Use your Q1 figures to improve your business and tax position
It isn’t myth that “knowledge is the key to success”. OK, a very small handful cruise through their business life seamlessly just making money but broadly speaking to keep your profits high and your tax low there needs to be a continual process of: Analysis, Planning and Action. Followed again by Analysis, Planning and Action.
Don’t delay until later this year to start the process…Q1 is the best time to start this financial year off with a view to making more profit and paying less tax.
Do you have the right tools?
Having an effective financial reporting system, which you not only keep up to date regularly but that also allows some basic reporting is vital to kick start the process.
No financial reporting system… Get one! It is impossible to effectively run a business without a tool to track progress
. All Figurit clients are provided with “Xero”, an excellent tool for effective business and financial management.
Financial reporting system not up to date? Keep it up to date! Again, it is impossible to be effective without current
information to hand. “Xero” is a real timesaver and makes the recording of financial transactions, simple and pain-free.
Analysis: Looking back
Once you are satisfied that all transactions for Q1 have been accounted for, a simple Profit and Loss Report is the best place to start the process of Analysis.
Learn to ask yourself these questions:
1) Is my Profit / Loss broadly what I expected? If not, why not?
- Did I have any unexpected expenses in Q1 that set me back? Repairs? Maintenance? Legal costs, perhaps?
- Did I have any changes to my workforce that affected income? Associates joining or leaving, staff pay-rises?
- If the profit is higher, have I missed any of my larger, regular monthly costs? Wages and salaries? Supplies? Rent?
- Am I expecting any larger invoices that haven’t arrived yet?
2) Is my Income and Profit consistent with previous periods?
- Compare each month within Q1 – to analyse if there are any peaks and troughs within the first quarter. A particularly good or poor month, maybe?
- Compare Q1 with Q4 of 13/14 (as in the previous quarter) – to analyse if business is consistent or rising or falling.
- Compare Q1 of 14/15 with Q1 of 13/14 – to analyse if there are any seasonal trends that occur year on year.
It is impossible to cover all questions within this article so the secret here is to make steps towards really knowing
your business month on month, quarter on quarter, year on year. Once you get started the process becomes easier as you know which questions to ask yourself and you will start to understand which figures hold meaning to the success of your business.
Help is available! Ask your point of contact at Figurit to work through this process with you for the first few quarters. They can guide and teach you to understand your business and tax position.
Planning: Looking forward
After the Analysis process, take the information and make a plan. To determine the plan, again, ask yourself these questions and consider your options:
1) Am I managing the costs of my business? Are there any savings I can make in Q2?
2) How can I increase my income in Q2?
- More new patients? Should I do more marketing?
- Am I successfully converting the enquiries I get?
- Should I increase treatment fees?
1) Am I saving enough for tax? Read our related article
2) How can I continue to be profitable in my business yet minimise tax?
To produce the results you hope to achieve in the year overall, it helps significantly to set targets to work towards in the form of a financial forecast.
This helps to keep both profits and tax on your radar. Read more about how Figurit can help you with this essential task.
Action: Here and now
Obviously, the plan doesn’t just work itself. Action needs to be taken to put into place the lessons learned from Q1 Analysis into the Q2 Planning and indeed future quarters.
Pick a couple of things to try in Q2 and see that this can make a real difference.
This is why starting now, in Q1, is vital. Don’t delay until later this year when it is too late to re-align your business on the track to success and ensure that you are maximising all tax saving opportunities in the process.
Contact the team at Figurit to discuss your Q1 figures and what actions you could consider in Q2.