New Year, New Budget: Mastering Your Finances in 2024

As December nears the end, it’s the perfect time for a bit of reflection and forward planning, especially when it comes to your business finances. Whether you’re running a bustling design studio or a dynamic videography agency, understanding the art of budgeting can make a world of difference as we look towards 2024.

The Importance of Year-End Budgeting

Why, you might ask, is budgeting at the end of the year so crucial for your creative enterprise? Well, it’s simple. It sets the tone for the upcoming year. It’s not just about keeping your numbers in check; it’s about aligning your financial plan with your business aspirations and growth strategies.

Reflections on the Past Year

Take a moment to look back at 2023. How did your business fare financially? This isn’t just about profit and loss, it’s about understanding the story behind those numbers. Did you invest enough in marketing? Were there unexpected expenses? Learning from the past year’s financial journey is key to a better budgeting strategy for 2024.

Setting Financial Goals for 2024

Now, let’s talk about your financial ambitions for the coming year. Setting goals is more than just hitting revenue targets; it’s about sustainable growth and financial stability. Whether it’s expanding your team or investing in new equipment, your goals should be realistic, achievable, and, most importantly, measurable.

Developing a Robust Budget for 2024

Here comes the nitty-gritty – crafting your budget. Start with your revenue forecasts, then list your expected expenses, and don’t forget a bit of wiggle room for those unforeseen costs. A well-thought-out budget is your roadmap to financial success in 2024.

Integrating Technology in Budgeting

Gone are the days of spreadsheets and manual calculations. Embrace the digital age with modern bookkeeping tools. They not only save you time but also offer insights that can drive smarter financial decisions. Unsure where to start? We can help guide you on the best tools for your agency.

Monthly Monitoring and Adjustment

A budget isn’t set in stone – it’s a living, breathing plan that needs regular check-ins. Make it a habit to review your budget monthly. This way, you can quickly adapt to any changes in your financial landscape, ensuring your business stays on track.

Seeking Professional Help

Sometimes, a bit of expert guidance can make all the difference. At Cloudit Bookkeeping, we understand the unique financial needs of creative agencies. We’re here to help you navigate the complexities of budgeting, so you can focus on what you do best – being creative.

 

Budgeting might not be the most glamorous part of running a creative business, but it’s undoubtedly one of the most critical. As we bid farewell to 2023 and welcome 2024, take the leap and start your financial planning now. Remember, a well-planned budget is the first step towards a successful and prosperous year.

Ready to get your finances in shape for 2024? Contact us today, and let’s create a financial plan that propels your creative agency to new heights!

3 Techniques to Master Your Rate Card for Creative Agency

In the world of creative agencies one of the most important aspects of business success lies in mastering the art of pricing. It’s not just about covering costs. It’s about understanding the value of your work, the dynamics of your market, and the needs of your clients. In this article we delve into three pricing techniques that can elevate your creative agency’s rate card and financial strategy. So, let’s dive in!

  1. Value-Based Pricing: Charging What You’re Truly Worth

Value-based pricing is a nuanced and highly effective strategy, especially in the creative industry. This approach involves setting prices based on the perceived value of your services to the client, rather than solely on the cost of production. It’s about understanding and communicating the unique benefits and solutions your agency provides.

Why It Works:

  • Aligns Price with Perception – clients are often willing to pay more for services they perceive as high-value.
  • Rewards Quality and Creativity – this method incentivises innovation and high-quality output.

Implementing Value-Based Pricing:

  • Assess Your Value Proposition – what unique solutions does your agency offer? How do your services impact your clients’ success?
  • Understand Your Clients – conduct surveys or interviews to gauge what aspects of your service your clients value most.
  • Communicate the Value – ensure your marketing and sales pitches highlight the unique benefits of your services.
  1. Tiered Pricing: Catering to Every Client’s Needs

Tiered pricing is about offering different levels of service at different price points. It’s an excellent way to address the diverse needs and budgets of your client base while also opening up avenues for upselling.

Why It Works:

  • Flexibility for Clients – clients appreciate having options that fit their budgets and needs.
  • Increases Revenue Opportunities – well-structured tiers can encourage clients to opt for higher-priced packages.

Crafting Effective Tiers:

  • Define Clear Service Levels – each tier should have a well-defined scope and deliverables.
  • Balance the Offerings – ensure each tier is appealing and provides tangible value.
  • Anchor Your Prices – the highest tier can act as a price anchor, making other tiers seem more affordable.
  1. Hourly Rate vs Project-Based Pricing: Finding the Right Fit

The debate between hourly and project-based pricing is a staple in the creative industry. Both have their merits and challenges, and choosing the right one can significantly impact client satisfaction and your agency’s profitability.

Hourly Rate:

  • Pros: Straightforward, ensures payment for all work done, and is transparent to clients.
  • Cons: Can limit profitability on efficient projects and is less predictable for clients.

Project-Based Pricing:

  • Pros: Offers cost certainty to clients, can be more profitable if the project is well-managed.
  • Cons: Requires accurate project scoping and can lead to losses if underquoted.

Making the Choice:

  • Evaluate the Project – consider the scope and complexity. For unpredictable projects, an hourly rate might be safer.
  • Client Preferences – some clients prefer the predictability of project-based pricing.
  • Manage Expectations – clearly communicate how you handle project changes or additional requests.

Each of these pricing strategies has its place in the creative agency landscape. The key is to understand your agency’s strengths, your clients’ preferences, and the nature of your projects. A mix of these strategies can often be the most effective approach, giving you the flexibility to adapt to different scenarios while maximising profitability and client satisfaction.

Navigating the waters of pricing in the creative industry needn’t be a daunting task. By implementing these techniques thoughtfully, your agency can develop a rate card that not only covers your costs but also accurately reflects the value you provide. And remember, a rate card is not set in stone – it should evolve with your agency and the market. Regular reviews and tweaks will ensure that your pricing strategy remains relevant and competitive.

Turning Turnover into Tangible Profits: 3 Actionable Steps for Creative Businesses

In the bustling world of creative industries, high turnover often garners the spotlight. It’s the headline figure, the trophy of success. After all, a swelling client list and projects pouring in can be thrilling. Yet, how often have creative agencies and freelancers looked at their bank statements, only to find their impressive turnover doesn’t quite match up with profit? Revenue might be the star on stage, but profit is the director running the show from behind the scenes.

  1. Distinguish Between Revenue and Profit

Before delving into actionable strategies, it’s essential to differentiate between revenue and profit. Revenue, or turnover, is the total amount of money brought into a business from its activities—selling goods, providing services, etc. Profit, on the other hand, is what remains after deducting all business expenses from this revenue.

For creative businesses, understanding this distinction is paramount. High revenue can be deceptive. It might reflect a large volume of projects, but not necessarily profitable ones. The goal is to ensure that for every project undertaken, the agency or freelancer is adequately compensated, keeping in mind all overheads and unforeseen expenses.

  1. Understand Your Costs

In the creative realm, costs can sometimes sneak up on you. An additional round of edits, equipment rentals, unexpected software updates, or outsourced expertise can quickly eat into your profits. Here are some ways to keep them in check:

  • Itemize Everything: Keep a detailed list of costs for each project. From big expenses like hiring additional hands, to minute ones like that extra coffee for a late-night brainstorming session. This will give you a clearer picture of how much you’re truly spending.
  • Negotiate with Vendors: Often, there’s room for negotiation. Whether it’s with suppliers for materials, software providers, or rental agencies, always try to strike a better deal.
  • Review Regularly: Conduct monthly or quarterly reviews of your costs. Identify any recurring expenses that aren’t providing value and find ways to reduce them.
  1. Price Smartly

One of the most significant levers for turning revenue into profit in the creative sector is pricing. Yet, it’s astonishing how often this is overlooked or undervalued.

  • Value-based Pricing: Instead of charging by the hour or a fixed fee, consider value-based pricing. This method involves setting a price based on the perceived value you are offering the client. For instance, if your design increases a client’s sales by a substantial percentage, isn’t that worth more than just the hours you put in?
  • Transparent Packages: Offer your clients transparent pricing packages. By bundling services and presenting clear, tiered pricing structures, you can encourage clients to opt for higher-value packages, boosting your revenue and profit.
  • Regularly Re-evaluate: The creative industry evolves rapidly. Ensure that your pricing reflects your growing expertise, portfolio, and the current market scenario.

Taking Charge of Your Financial Narrative

The world of creative business is vibrant, dynamic, and filled with challenges and opportunities. While high turnover can offer a temporary thrill, sustainable success lies in consistent profitability. By understanding the nuances between revenue and profit, keeping a keen eye on costs, and adopting smart pricing strategies, creative agencies and freelancers can ensure they’re not just earning but also retaining the fruits of their hard work.

Remember, in the vast landscape of business, turnover might be the exciting peaks, but profits are the nourishing rivers that sustain the journey. So, as you paint your masterpieces, design revolutionary websites, or capture moments through the lens, keep this mantra in mind: revenue is vanity, profit is sanity.

Fuelling Informed Decisions: The Powerhouse of Bookkeeping in Business Strategy

In the intricate realm of business strategy, data reigns supreme. Beyond the buzzwords, glitzy presentations, and high-octane brainstorming sessions lies a foundational element that dictates every significant decision in the business world: information. At the heart of this is bookkeeping, an often underestimated powerhouse that fuels informed decisions, ensuring businesses not only survive but thrive in the competitive landscape.

Beyond Numbers – The Tale of Data

Numbers, in their raw form, are simply digits – lifeless, cold, and inert. Yet, when processed, interpreted, and contextualised, these numbers turn into stories, tales of triumphs, lessons from failures, and paths to future possibilities. This transformative process, where digits morph into actionable insights, is where bookkeeping shines.

  1. The Competitive Landscape and the Role of Bookkeeping

Every industry, regardless of its nature, faces stiff competition. The lines that differentiate one brand from another, one product from its rival, are often blurry. In this haze, bookkeeping provides clarity.

By maintaining accurate financial records, businesses can gauge their performance against industry benchmarks. This not only helps identify strengths and areas of opportunity but also sheds light on potential threats. In a market dictated by consumer preferences, understanding financial performance can be the key to staying ahead of the curve.

  1. Data-Driven Strategies: The New Age Necessity

The age of intuition-led business strategies, while not entirely obsolete, is giving way to a new era – the age of data-driven decision-making. In this new landscape, bookkeeping stands as the bedrock.

Informed decisions, reinforced by accurate financial data, eliminate the guesswork. Whether it’s choosing to expand into a new market, developing a new product, or streamlining operations, the numbers guide the way. Each financial statement, ledger entry, or tax record provides a piece to the puzzle, helping business leaders see the bigger picture.

  1. Agility in Volatile Markets

Markets are seldom stable. Economic downturns, global crises, industry disruptions – the challenges are manifold. Yet, in this volatility lies opportunity, provided businesses possess clarity.

Bookkeeping ensures this clarity. By consistently updating financial data, businesses can anticipate shifts, understand trends, and predict future challenges or opportunities. Instead of being reactive, firms can be proactive, navigating market uncertainties with confidence.

  1. The Road Ahead: Future-Proofing with Bookkeeping

The future of business is indisputably digital. With advancements in AI, machine learning, and predictive analytics, the potential to harness data is immense. However, the foundation remains unchanged: accurate, timely, and relevant financial data.

Bookkeeping, in essence, future-proofs businesses. By ensuring data integrity and accuracy, it paves the way for more advanced analytical tools. As businesses move towards automation and digital transformation, bookkeeping provides the raw material – the invaluable data – to drive these innovations.

The Symphony of Informed Decision Making

Bookkeeping is more than an administrative task; it’s a symphony. Each entry, record, and reconciliation adds a note, creating a melody that resonates with strategy, foresight, and innovation. For businesses keen on charting a course defined by informed decisions, bookkeeping isn’t optional; it’s fundamental.

Why Businesses With Top-Notch Bookkeeping Thrive Over the Rest

Whoever said bookkeeping was just about “crunching numbers” clearly never ran a thriving business. Bookkeeping, often seen as the broccoli of the business world—good for you, but not that exciting—turns out to be a hidden superhero cape. Let me explain.

Financial Clarity and Decision Making:

Picture this: you’re on a road trip with a map that’s been through the wash a few times. It’s faded, has coffee stains, and let’s be honest, you can barely make out the next turn. Running a business without clear bookkeeping is a bit like that. Chaotic? Absolutely. Recommended? Not on your life.

Good bookkeeping doesn’t just tell you where you’ve been—it illuminates where you’re going. When your financial picture is crystal clear, every decision, from buying that fancy new espresso machine for the office to expanding into a new market, becomes informed and calculated. No more shooting in the dark.

Time and Resource Efficiency:

Raise your hand if you love last-minute scrambles during tax season. No takers? That’s what I thought.

The beauty of organized bookkeeping is like having one of those fancy closet systems for your finances. Everything is in its place, saving you time, grey hairs, and the frantic search for that one rogue receipt from February. Plus, with everything running smoothly, you can channel your energy where it truly matters – growing your business and delighting your clients.

Trust and Credibility with Stakeholders:

Ever tried getting a loan with a shoebox full of random receipts and some handwritten notes? It’s not a winning strategy.

Whether you’re courting investors or trying to convince a lender you’re good for the money, having a clear and organized financial history speaks volumes. It’s like showing up to a first date in a clean outfit versus the shirt you painted your house in. First impressions count, and clear finances make you look like the reliable, trustworthy business you are.

Proactive Problem Identification and Solution:

Imagine if you had a little fairy that whispered in your ear every time something was about to go sideways. Good bookkeeping is kind of like that (minus the wings and pixie dust).

By regularly keeping tabs on your finances, you spot those little gremlins in the system. Maybe it’s an area where costs are creeping up, or a product line that isn’t as profitable as you thought. Recognizing these issues early means you can pivot before they turn into money-eating monsters.

Enhancing Business Growth Opportunities:

Alright, pop quiz time! Which product or service brought in the most revenue last quarter? If your answer was a shrug or a guess, it’s time for a bookkeeping glow-up.

Clean financial records are like a treasure map to gold mines in your business. You can identify growth trends, see which products or services are fan-favourites, and uncover hidden opportunities. Who knew that little side product you introduced last year would become a best-seller? Well, with proper bookkeeping, you would!

 

Bookkeeping, far from being the most boring superhero at the business justice league, is actually one of the most powerful. It’s the unsung hero making sure businesses not only survive but truly thrive. And the best part? You don’t need X-ray vision to see its benefits.

Feeling inspired to give your books the love and attention they deserve? Drop us a line. At Cloudit Bookkeeping, we believe that every business deserves a shot at greatness, and it starts with understanding your numbers. Let’s crunch, calculate, and create your success story together!

 

Cashflow Crunch: How Financial Strains Stifle Creativity in Agencies

The lifeblood of any creative agency is the relentless pursuit of originality. From captivating visual designs to pioneering marketing strategies, innovation is what gives an agency its edge. However, financial turbulence, particularly cashflow problems, can threaten this drive. When funds dry up, the cascading effects can be both immediate and far-reaching. Let’s delve deeper into how these financial constraints can impact the very essence of a creative agency.

  1. The Emotional Toll of Financial Stress: The human mind is a fragile entity. While it’s capable of boundless imagination, it’s equally susceptible to the pressures of reality. Financial uncertainties induce a heightened state of stress, affecting the mental well-being of staff. This elevated stress not only diminishes overall job satisfaction but also cripples the mind’s ability to think outside the box. The once enthusiastic brainstorming sessions may become tedious, and new ideas might struggle to take flight.
  2. Reduced Risk-taking: Creative genius often resides outside the comfort zone. Every paradigm-shifting campaign or concept involves stepping into the unknown, embracing uncertainty. When cashflow is unpredictable, the very foundation of this risk-taking ethos is shaken. Agencies might pull back from ventures that, while promising, also come with upfront costs. The result? A safer, more predictable portfolio that doesn’t push boundaries or challenge the status quo.
  3. Talent Drain: The heart and soul of any creative agency lie in its talented individuals – the designers, copywriters, strategists, and more. However, cashflow constraints can lead to sporadic compensation, stagnated growth opportunities, and in extreme cases, layoffs. This not only dampens team morale but can deter potential high-calibre recruits. Over time, the agency might find itself grappling with a talent vacuum, impacting the quality and diversity of its offerings.
  4. Limited Tools and Resources: The realm of creativity is ever-evolving. New software tools emerge, training methodologies advance, and the digital landscape shifts. Staying at the forefront of this evolution often requires investment. But with a tight budget, agencies might find themselves using outdated tools or skipping essential training sessions. This not only affects the efficiency of projects but may also result in output that’s not in line with modern standards or client expectations.
  5. Shifting Priorities: In the throes of a cashflow crisis, survival instincts kick in. The long-term vision that once drove the agency might become clouded by immediate financial concerns. There’s a subtle shift from pursuing passion projects to chasing quick cash opportunities. While this might address immediate financial concerns, it could lead to a diluted brand identity. The agency might be seen as a jack-of-all-trades, mastering none.
  6. Client Relations and Trust: At the end of the day, an agency’s reputation hinges on its reliability. Consistent cashflow problems can result in delayed deliverables, cut corners, or even the inability to see a project through. Such inconsistencies can erode client trust, leading to lost contracts or negative word-of-mouth in an industry where reputation is everything.

Creative agencies are havens for dreamers, thinkers, and innovators. But for these talents to truly shine, a stable financial platform is essential. Understanding the multifaceted impact of cashflow issues can be the first step towards addressing and preventing them.

Cloudit Bookkeeping isn’t just about numbers – it’s about ensuring that the pulse of creativity remains unfettered by financial constraints. Reach out today, and let’s build a brighter, more creative future.

 

3 Proven Ways Creative Agencies Can Solve Cashflow Challenges

We’ve all been there, right? Working tirelessly on a project, your creative juices flowing, your team working in harmony, and then – BAM – financial reality crashes the party. You’ve run into cashflow problems. Again.

The lifeblood of any business, cashflow can often feel like a fickle friend to creative agencies. One minute it’s there, supporting your every idea, and the next, it’s vanishing into thin air, leaving you wondering how you’ll keep the lights on, let alone fund that cool new project. But why does this happen, and more importantly, how can you fix it?

The Cashflow Challenge in Creative Agencies

Cashflow is the silent rhythm that keeps your business alive. It’s the pulse of money moving in and out of your business, dictating whether you can pay the bills, fund new projects, or need to tighten your belt.

For creative agencies, the cashflow dance can be particularly intricate. You’re not selling widgets; you’re selling ideas. Your income can be irregular, arriving in big chunks after project completion. Add to that high overhead costs, unpredictable expenses, and that lovely habit clients have of delaying payments, and managing cashflow starts to feel less like a dance and more like a circus juggling act.

What’s Tripping Up Your Cashflow?

So, what exactly causes these cashflow hiccups? Let’s break it down.

Inadequate Cash Reserves: Creative work is often feast or famine. When it rains, it pours, but when it’s dry, the drought can be severe. Without a safety net of cash reserves, one delayed payment or unforeseen expense can send your cashflow into a tailspin.

Lack of Financial Focus: Creativity is your game. You live for it, and you’re good at it. But that doesn’t mean you should ignore the numbers. Overlooking the importance of financial management can lead to nasty surprises down the line.

Operational Costs Run Amok: From software subscriptions to salaries, operational costs can sneak up on you. Not keeping an eye on these can leave your cashflow gasping for breath.

3 Proven Action Steps to Solve Cashflow Challenges

So how can your agency mitigate cashflow challenges? Implement these 3 steps and you will ease the cashflow stress:

Step 1: Tighten Up Your Invoicing and Collections

First things first – get your money. It’s only fair, right? You’ve done the work, and now it’s time to get paid. Make your invoicing process watertight. Send invoices promptly and follow up relentlessly. Remember, every day an invoice goes unpaid is another day your cashflow suffers. It might feel awkward to chase, but hey, you earned it!

Step 2: Embrace Financial Forecasting

Imagine being able to look into the future and prepare for financial ups and downs before they happen. Sounds good, right? That’s what financial forecasting can do for you. Regularly review your financials and forecast your cashflow. Identify when those dry spells are coming, and plan accordingly. It’s like having a financial crystal ball.

Step 3: Nail Your Pricing Strategy

You’re not just selling services; you’re selling creativity, passion, and expertise. So, price it right. Your pricing strategy can make or break your cashflow. Make sure you’re charging enough to cover your costs, fund your growth, and, yes, make a profit. After all, you’re in business to make money, not just make art.

 

Cashflow problems can feel like an unwelcome guest at your creative party. But with a little focus and planning, you can take control and keep your agency thriving. Remember, managing your cashflow isn’t about stifling your creativity; it’s about giving it a solid foundation to grow and flourish.

At Cloudit Bookkeeping, we’re passionate about helping creative agencies like yours navigate the financial maze. From bookkeeping and payroll to credit control and cashflow forecasting, we’re here to help you keep your cash flowing so you can focus on doing what you love – creating amazing things. Ready to kick those cashflow woes to the curb? Get in touch with us today!

From creative dreamers to financial wizards, we’re all in this together. Let’s make magic happen.

Fuelling Your Financial Race: Boosting Creative Agency Profits with Lessons from the F1 Track

Running a creative agency can feel like hurtling down the Monaco Circuit at 200 mph. You’re juggling creativity, client demands, and your triple-shot latte when—boom—you remember those pesky financials. But fear not! Just as Formula 1 success isn’t solely about the flashiest car, your agency’s triumph isn’t just about stunning designs—it’s about making your bookkeeping and accounting work for you. Buckle up and let’s ride into this analogy!

The Nuts & Bolts of Creative Agencies

Behind every mind-blowing design, there’s a less glamorous but essential bit—financial management. Just as a Formula 1 car isn’t going anywhere without a well-tuned engine, your creative agency can’t thrive without keeping the books in check. It’s about as exciting as watching paint dry, but it’s the bread and butter that helps your agency keep the lights on and the coffee brewing. Neglecting the bookkeeping and accounting functions can lead to missed opportunities, non-compliance, and financial discrepancies, jeopardising your business’s success.

F1 and Bookkeeping: More Similar Than You’d Think!

Formula 1 is a symphony of precision, efficiency, and those incredibly fast pit stops (I mean, how do they change tires so quickly?). Similarly, in your creative agency, disregarding the nitty-gritty of accounting can cause more pile-ups than a wet race at Spa-Francorchamps.

Efficient bookkeeping and accounting in your creative agency can yield substantial returns. Accurate, timely recording of transactions, quicker financial reports, and efficient payroll management are just a few aspects where efficiency can translate into significant time and cost savings. This newfound time can then be channelled into nurturing your agency’s creative soul.

The Pit Stop Magic: Efficiency in F1 and Accounting

In F1, the motto is: every microsecond counts. Whether it’s a slightly faster tyre change or more aerodynamic wing mirrors, everything adds up to that sweet taste of victory.

Your agency’s bookkeeping can follow the same principle. Shaving time off record-keeping, collecting payments, processing payroll like a pit stop, or getting financial reports quicker than an F1 car’s 0-60 – it all adds up, leaving you more time for your creativity thing.

The Power of Consistently Upgrading Your Gear

Data analysis is the secret sauce behind a winning Formula 1 team. Teams painstakingly analyse every race, every tyre change, and probably every lunch break to find improvements.

Now, imagine applying that same hunger for improvement to your financials. Consider the creative agency that increased profitability by optimising their invoicing process, thereby improving cash flow. Or the agency that outsourced their accounting to Cloudit Bookkeeping, freeing up valuable time to focus on their creative endeavours, leading to increased client satisfaction and subsequent profitability.

Victory Lap: The Payoff of Efficiency and Improvement

Formula 1 history is teeming with success stories where continuous improvement and efficiency led teams to glory. Take for example Mercedes AMG Petronas, their obsession with incremental improvements culminated in numerous championships.

In the business world, parallels are abundant. Consider the creative agency that increased profitability by optimising their invoicing process, thereby improving cash flow. Or the agency that outsourced their accounting to Cloudit Bookkeeping, freeing up valuable time to focus on their creative endeavours, leading to increased client satisfaction and subsequent profitability.

Just like a Formula 1 team can’t run on monster engines alone, your creative agency needs more than just killer designs—it needs a well-oiled financial machine. Handing over the financial keys to a specialist like Cloudit Bookkeeping might just be your ticket to the podium of success.

The race to success begins now! Embrace the power of efficient accounting, seek continuous improvements, and prepare to take your creative agency to the podium of success. Ready to accelerate your journey? Reach out to us and let’s drive your business forward, together. Because in the race of business, much like in Formula 1, every second counts.

Building Financial Muscles: The Benefits of Regular Bookkeeping for Your Business

The old saying of “no pain, no gain” is as true in the world of finance as it is in the world of fitness. If you’re a creative agency director, understanding the relationship between regular exercise and regular bookkeeping might just help you get the most out of your business. Let’s examine six ways in which the two practices intertwine:

  1. Regularity Matters

With physical fitness, consistency is key. It’s a universally known fact that an irregular, inconsistent fitness routine won’t yield the results you desire. The same principle applies to bookkeeping. Regular tracking and updating of financial transactions enable your business to stay financially healthy. Just as skipping the gym can result in loss of physical strength or weight gain, neglecting regular bookkeeping can lead to potential financial losses or missed opportunities for growth.

  1. Visible Progress

When you stick to a regular workout routine, you start to see improvements in strength, endurance, and overall physique. Similarly, when you commit to regular bookkeeping, you begin to see a more organized financial structure and improved profitability. Not only does this give you a clearer view of your business’s financial status, but it also allows you to make proactive adjustments to ensure the continuous growth and success of your business.

  1. Developing a Routine

Finding the right exercise routine can be a game-changer in achieving your fitness goals. Likewise, establishing a consistent bookkeeping routine is crucial to financial success. Both require identifying the best approach for you (or your business), setting up a schedule, and sticking to it. Over time, these routines become ingrained habits that are easier to maintain and yield consistent results.

  1. The Right Tools

In fitness, having the right equipment or using the correct form is critical to achieving desired results and preventing injury. Also, in bookkeeping, utilizing the right tools – such as suitable software or employing the correct accounting methods – can significantly streamline processes and prevent financial mishaps. The right tools can provide accurate insights, enhance efficiency, and reduce the chances of errors.

  1. Measure of Health

Various fitness metrics, like BMI, heart rate, and endurance levels, provide valuable insights into one’s physical health. Similarly, different financial indicators – profit margin, cash flow, return on investment, etc. – serve as vital signs of a business’s financial health. Regular bookkeeping enables a business to track these indicators, assess its financial health consistently, and devise strategies accordingly.

  1. Professional Guidance

A personal trainer provides you with expert advice, custom workout plans, and helps you avoid common exercise mistakes. A professional bookkeeper can guide your business through complex financial landscapes, provide customized financial strategies, and help you avoid common financial pitfalls. In both scenarios, professionals provide the necessary guidance and expertise to optimize performance and results.

In essence, regular bookkeeping, like regular exercise, is an ongoing commitment. It requires consistency, the right tools, and professional guidance. But most importantly, it provides invaluable insights into the overall health of your business, enabling you to make informed decisions and secure a successful future. Train your business’s financial health like you train your body, and you’ll set yourself up for success.

Talk to us about how you can achieve financial fitness with out expert bookkeeping services.

Fuel Your Business Engine: The Power of Strategic Financial Management

Imagine your business as a well-oiled machine, with every cog and wheel representing a different aspect of your operations. Among these vital components, one stands out – the engine. That engine, the lifeblood of your business, is strategic financial management. It’s the force that propels your business towards sustainable profitability. In this post, we’re going to delve into the importance of financial management, the risks of neglecting it, and the solutions that can help you steer clear of financial pitfalls.

Understanding Financial Management

Financial management, at its core, is the efficient and effective management of money to accomplish your business objectives. It comprises a range of activities, such as financial planning, accounting, risk management, and investment decisions.

In the creative agency industry, financial management is particularly crucial. Amid the whirlwind of creativity and innovation, it’s easy for the numbers to get lost. But ignoring financial management can have severe consequences. A keen understanding of your financial position, cash flow, and financial performance can help you make informed decisions, from pricing your services correctly to managing your resources, and ultimately, maintaining your profitability.

The Engine of a Profitable Business

Just as an engine uses fuel to power a vehicle, your business uses strategic financial management to drive profitability. It’s through financial management that you maintain a positive cash flow, minimize costs, maximize revenue, and sustain your business growth.

Efficient financial management powers your business, propelling it towards better financial health and profitability. It’s the tool that helps you navigate the financial landscape of your business, foresee potential financial pitfalls, and guide your business towards financial stability.

The Risks of Running Out of Fuel

Imagine a vehicle running on an empty tank. It sputters, slows down, and eventually comes to a complete halt. The same happens to a business that neglects financial management. Without strategic financial oversight, a business faces a myriad of issues – from cash flow problems and inadequate capital to poor decision making based on inaccurate financial data.

For example, one of our clients came to us frustrated and stressed because of bad financial management by their previous provider. They had no idea what money was still owed to them, had cashflow problems and struggled to understand how much money they could draw to live on. They had no insights into where their business was financially and had lost their passion for it because of that. This case underlines the importance of keeping your business engine fuelled with sound financial management.

Refuelling Your Business Engine

If your business engine is running low on fuel, it’s time to refuel. You can improve your financial management in several ways, such as hiring financial professionals, utilizing financial management software, and continuously educating yourself about financial best practices.

These measures help maintain the health of your business engine. Financial professionals can provide expert advice, handle your bookkeeping, and guide you in making sound financial decisions. Financial management software automates processes, minimizing errors, and giving you real-time insights into your financial situation. Education empowers you, providing a clear understanding of your finances, helping you interpret financial data and make informed decisions.

How Our Services Can Help

At Cloudit Bookkeeping, we specialize in financial management services tailored for creative agencies. Our team of bookkeeping experts work tirelessly to streamline your accounting, providing you with the financial clarity you need to drive your business to profitability. Don’t just take our word for it – our clients, a host of successful creative agencies, can attest to the transformative power of our services.

Strategic financial management isn’t just a part of business operations – it’s the engine that drives your business towards sustainable profitability. Prioritize it, invest in it, and watch as your business transforms into a lean, mean, money-making machine.

Ready to fuel your business engine? Contact us today for a free financial health check and discover how we can drive your business towards greater profitability. Share this post with others who might need a fill-up too!

The 3 Most Common Financial Strategies Creative Businesses Use to Achieve Greater Profitability

Creative businesses face unique challenges when it comes to managing their finances. However, by deploying the right financial strategies, creative businesses can achieve greater profitability and long-term success. In this article, we discuss the three financial strategies that creative businesses use to achieve greater profitability.

  1. Monitor Your Cash Flow

Cash flow is the lifeblood of any business, and creative businesses are no exception. Managing cash flow is essential to ensuring that your business has enough cash to pay your bills and invest in growth opportunities. Cash flow management also helps you identify potential cash shortages before they become a problem.

To monitor your cash flow effectively, you should regularly review your cash flow statement, which shows the flow of cash in and out of your business. You can use this information to identify trends and make informed decisions about managing your cash.

  1. Set Profit Targets

Profit targets are specific goals that you set for your business to achieve. By setting profit targets, you can focus on achieving specific financial outcomes, such as increasing revenue or reducing expenses. Profit targets can also help you measure your progress and identify areas for improvement.

To set profit targets, you should start by reviewing your financial statements and identifying areas where you can improve profitability. You can then set specific, measurable goals and develop a plan to achieve them.

  1. Manage Your Expenses

Managing expenses is crucial for creative businesses who want to achieve greater profitability. By keeping your expenses under control, you can improve your profit margins and invest in growth opportunities.

To manage your expenses effectively, you should review your expenses regularly and identify areas where you can reduce costs. For example, you may be able to negotiate better rates with suppliers or reduce your overhead costs by working remotely.

You can also consider implementing cost-saving measures, such as implementing energy-efficient practices, reducing travel expenses, or outsourcing non-core activities.

In summary, creative businesses can achieve greater profitability by deploying financial strategies that focus on managing cash flow, setting profit targets, and managing expenses. By following these strategies, you can improve your financial performance and achieve long-term success.

New VAT Late Submission, Late Payment Penalties and Interest Charges

As part of HMRCs ambition to become a modern, trusted tax authority, it is changing the way penalties are issued for submitting late VAT returns and paying VAT late, which will affect all VAT registered businesses from 1 January 2023.

ForVAT periods starting on or after 1 January 2023, HMRC is replacing the defaultsurcharge with separate penalties for late returns and late payment of VAT.At the same time, HMRC is introducing a new approach to VAT interest.

If you submit your VAT return late

Late submission penalties will work on a points-based system. For each VAT Return you submit late you will receive one late submission penalty point. Once a penalty threshold is reached, you will receive a £200 penalty and a further £200 penalty for each subsequent late submission.

The late submission penalty points threshold will vary according to your submission frequency.

Submission frequency Penalty points threshold Period of compliance
Annually 2 24 months
Quarterly 4 12 months
Monthly 5 6 months

You will be able to reset your points back to zero if you:

  • submit your returns on or before the due date for your period of compliance — this will be based on your submission frequency
  • make sure all outstanding returns due for the previous 24 months have been received by HMRC

The new pointsbased system for late submissions is designed to be more lenient for theoccasional slipup, whilst still penalising those who repeatedly fail to comply. Late payment penalties will be charged at different rates based on when payment is received. This means the penalty is more proportionate to the length of time a payment isoutstanding the sooner you pay, the lower the penalty.

HMRC is also introducing late payment interest, which means that youll be charged interest from the date your payment is overdue, until the date you pay in full. HMRC is discontinuing repayment supplement and instead will be introducing repayment interest. Customers who make a repayment claim will be paid repayment interest fromthe day after the due date, or the date of the submission (whichever is later), to the date therepayment is made.

By introducing these changes, HMRC is aiming to incentivise businesses to file their returns on time and pay their VAT on time. This will make it easier for businesses to understand their obligations and help to ensure that HMRC continues to be a modern, trusted tax authority.

For more information, see the HMRC guidance on how to prepare for upcoming changes to VAT penalties and VAT interest charges.

Speak to us if you need help preparting and submissing your VAT returns on time. Our experienced bookkeeping team will be happy to help.

Xero Efficiency Tips

Xero is a cloud-based accounting software designed to help businesses manage their finances more efficiently. The software is user-friendly and offers a wide range of features making it easy for businesses to track their income and expenses, create invoices, manage inventory, and generate reports.

One of the key benefits of using Xero is its ability to save time and reduce the amount of manual work involved in managing finances. With Xero, businesses can automate many of the tedious and time-consuming tasks associated with accounting, such as reconciling bank accounts and generating reports. This allows businesses to focus on more important tasks, such as growing their business and serving their customers.

Another benefit of using Xero is its ability to provide real-time financial information. With Xero, businesses can access their financial data in real-time, which allows them to make informed decisions about their finances and ensure that they are on track to meet their goals. This real-time information can also be shared with other members of the business, such as accountants and investors, which can help to improve collaboration and communication within the organization.

Xero also offers a range of tools and resources that can help businesses to improve their efficiency. For example, the software includes features such as the ability to track inventory, create purchase orders, and manage bills and expenses. This allows businesses to easily manage their finances and stay organized, which can help to reduce errors and improve overall efficiency.

In addition to these features, Xero also offers a range of integrations with other popular business tools and software. This allows businesses to connect Xero with other systems and platforms, such as point-of-sale systems and ecommerce platforms, which can help to improve the overall efficiency of their operations. For example, businesses can use Xero to automatically import their sales data from an ecommerce platform, which can save time and reduce the risk of errors.

 

In summary, there are several ways to use Xero more efficiently and effectively, including the following tips:

  1. Import your bank statements directly into Xero to save time and avoid errors.
  2. Use Xero’s mobile app to manage your finances on the go.
  3. Use Xero’s built-in reports to get a clear picture of your business’s financial health.
  4. Set up automatic reminders for invoices and bills to avoid late payments.
  5. Use Xero’s collaboration tools to work with your accountant or bookkeeper in real-time.
  6. Take advantage of Xero’s integrations with other business tools, such as online payment systems and inventory management software.

In addition to the tips mentioned earlier, there are several other ways to use Xero more efficiently:

  1. Use Xero’s recurring invoices feature to automatically generate and send invoices on a regular schedule.
  2. Use Xero’s multi-currency support to manage transactions in multiple currencies.
  3. Use Xero’s project tracking feature to track time and expenses for specific projects.
  4. Use Xero’s inventory management tools to track stock levels and generate purchase orders.
  5. Use Xero’s payment gateway integration to accept online payments directly from invoices.

Overall, Xero is a powerful and efficient tool for businesses looking to manage their finances more effectively. The software’s user-friendly interface, real-time financial information, and range of features and integrations make it easy for businesses to save time and improve their efficiency. By using Xero, businesses can focus on growing their business and serving their customers, rather than spending time on tedious and time-consuming accounting tasks.

Talk to our experienced bookkeeping team if you want to explore Xero and it’s additional features for your business or would like someone to help you with keeping your accounts updated and relevant.

Business Finance Options

Throughout the cycle of a business, there is often a need for some additional cashflow to support business growth. Ever assumed that only struggling businesses need extra finance? Securing cashflow finance for your business can actually mean the opposite.

Business Loans can be used to fund the growth and expansion of a business, the purchase of a new premises, additional stock, recruitment or simply to provide some extra funds in the bank to offer some peace of mind.

What different types of business loans are available?

The most common types of business finance are Business Loans, Invoice Finance, Asset Finance and Property Finance. There are also many other alternative finance options such as Revolving Credit Facilities, VAT Loans and Merchant Cash Advance.

Why would a business need finance?

There are lots of reasons a business may choose to source additional funding. Here are some examples of how the different products work, and the benefits to the business:

  • Business Loans – often used for cashflow, expansion and growth. This loan would be a fixed amount over a fixed term, and many lenders don’t charge an early repayment fee if the loan amount is settled prior to the end of the term.
  • Invoice Finance – a way to improve cashflow when you have 30/60/90 day invoice terms. For example, a construction firm who has to pay out for materials and labour before their client clears the invoice, which heavily impacts cashflow. With Invoice Finance, the construction firm could borrow up to 90% of the invoice amount in advance, automatically paying the balance back when their client pays their invoice.
  • Property Finance – covers a variety of products including Commercial Mortgages, Bridging Loans and Development Loans. A property developer looking to fund their next project could utilise property finance to purchase the property or land and cover all projected costs.
  • Asset Finance – a facility which allows businesses to purchase new assets, including vehicles, plant, machinery and hardware, without using cash from their bank. You can spread the cost of the asset over a fixed term with a fixed interest rate.
  • Revolving Credit Facility – works in a similar way to an overdraft and allows you to withdraw, repay and withdraw again, whenever your business needs a cashflow injection. You only pay interest on what you use of the facility. A flexible solution which grows with your business.
  • Merchant Cash Advance – an additional financing solution for businesses such as retail, leisure or hospitality who take payments via a card terminal. You can borrow against forecasted revenue and pay back using the transactions taken, either in person or online.
  • VAT Loans – a type of borrowing specifically to spread the cost of an unexpected VAT bill. A VAT Loan can be arranged prior to the VAT being due, or can be put in place shortly after the VAT has been paid, helping to maintain cashflow within the business.

How does a business owner know if they are eligible to apply for a business loan and how much could they borrow?

A businesses eligibility is based on lots of factors including company trading history, the directors’ personal circumstances and company financials. A business would typically need a minimum of 3 months trading history, but the longer you’ve been trading and the more evidence you can provide of your affordability, the more attractive your business becomes to a lender which is then reflected in the rates, amount and term offered.

How can a company apply for a business loan?

The first place a business will usually go for a loan is their bank. The risk appetite of a bank is low, so applications can be rejected unless the business is extremely favourable. If your bank says no, you can then approach an alternative lender directly, or via a finance broker. A broker will use their experience to match you with the most suitable finance product, and as they generally work with a large panel of lenders, they have lots of options to choose from.

How does a business owner know what type of business loan is right for them?

There are so many different products in the market, so it’s hard to know where to start. Having a conversation with your bank or a finance broker is a great starting point so they can understand your requirements, and suggest some options that suit your needs and that you would be eligible for.

Where would a start-up business look for funding?

If you are a start-up or have been trading for less than 3 years, you may be eligible for a British Business Bank loan, which are backed by the government. You can apply online at www.startuploans.co.uk and they will assess your application along with your business plan, cashflow forecasts and directors experience in order to make a decision. You may also be able to raise funds via private investors or crowd funding, and your Local Enterprise Partnership should be able to offer advice on any grants and funding that you may be eligible for within your local business community.

When is the right time to start thinking about business finance?

Often business owners only start to think about business finance when they need it, by this time your eligibility may have suffered, or there may be limited options available to you. By forecasting your cashflow for the year ahead, you may be able to identify any opportunities that may require additional funding, for example an upcoming VAT bill, dips in revenue due to seasonal trading or planned expansion costs. By applying when your finances are healthy, you are ensuring you have as many options available to you as possible, on the best terms.

 

Grange Business Finance are an FCA approved commercial finance brokerage based in Suffolk, sourcing cashflow solutions for your business. For more information on their services, visit www.grangebusinessfinance.co.uk.

 

3 Fail-Safe Business Growth Ideas

There isn’t a small to medium sized business that isn’t looking to manageably scale and grow their business. Yet growing a business can be difficult for many companies. If nothing else, attempting to work on the business whilst you’re working in it, is exhausting. However, we have three fail-safe ideas which we always tell our clients to follow if they want to start making meaningful differences in growing their company.

Simple Business Growth Ideas for SMEs

 

  1. Put Your Prices Up!

The majority of clients rarely think to put their prices up, or worse — feel like they can’t. However, everyone else is putting their prices up; so of course, you must also. Price is often tied up with concern over a. worth or b. demand. The truth is, if people want your product or service, they will pay for it. If you are competitive and professional, why shouldn’t you expect to charge the correct price?

Undervaluing and underselling a product or service is not only detrimental to our mental states as we start to believe our worth is akin to the charge amount, but also terrible for our industries. Repeatedly I witness horrifically low hourly rates on agency sites. Not only are these personally unsustainable, but it devalues the sector as a whole. At some point, the people who are initially selling their work for such low rates have to put their costs up to survive, then guess what? Clients will look for the cheaper option – pushing these guys out of the sector as they can no longer afford to remain with these sorts of clients. Very simply, cost your work properly and charge what is required to offer a first-class service or product, the right people or companies will pay for the best. It is these clients or customers you should be looking to align your company alongside.

How to easily raise your prices

Try answering these questions:

  • Are you charging enough?
  • How do you measure your profit margin on each sale you make?
  • What does a 5% increase in sale price do to your profit margin?

Now try two simple exercises:

  • Look at all your services and simply add £50 to them. What does that increase look like? What difference does that make?
  • Now consider your clients: if you have 10 clients bringing in £1,000 per month each, put £50 on each (5% increase). What would £500 extra per month mean to you? See how much more you can earn by adding a slightly greater increase.
  1. Sort out your sales and marketing!

Yup, if no one knows you exist how do you expect to sell anything? Marketing is essential for bringing in new leads to convert into clients or customers.

Have you ever considered how many new clients or customers you actually need to earn the money you’re looking to achieve?

Marketing consultant and founder of Sasa.Marketing, Cat Bowyer, offers three genuinely helpful pieces of advice to companies looking to get better noticed:

A. Do you really know who your customer is?

  • Do you know their motives?
  • What are their communication channels?
  • What concerns do they have?
  • What size are their budgets?

Understanding your customer will ensure you’re investing your marketing spend in the right places.

B. Make sure your marketing objectives reflect your business objectives. Are you looking to achieve growth through new customers, or growth through increased sales per customer? What about your profit margin and sales relationship? Do you have a high margin and low sales or a low margin but high sales?

C. Websites and social media content are great, but you still need to let people know you’re online. Otherwise it’s like having a box of leaflets under the desk. Make sure there’s a mix of campaign and brand awareness activity.

From a bookkeeper’s perspective we look at the figures involved in marketing from a time and value ratio.

  • Do you know your conversion rates? (The conversion rate is the percentage of new leads who take a desired action and become paying customer.)
  • How many leads do you need to generate, so they eventually convert into the desired number of clients or customers?

For example, conversion rate of new leads to paying customers is 5% and you would love to gain two new clients in a month. How many leads do you need to generate? The answer is 40 new leads, which at 5% conversion rate will secure you two new clients.

Marketing is a numbers game! The more people you attract, the more customers or clients you’ll retain! The greater your marketing efforts, the greater your gain.

  1. Capacity

To improve capacity, it is essential your organisation runs efficiently. Rather than taking on more costly staff members, place in better systems and processes that actually work to reduce labour time in all departments.

  • Train your current work force with your new systemisation to effectively utilise your current team, before looking to employ more staff to cope with an increase in demand.
  • To systemise your organisation, you will need a plan. It’s essential you understand your figures and have a visualisation of the profit you require to achieve the kind of growth you’re looking to make. If the figures and goals aren’t attainable or tangible, how do you expect to get great results?
  • To get an idea of how to create a financial model and plan that will work for you, read our article: Financial Clarity – How To Sleep At Night.

 

Business growth doesn’t have to be confusing:

  1. Create a plan
  2. Put your prices up
  3. Market yourself
  4. Improve your efficiency.

However, if you want to chat through these ideas or look at figures you can achieve with a professional bookkeeper, get in touch! Call 01206 700 252 or email hello@clouditbookkeeping.co.uk

How To Save For Tax Payments

In 1716 Christopher Bullock wrote in his comedy play The Cobbler of Preston, “Tis impossible to be sure of anything but Death and Taxes”. Whilst tricky to argue with, it’s not a terribly inspiring thought!

If we’re honest, the death part is not really in our realm of services. But understanding tax and making it less scary, is definitely where we help businesses!

To get on top of tax payments there is only one simple trick you need to know: plan and save!

I know, you’re thinking that’s easier said than done, and of course it is! If it was so super simple, nobody would ever find themselves worrying about how to pay their next tax bill.

However, all is not lost! This article explains the simple steps you can take to easily save and pay your tax bills, keep on top of your ins and outs, and maybe if you’re lucky — have some money left in reserves to put towards your dividends!

Cloudit Bookkeeping’s simple steps to saving for tax

  1. How much will you pay in tax?

Before beginning to work out how much you can save, you first need to establish how much you estimate to pay in tax each year.  This depends entirely on your business structure: are you self-employed (sole trader or partner in a partnership), or is your company limited? Limited companies have to pay what is called corporation tax. This is charged at a flat rate percentage (check the percentage applicable in that year, but in 2021-2022 this is 19%) on taxable profits. If you’re self-employed things get a little more complicated as there are various different tax rates which kick in at different tiers, plus national insurance and student loan repayments.

Limited companies

If your company is limited, you’ll need to pay your tax bill nine months and one day after your year end. Corporation tax must be paid on both your company’s profits and on any gains you made from selling assets that increased in value.

If you’re keeping your accounts up to date, it’s most likely you have a rough idea of how much net income you earn each month. You’ll be paying set percentage on your profits — the money you make in that accounting period, minus overheads and allowable expenses. It’s worth knowing that any expense your company incurs for the running ‘wholly, exclusively and necessarily’ of the business can be deducted from your company’s profits, before you pay tax. Expenses include:

  • Goods bought for resale
  • Purchase of materials
  • Freelancer costs
  • Salaries of all employees
  • Employers’ National Insurance Contributions (NICs)
  • Employer pension contributions
  • Business insurance
  • Business-related travel and accommodation
  • Office running costs
  • Accountancy costs

There are other expenses, but these are the main ones. Sadly, equipment and plant you buy and keep for the business cannot be claimed, as these are considered capital assets.

Once you’ve looked at how much you earn each month and have considered expenses and any tax reliefs you may be entitled to, you can then estimate the corporation tax amount you need to save for each month at the current tax rate.

Self-employed, sole traders and partners in a partnership

If you’re self-employed you’re required to pay your Self Assessment tax bill, Income Tax and National Insurance Contributions on your business profits, after deductions for expenses. You need to know these figures before you can start saving for your tax bill.

Our advice? Use HMRC’s self-employed ready reckoner to help you budget for your Self Assessment tax bill. (Yup, they’re trying to help you pay your taxes!)

Here you simply place in your estimated weekly or monthly profit to get an idea of how much Income Tax, Class 2 and Class 4 National Insurance you’ll be asked to pay. However, if you need to make payments on account, these are not included in this tool. The tool also assumes you have no other taxable income and receive the standard personal allowance.

  1. Accounts

Next, open two current accounts. One will be for income, the other for expenses.

  1. Savings accounts

Once you’ve opened the current accounts, you also need to open two savings accounts: one you will use to save for your tax, the other for your reserves.

  1. Expenses

How much do your expenses cost you each month? Work out every cost to your business from business rent and staff payments to stationary bills and water bills. Now you can calculate how much income you need to move into your expenses account to ensure your monthly bills are paid.

  1. Tax

Go back to your estimated figures you worked out for your tax and now calculate how much income needs to be moved into your tax savings account each month to ensure there’s enough to pay HMRC.

  1. Reserves

Whatever is left, gets moved into your reserves account to pay your dividends. This can also be your pot for expensive equipment required in the future and other big purchases.

 

Ta-dah! Saving for tax made simple! For those of you who are up-to-date with your accounts, payments can be made twice a month, but this is only possible if you have good record keeping and a great bookkeeper.

If, after reading this article, you’re still not entirely sure how to begin the process of sensibly saving each month, just ring Cloudit Bookkeeping!  We’re here to make sure businesses not only succeed but thrive!

Don’t let tax get you down; there are always ways to help businesses cope and a great bookkeeper is one of the best ways of helping yourself. Please call and we will assist in helping you remove the fear of future tax payments.

Financial Clarity – How To Sleep At Night

So, what’s stopping you from sleeping soundly? I would say like a baby, but we all know they sleep terribly …

Lying awake at night, with a thousand thoughts racing around your mind is a horrible state to find yourself. It leaves you exhausted and cranky with anxiety slowly clawing at your thoughts.

This is no way to function at the best of times, let alone when you’re attempting to navigate your business through financial and politically tricky times. As a business owner there can be many reasons sleep evades you.

Common business concerns often include:

  • Loss of clients — are customers leaving your services, creating a financial deficit?
  • Stagnation — is your business struggling to grow or move forward in direction?
  • Denial — admit it, are you in full control of your accounts?
  • Overheads — can you cover your business overheads and reliably pay your staff?
  • Income — are you struggling to personally earn enough to live on?

How to start taking control of your business

If any of the above worries resonate, it’s not surprising you’re finding it tough to sleep at night. Any of these concerns are difficult to know how to overcome. It often feels like the wood and the trees are one, and the light is never going to show at the end of a dark tunnel.

However, there are pragmatic solutions. Try answering these simple questions:

  1. How much money do you want to take home each month after tax?
  2. Where do you want your business to head?
  3. How are you going to reach your goal?

Financial Planning and Modelling

Once you’ve answered the above, it’s time to work backwards! How are you going to achieve your objectives?

If you want to feel in control of your business and profit, you need to make informed decisions based from your financial data. A financial plan and model helps you work out how much money you need, your expenses and what sources of income are available. In other words: a financial model helps a business budget, forecast and plan. It keeps companies in control of their business and finances, so they know they’re on track. And if they’re not — why they’re not on track so they can fix that problem.

What is a financial model?

Essentially it involves creating a spreadsheet (don’t groan – they don’t have to be terrible!) to act as a representation of some, or all of your business operations.

  • A model can be used as a decision-making tool. It can assist in forecasting business decisions as you will better understand how much or how little money you have, or when more revenue will be coming in so you can invest, spend or save accordingly
  • Financial plans can be used in strategic planning, cash flow analysis, sensitivity analysis or appraisal
  • Models help estimate the value of your business
  • A model is useful if you are looking to compare yourself with competitors
  • They are very handy when it comes to selling a business

Considerations for a financial model

On a spreadsheet you need to add your business assumptions – these are educated guesses based from your historical data: numbers, trends, external conditions, industry and market. It’s important to consider situations or challenges that may arise and place these into your model to help plan for unforeseen eventualities.

Ideally you need to create a model which helps you understand how to plan for:

  • Working capital: How much revenue do you need to make to support your business after paying out for your direct costs and operation costs?
  • Revenue: Is the business continuing on the same trajectory as previous years? This helps plan when and how payments occur, whether prices are correct, how and when customers buy and areas of business stagnation
  • Financial statements: Forecasting of financial statements helps with talking to investors, banks, auditors etc
  • Growth margin: How much money goes towards delivering your product or service and how much is left over? This helps you plan to successfully develop your company
  • Increase in demand: Do you have the manpower or software capabilities to cope?
  • Operational expense: How much does it cost you to operate as a business? How much does each area cost e.g. admin, marketing, software etc?
  • Significant decline: Look at why a product or service is no longer popular and use this to make an informed decision to find a successful solution

We know it may seem a tad daunting, especially if you have a lot to focus on, but believe us when we say how important a great financial modelling plan is to a business.

If you don’t know where to start, or just want to talk things through, please give us a call.

As cloud-based bookkeepers, financial planning is just one of the many services we offer, so chat to us and we can help you get the sleep you dream of achieving.

Call 01206 700 252 or email hello@clouditbookkeeping.co.uk and take control of your business finances.

Great finances = great sleep!

Spring Statement 2022

A detailed round-up of 2022 Spring Statement and changes coming up in the 2022-2023 tax year is this downloadable PDF prepared by The Institute of Certified Bookkeepers.

Click the link below to download your copy:

Spring_Statement_2022

3 Lessons Digital Agency Owners Can Learn from Nick Suckley?

The book “Start. Scale. Sell. 75 Lessons for Business Success” arrived on Friday morning and I have finished reading it by Sunday. The book just flows and is an easy read with concise lessons and examples. I believe any agency owner reading this would relate to most lessons Nick Suckley learned building and selling Media21 and Agenda21. I have picked out 3 that hit the cord the most with me being involved in helping digital agency owners manage and plan their financial side.

What can you, Digital Agency owner, learn from Nick Suckley’s experience?

  1. Measure your KPIs but don’t overcomplicate. Simplicity is key if you want to understand and use your numbers. The list of key performance indicators Nick uses is:
  • Pipeline – number and size of potential customers. If you do not have a sales strategy or there is no real sales pipeline, this will hurt the business most in the long run. You cannot leave new business to luck or referrals. This is unsustainable if you wish to grow. Imagine your best earning client decided to bring it all in-house or move the service you provide to another agency which usual mean you receive an email saying “we are bringing all our digital marketing under one roof and agency XYZ can do it all”. New business is the top 1 reason agency owners are stressed and anxious. Having data on sales pipeline will give you clarity and focus.
  • Pitch-to-win ratio – how many potential clients you converted via pitch or proposal. This is important as it will give you an understanding if your pitch material works and where you need to make changes. Correct positioning can help here too.
  • Billings per head – measure how productive your team is and if you are over or under servicing clients. The more efficient your team can be the more billings per head you can have.
  • Income-to-salary ratio – measure how profitable and productive the company is. If this ratio is too high you need to cut salary costs or increase your billings.
  • Gross profit margin – how good you are at charging clients.
  • Net profit margin – how profitable you are.
  1. Boost profitability – use the right tools. Nick calls this Profit Improvement Programme (PIP). You need to understand how each area of your business is generating income and what are the costs associated with it. Track each service you offer and associated team’s Profit and Loss (P&L). You might have media, paid search, SEO, social, affiliates and analytics services. You would match income with team costs for that service and any other associated expenditure. This will give you the profitability for each service area you provide. Nick has the Golden Rule which each team leader has to follow. This is – staff cost cannot be more than 50% of the income generated. If you follow this rule, you will have enough left for the general overheads and your own pay. Get this right and you will see great improvement in your net profit margin.
  2. Never make a loss. This is a tough but most important rule in my view. Nick Suckley argues that by not making a loss you do not lose control. Making decisions quickly when times are tough, cutting costs and staff will save your business. These are the toughest decisions for any owner but can mean survival or going under. That’s why having up-to-date and accurate financial information will make a difference and provide the data you need to make those vital decisions. You will have the gut feeling that things need to change, or things are not going quite right. Having your financial reports in good shape will help you understand the situation better.

What can you do right now to make a difference to your business?

Take these 3 steps today and you will be on the path to success:

  1. Measure, measure, measure. Decide on your KPIs, measure and report on them at least monthly. You will need to track staff hours spent on client work, service team P&L, sales pipeline and anything else you decide is vital in making business decisions. Start with simple Excel spreadsheet and build from there. You don’t need to overcomplicate it.
  2. Analyse your management reports monthly. Review your accounting function and make sure you have accurate data at least monthly. If you do not have management reports, then look at your P&L and Balance Sheet as a minimum.
  3. Set net profit percentage you want to achieve and maintain. Do everything you can to keep it above this level. Paying yourself is the number one priority.

If you are not sure where to start, we can help you get started and support your agency with providing accurate and up-to-date accounts information, reports and tracking. Get in touch with us today.