debt.
Lower debt leads to a better credit score and high chances of receiving a loan, should you need one down the road.
Financial Tip #11: Embrace Technology
Automation has quickly become the premier method for managing business finances. It offers speed, efficiency, and accuracy all in one.
With the help of technology, you can manage nearly every aspect of your finances, including, but not limited to:
Sending invoices
Payroll
Bookkeeping
Collecting payments
Managing documents
As 2022 gets underway, consider all of the ways you can implement technology into your financial systems.
Financial Tip #12: Work with a Trusted Accountant
Last, but certainly not least, we suggest working with a trusted accountant for healthier finances in 2022.
Not only will they work with you to ensure each of the above tips is being taken care of, but they will also serve as a guide, offering advice and new, better ways to run your business. They’ll be dedicated to your finances, meaning you can trust that all of your tedious financial tasks are getting done while you are focused on running your business.
Let SIMPLY Financials PLUS be your trusted accountant! Contact us today to learn more about how we can lead you to healthier finances in 2022!