Financial Resolutions for 2024
When entering a new year, it’s important to reflect on our previous financial decisions and where things could have been done differently. This week I’ll share Baxterworld’s methods of setting and sticking to financial resolutions, to help you achieve success in 2024.
The most painful issues usually relate to cashflow, or lack of it. An important discipline which we recommend to all Clients is to put aside money needed for future tax payments, preferably in an interest-bearing bank account.
The first amount to put aside is to for your quarterly VAT payments. Calculate how much previous VAT payments were as a percentage of turnover. This allows for the VAT reclaimed on expenses. If it works out at say 15% then calculate 15% of money received from customers each week and transfer that amount from your current account to a business savings account. Set up your HMRC VAT DD to deduct from that account.
The next big tax outflow is the annual Corporation Tax payment normally payable 9 months after the accounts year-end. Calculate what this was in previous years as a percentage of turnover (or ask your accountant to estimate). If it is say 10%, then put that aside also. You could combine both for convenience.
Having carried out the above you will now see the real cash position of your business without the benefit of the taxman’s money. This may motivate you to make changes to your cash management. For example, you might look at revising the timing of capital investments or, if you offer credit to customers, tighten your credit control processes.
Equally essential is the regular monitoring of your management accounts. (Contact us if you need better reporting). Take time to review and analyse every month complete with action points. These new disciplines will work wonders for your business.