A spring cleaning refers to the ritual cleaning of homes in the spring. When spring comes around, people open their windows, doors and clean their homes out thoroughly.
In business, the term ‘financial spring cleaning’ refers to the actions performed to streamline all aspects of the business. In this routine, you primarily focus on increasing sales, revenue generation, and managing daily operations. It would be best if you took the time to refresh your finances. It would be best if you examined notice of pending invoices, old bills, and a revision of business plans to take immediate and necessary actions. All these steps will save the business from loss and complications and benefit you greatly in the long run. So, how do you open your proverbial windows and doors to rid your business of the clutter? Let us look.
Re-examine Payment policies
Increasing cash flow is the key to growing a business and enjoying a debt-free company. A small business owner should sit with their accountant with bookkeeping records. From transactions and customer history, determine the number of customers whose payments are pending and for how long. Generate an aging table for accounts receivable to know the period for which each payment is pending. Categorize the customer according to the price time, i.e., 30 days, 90 days, or 120 days. This aging table is used to collect outstanding payments, evaluate payment policies, and have a solution for the customer who is habitual in delaying payments. If you get payments from a customer early, you may be saved from borrowing money or going into more debt.
Assess pricing Models
The other crucial part of a financial spring-cleaning strategy is an assessment of your pricing. The pricing of your small business should be comparable to your market competitors. Pricing should be at profitable levels, and you are not at a loss. But in fact, pricing is a problematic area for many small businesses. Many market conditions affect pricing, and it is not easy to manage price. Still, the best strategy is to keep the pricing of products and services comparable to your market competitors.
Review cash Balances
The coming of summer characteristically causes many businesses to postpone their huge purchasing decisions until the fall. Summertime is typically a crucial time for small businesses because they must
pay fixed expenses like utility bills, office rents, etc., whether revenue is falling and you are at a loss. During this slow business period, you must prepare well for the fall and maintain enough cash balances to get through successfully until your regular business is back. Reviewing sufficient cash balances is a significant step for financial spring cleaning. If you contain adequate funds, it is sensible to go for a working capital loan or a new line of credit.
Discover opportunities for Re-negotiations
Almost all businesses need to make long-term contracts. These contracts may include leasing an expensive piece of equipment long-term instead of purchasing it or making a long-term service contract. All these agreements save money; sometimes, a vast amount of fixed costs are allocated each month to pay for the fees of these contracts. You should reassess these contracts, and you should explore opportunities for re-negotiation so you can save that money.
Analyze your Subscriptions
Many small businesses subscribe to different types of software. Some of them require a specific project or a limited time. Still, you do not remember canceling that subscription after it is no longer needed due to hectic business routines. In many cases, these are automatically renewed, as software companies have your credit card numbers. Each month, subscription fees are deducted, and you may not even notice. A financial spring cleaning provides you the opportunity to re-evaluate all recurring expenses and cancel such subscriptions which are not in use.
Final Thought
Just like spring cleaning is necessary for cleaning your home and enjoying the refreshing feeling of doing so, a financial spring cleaning is also an excellent step to refresh the productivity of your small business and improve its financial health. A periodic and detailed review of the company and adjustments accordingly are necessary to keep your business prosperous. And good news! It does not have to be spring for you to start!
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