Tax season is now behind us, but that doesn’t mean you should lose sight of your finances as we begin the new financial year. No matter how profitable your business is, there’s always room for improvement as far as financial management is concerned, so why not take this time to review your finances and make some changes for the better?
Whether it’s looking up your credit reputation, consolidating (or reducing) business debt, weighing up different finance options, or negotiating better deals on your business expenses, there are many ways you can improve the financial position of your business.
Keep the following steps in mind when conducting your financial detox this year;
1. Find out what your credit score is:
You may have heard of a credit score in a personal finance sense, but it’s also important for you to know the credit reputation of your business. Your business credit score is a number between 0 and 1,200 that’s calculated using the details on your business credit file.
This information can include things like credit enquiries you’ve made for your business, the time you’ve been in operation (a startup will be deemed more risky than a business who’s been around for 15 years), and director information (such as any defaults on the director’s file).
It’s important to realise that any late or missed payments can negatively affect your credit score. If you have a low credit score, it may be time to adopt some debt-reduction strategies so you can fully meet your financial obligations.
2. Go down the debt-reduction route:
If you have a business loan, think about making additional repayments (above and beyond the minimum repayment) so you can repay the debt as quickly as possible.
For example, if your monthly loan repayment is $810, you could round this up to $850 if you have some spare cash. Contributing an extra $40 per month will go a long way in terms of helping you reduce your interest costs (and it will also mean you service the loan sooner).
Making more repayments more frequently is another tactic you can adopt to reduce your outstanding debt. If you switch to fortnightly or weekly repayments instead of monthly, you’ll be able to save on interest charges.
3.Compare business finance options:
Weighing up finance options for your business is an important part of the decision-making process, so make sure you set aside some time to do this. Having the right type of finance (at a competitive price) can influence your overall business success.
For instance, if you spend a big chunk of your time on business trips, you may want to make the most of frequent flyer and rewards points offered by a business credit card. On the other hand, if you’re looking to trim fees, you may want to sign up for a low-fee business credit card.
Make sure you exhaust all your business finance options. Read up on lines of credit, trade finance, or even short-term loans, to see which product will support your spending needs.
4.Be frugal with your business expenses:
Being frugal with your expenses is an important skill to master early on, as it can potentially save you thousands of dollars over the years. Whether it’s office equipment, machinery, or even your office rent, negotiate for better prices on all your accounts. You can do this by reviewing your payment terms and asking your supplier if they can offer you a better deal (or value-add).
If you’ve been a loyal customer, they’ll be inclined to give you a discount as they won’t want to lose your account.
Getting ready for the new fiscal year doesn’t need to be difficult, as long as you do some groundwork to review your business finances and find money-saving opportunities, you’ll set yourself up for great success.