In recent months there has been news of large corporations and even football clubs falling into liquidation, with many jobs lost and well known household names disappearing.
However, the situation is not restricted to prominent companies, with millions of pounds passing through their bank accounts. Any company, of any size, can drift into insolvency. If your company owes its suppliers more than it can realistically generate, it could be insolvent. The current business climate means that it is now extremely important to keep track of your company’s financial health.
There are several ways key ways that you can do this:
- Activities as simple as regular bookkeeping can make a big impact. With bank accounts regularly reconciled, you will be able to see the funds available to your company.
- By keeping active records of balances owed from customers and due to suppliers, you should be able to pinpoint any cash flow problems that you might encounter in the future. It may be that you will need to chase long standing debts, or negotiate with any businesses that seem to have problems paying you.
- Actively generating management accounts, either quarterly or monthly, will give you a good idea of the profitability of your company throughout the year. Relying on your accountant to provide you with bad news about your figures, potentially 9 months after the company’s year end might not give you enough time to effect a turnaround.
- You should act quickly and decisively on the information provided to you in your management accounts. If you can see that your business’ performance has started to decline, then review the business for any costs you incur that do not bring value to the business.
- Prepare financial forecasts. A clear idea of where the company is going may help make valuable decisions that would keep your business growing.
- Consider outsourcing activities and labour in order to maintain flexibility. With uncertainty over the economic landscape companies will continue to rely on the skills, expertise and ‘can-do’ attitude of flexible workers like contractors and freelancers.
Many of the above can be achieved through purchasing a copy of Sage accounts software, which we can provide to you if you are interested.
If you would like any help with bookkeeping, management accounts or forecasting, please let us know, so that we can help keep your company healthy.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
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