2020 was a really tough year with plenty of speed bumps, but now is the time to move forward and lay the financial groundwork for a better 2021. Reconsidering business plans that have been affected during such uncertain times is crucial for business growth and to help cash flow.
To make it happen, the number one business advisory and consulting firm in Brisbane is offering superior professional accounting services. Hoffman Kelly has come up with some valuable accounting tips to get your business finances in check for 2021:
Tip to Get Your Business Finances in Check
- Switch to Accrual Accounting
Accrual accounting is a system of recording both expenses and revenues as transactions occur. The cash method, by contrast, records the payment when made or received. Why do business advisory and consulting firms prefer the first method? Because it creates an accurate view of business growth and the current financial picture. Plus, it is the most suitable approach for small businesses.
- Take Inventory into Consideration
In 2020, many businesses ended up with higher expenses than revenues, plus a lot of stock sitting in the warehouse. However, this could be a good thing if you consider inventory as an asset. Once you go through your inventory, accounting software and balance sheet to assess stock levels, purchases, and sales, you can make an efficient plan for better inventory flow in 2021.
- Claim Instant Asset Write-offs
Luckily, a small business can claim instant asset write-offs. But, what are instant asset write-offs? They are instant deductions of the asset cost that is applied in the year the asset is used or installed. To be more precise, instant asset write-offs apply to both new and second-hand assets, as well as multiple assets, if the cost is less than the threshold.
For instructions, thresholds, changes, and eligibility, look for info at the ATO’s website or simply get in touch with the ultimate consulting firm – Hoffman Kelly – to get everything explained in detail.
- Predict 2021 Sales
Even though it may seem impossible after a year like 2020, predicting sales can help improve sales and foster business growth now that you know how the coronavirus pandemic has affected you. As sales trends are changing, you can identify whether you need to work on new offerings or simply improve your current ones. Just go through your revenues from the past couple of years, determine the changes, and predict the future.
- Determine Your Budget
Once you have forecasted 2021 sales, you can now determine your budget based on costs. This is key to sound financial planning. Start by creating a profit and loss statement for the previous year and then decide which items are variable and which are fixed. To be more precise, fixed costs are those that don’t change regardless of business operations while variable costs are those that vary based on sales and business growth. By determining your budget, you can identify the expenses you could reduce and those to increase.
Now that you know how to get your business finances in check for 2021, it’s time to contact Hoffman Kelly and ensure that you get the best advice and accounting services.