If you’re not on the journey you want to be on, how do you change course?
When you know your business is going to work, but the big break seems to be just out of reach, what action can you take to regain control?
As soon as your business has the basic operations of invoicing, quotes, paying bills and collecting cash under control the next step is to get information from the accounting system that will help you on your business journey. A quick look at the Profit and Loss and Balance Sheet can leave you underwhelmed as you struggle to see the bigger picture. If you’ve got this far you need to see the bigger picture of your business now, and in the future.
This is where business intelligence tools come in – handy little applications that your accountant can bolt onto your accounts, interpret and look at the pictures with you. The advantages for you?
- You see what’s going on now.
- You understand your gross profit and it’s relationship to your operating profit.
- You understand the highs and lows of your cash situation.
- When you put a stake in the ground, you can then forecast forward for a range of scenarios. You can plan how to change your own business journey.
What, exactly, do I need to forecast, you may well ask. Here’s the low down on the popular 3-way forecast.
Cashflow Forecasts do just that – you plug in your sales expectations, and your costs and VAT and project forward. Many try this on Excel, which has it’s place, but also it’s limitations. For a speedy, simple solution which also allows you to add in various “what if” scenarios – try Float – our favourite Xero add on cashflow app. It’s useful to forecast cashflow variations like, fluctuatons in sales, a big events like trade shows, the aquisition of new staff or a capital expenditure item.
Profit Forecast are useful, especially if you’re interested in how much distributable profits you may have available to pay in dividends. Or you may be planning for the reduction in corporation tax in 2016 and 2017 by deciding to invest in your business now, so when you start turning a profit in later years, the corporation tax you pay will be at the lower 2016 or 2017 rates.
Balance Sheet Forecasts are usful to keep a handle on your assets, liabilities and equity. This is part of what’s called a 3 way forecast – another essential business tool to get a complete picture, and to see how the business looks depending on the path you take.
Forecasting tools are now accessible and affordable to even the smallest business owner. If you have your accounts on Xero, the eco system of over 300 add-on applications is at your fingertips. This means you can have the same super powers as a big corporation.
A Xero Accountant will help you to get the business journey map to your chosen destination.
Want a map? If you’re on Xero – Get a free dashboard report for your business – Get in touch with Shaper Accountants today and quote “Free Dashboard” offer.
To change your business journey and experience the power of business analysis get in touch today. You can call us on 01603 516 304 or follow us on Twitter @ShaperAccounts.