As your business grows and takes on more customers, employees and suppliers, maintaining core financial controls should keep you travelling up the success curve.
Financial controls allow your directors and key people to focus on the actions that underpin business success – the important and creative tasks that drive growth and profitability.
Here are some tips on processes and routines to help you monitor performance and do things right.
1. Create a budget – and review performance against that budget
Many companies have a budget but, when things get busy, it’s easy to stop reviewing performance against that budget on a monthly or quarterly basis. Establishing the discipline of reviewing your management accounts against your budget is important. Try to highlight where things are going well and where they are going badly, then you can take corrective action to deal with any problems.
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2. Report on and review critical measures for your business
The current and future health of your business isn’t just revealed by conventional financial performance measures. What are the factors that make your business successful? These could be levels of website traffic, sales conversion data or helpdesk calls and issue resolution. Work out what matters in your business, then capture that data and monitor it.
3. Keep track of your expenses
For a company working in immersive technology, expenses are likely to revolve around development costs & marketing. It’s important to identify the key costs in your business and then monitor expenditure against budget month on month.
For example, payroll could be a major cost. So could cost of sales. If you don’t have the time to do a detailed review yourself, identify an appropriate person (perhaps in payroll or accounts) to prepare a ‘payroll bridge’ or a ‘cost of sales bridge’ showing the movements from the previous month to identify significant changes. This way you don’t need to review all the data, but can easily see any unusual or unexpected increases.
Doing things right
4. Make use of the user permissions in your accounts software
Every accounting package has restricted access user permissions designed to prevent people from doing things they shouldn’t do. Unfortunately, many start-ups forget to activate them or fail to enforce them properly. (Passwords should not be shared!) However, establishing user permissions is an easy control to set up and particularly powerful for preventing fraud.
Posting manual journals is one of the main ways that frauds are covered up. So if you restrict the access for posting manual journals to certain qualified people or even just the directors, you have a better chance of preventing fraud.
5. Get your contracts in place, signed and keep them securely
When starting a business, the need to formalise relationships (including employment and leasing relationships) can be overlooked. As the business grows, making sure contracts are in place and correctly documented is increasingly important for protecting the business and its employees. Getting these formalities right early on can avoid onerous legal situations in the future.
6. Keep Companies House filings up to date
Filing documents with Companies House might seem like a boring and unimportant task, but it is part of running a successful business. Online filing via Companies House can also make it relatively simple to do.
You should review your filings at least annually to make sure you’re up-to-date. Key documents you need to file include your annual accounts, annual confirmation statement and other documents relating to events such as a change of directors or share capital.
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Ongoing support for the immersive tech sector
If you’d benefit from spending more time on building your business, and less time on back office finance and accounting functions, then you need BDODrive.
BDODrive delivers a range of services designed to help ambitious, entrepreneurial businesses across the immersive tech industry, by reducing your day to day strain and by finding ways of adding real value to your company and its owners.
To find out more, visit www.bdodrive.co.uk