Business Resolutions for Creatives13 Nov 2017
Whilst it is commonly held wisdom that January is a great time to refocus and prioritise improvements, there really is no time like the present.
Those working in creative industries, artists, designers and so on, tend to have creative flair in spades but are stereotypically less likely to focus on the operational elements of their businesses.
However, like all businesses, creative enterprises thrive when they are organsied.
Focusing on the accuracy and timeliness of systems and identifying potential risks can allow you to make better commercial decisions, identify cost savings and allow for better business planning and cash flow management. Here are our top tips:
Get On Top Of Filing And Administration Of Financial Paperwork
Paperwork is a bore. However, nothing is worse than not being up to date. This can result in lost opportunities, fines and increased professional fees. If you make an effort to be organised this should be relatively pain free. Quick wins include opening documents and filing them away into clear marked files in chronological orders on a regular basis.
Make sure to throw away any envelopes and unnecessary marketing collateral. You will be surprised at the amount of paperwork you can bin immediately.
Retain bank statements for at least six years. Receipts for purchases and orders should be retained indefinitely.
You may choose to adopt a digital filing solution with a tool such as Evernote. This will help you access vital documents on the move, and will make them easy to share with stakeholders.
It is currently a grey area as to whether physical copies of purchases orders and receipts should be retained. To be on the safe side it is recommended to that you do this should you get an investigation from HMRC.
Review financial systems
Moving your systems into the cloud will benefit your business by allowing you to view your company’s performance in real time.
Adoption of a cloud accounting software package such as Xero or QuickBooks will have the benefit of being able to aid strategic decision making, as well as allowing your adviser/s to be able to offer timely insights.
Depending on your industry, you may also choose to use complimentary software add-ons relevant to your business.
For example, if you run an online or offline retail business you may consider integrating Shopify as an e-commerce and/or EPOS solution. The benefit of using a solution which integrates with cloud accounting software is that the experience of running sales reports, generating invoices, and syncing related data (i.e. stock movements) with your financial information should be seamless.
Another benefit of cloud systems is that it is easy to measure their costs due to their subscription billing models. This means that you will be able to better forecast associated expenditure.
Manage finanacial and legal risks
Take a step back to consider risks, both internal and external, faced by your business.
This could include concerns about retaining key staff and clients, alongside the price of cost of sales increasing due to overseas currency movements and inflation.
If you have any particular concerns write down strategies for how to counter them, and consider discussing them with related stakeholders in the business, alongside your business advisor.
One way of retaining the services of key members of staff is to give them share options, which vest over a period of time. This means that they will not enjoy any associated economic benefits until they have fully vested. Typically, such schemes (i.e. EMI share option scheme) vest over three or five years within the creative sectors.
Risks related to the cost of materials in your supply chain can be countered by considering focussing sales, and opening a bank account, in a currency which you source purchases from.
Concerns about retaining large clients can be mitigated by reviewing your communications charter and being transparent and asking for detailed feedback.
Being over reliant on one client for business is a common risk, and if this applies to your business it will be a worthwhile risk exercise to forecast your annual cash flow with revenues from your largest client stripped out.
Review monitor and control your costs
Review costs with regular supplies in order to make sure that you are getting the best deal, and that you are not overpaying.
A simple exercise to carry out is to compare the annual amount spent on specific suppliers to the previous year.
It is good practice for categories of expenses to not exceed a certain percentage of turnover. You may want to refer to your business adviser to see if they can offer you insight as to what this should be for your specific industry.
If the percentages have increased significantly it is worthwhile to hunt around for alternative suppliers to provide the same product or service but at a cheaper price.
If the cost category of the supplier is a variable expense or cost of sale and your usage has significantly increased, you may be able to negotiate a better deal based on your additional usage.
Identify funding needs and options
Use the new year to forecast what your cash requirements will be over the next 12 months. If you anticipate increased revenues, this could put a strain on your cash flow if the days it takes you to get paid exceed the credit days of your suppliers.
If you are seeking equity investment, you will be in a stronger position to negotiate if you have a strong cash balance. If investors know that you are likely to soon run out of money they may try and invest in your company on a lower valuation, resulting in you selling equity more cheaply.
If seeking debt or equity funding your financial adviser should be able to help you put together an integrated financial model, based on sound assumptions.
Additionally, they will be able to let you know about whether your business qualifies for tax schemes such as SEIS/EIS, which can make your business more attractive to investors and may be able to result in a higher valuation.
Get good advice
If you've reached that stage in business where you can't manage then hiring an accountant to manage your bookkeeping, accounting and tax will save you both time and money.
A good accountant can also answer questions you might have on all of the above, helping you grow your business and become more profitable.