Control is about a lot more than tracking sales and comparing them to the current budget and previous years. There are many events and situations that can affect your business. For example, none of us had foreseen the coronavirus crisis, and many companies that once felt secure and on stable ground are now struggling with tight liquidity and reduced earnings.
If you have a plan for dealing with unexpected events in advance, you can reduce risks and increase security. Here are some tips that will get you better prepared and make you less vulnerable.
1 - Do forecasts on an ongoing basis
During the year, there are many events that will affect the budget you set at the beginning of the year. To keep your budget up to date, make regular adjustments. Depending on the industry, you should make a forecast for the most important key figures every three or four months. That way you get a better and more current overview and have the opportunity to act in time if something happens.
2 - Know your customers and take care of them!
Do you have enough customers for your business to be sustainable? Can you add extra value to your products and services and thus expand the market? Invest in your existing customers. It is easier and cheaper to get an existing customer to buy more than to land a brand new customer.
Make sure that being your customer is easy. Stay in touch and always answer questions. Make sure your customers feel heard. Often, people do not leave a supplier because of the price, but because service is been poor.
Look for new customers that are similar to your existing ones. Find your most profitable customers, and try to find more of the same kind. Examine what your ideal customer looks like by finding similarities between your best customers.
3 - Review costs and purchases
If your company has a profit margin of 10%, then 1 DKK saved corresponds to DKK 10 in increased revenue. If it makes sense for your business model, share costs with other companies (e.g. office rental, materials, etc.). Make your purchases via membership schemes, as you can get big discounts this way. If you have a warehouse, make sure that the stock matches the revenue so you don’t have too much money tied up for too long.
4 - Keep track of cash flows
Make ongoing liquidity forecasts so you are sure that your company's funds can cover e.g. future salaries, investments and contingencies. This is a good way to avoid unpleasant surprises and suddenly be left without capital in an important situation.
5 - Improve your liquidity
Make sure to take care of and improve your liquidity, e.g. by getting customers to pay as quickly as possible, in advance or at the time of purchase. If you are invoicing, send the invoice as soon as possible and use a 10- or 14-day payment deadline. Send a reminder as soon as an invoice has expired. Find a good debt collection solution for bad payers. Conversely, for supplier invoices, it can be advantageous to pay as late as possible.
6 - Raise prices
Have you set the right price for your products and services? Find which products and services sell the best and see if these prices can be raised. An increased margin will be directly visible on your bottom line.
7 - Prepare for the worst!
What does your business rely on? What happens if a supplier's factory burns down and you can’t get your raw materials? What if a scandal erupts in your industry and no one wants to deal with providers of your kind anymore? What if a competitor offering the same product or service suddenly cuts their prices in half? What if there is another corona crisis? Stay informed about the industry, competitors and the outside world, and make sure you have a plan for what to do in a crisis situation.
8 - Ask for help
Do you have the right skills in your company? As your business grows, greater demands are placed on the skills in many areas of your company's operations. Do you need to hire more people or ask for help? Don’t spend time doing tasks for which you do not have the skills. The results won’t be good, and it will take too long – time that can and must be spent elsewhere in the business.
Get help with the accounts
At Azets, we can help you with your accounts and make running a business more manageable and smart. Let us handle all or part of the company's accounts and bookkeeping while you maintain a full overview of your finances and key figures. With us, you can have your invoices paid, your vouchers posted and the accounts checked and reconciled. You get a professional solution that frees up time and energy, as well as smarter and more efficient work processes, so you can focus on making important, strategic decisions about your core business.
