How to approach your business finances in 2022 from an accounting perspective
As 2021 wound down, many business owners were thinking of starting the new year on the right financial footing. If you’re on this page, you’ve already taken a significant first step to improving your business finances in 2022.
Excellent business finances are essential for any business to run effectively, and this year, in particular, traditional financial processes have been affected because of the prevalence of remote work.
Another notable change that will affect business finances in 2022 is adopting cloud technologies in expense management software and payroll processing to help automate finances.
Check out how you can set up your business finances to prepare for these changes and use them to your advantage in 2022!
8 ways to approach your business finances in 2022 from an accounting perspective
Set out a process map for auditing present financial processes
You need to understand your current processes’ underlying strengths and weaknesses before making any beneficial changes to them. Performing this audit will also reveal the broken processes that need immediate improvements for better efficiency.
One of the quickest ways of doing this is visual with a Finance Process map. It shows all the finance operations in the sequence that they occur in your organisation. Visually representing such data lets you know the time it takes to finish tasks for each process and identify the roadblocks. This is usually a significant first step to determining all the areas needing improvement in your financial operations.
Use cloud technology for automating faulty and error-prone processes
You can improve your impact when handling critical financial operations by using new technologies like automation. It is a tool available in the cloud for simplifying many tasks and reducing the possibilities of errors. Automation-focused technology is designed to put the end-user first. It is not a tool to replace finance teams but rather to focus on more critical tasks and leave the error-prone ones to technology.
Manage expenses better
A new year is akin to a fresh start, and as such, you have to reexamine your finances and identify the ones that may not be beneficial to you any longer. Some great strategies for managing expenses include arranging for a periodic payment plan for higher costs to reduce the effects on your business. You can also try shopping for new deals from other suppliers and insurance companies. Also, consider using cheaper consumables like energy and change how many stocks you buy.
Lower/raise your prices when appropriate
Depending on how you run the business, sometimes it may be feasible to lower your prices. It is an excellent way to increase business and improve your financial standing if successful. Sometimes, this reduction doesn’t have to be significant, as a slight markdown can do wonders in making your products or services more appealing to customers.
Conversely, raising your prices is sometimes the better choice depending on the situation. Leaving prices unadjusted for years could mean they are below market, and you are potentially losing. If it is possible to increase your prices without losing many customers, you can improve your business’ finances.
Improve cash flow
Like everyone says, cash is king. A proper cash flow is essential to the finances of every business, and you can carry out some steps to improve it:
- Following up on outstanding customer payments quickly
- Ensuring the customer gets the appropriate invoice at the time of purchase
- Cutting down on unnecessary expenses
If you have unexpected changes in cash flow, you can consider getting a business loan to help smooth things out. Just make sure to assess your financial needs before getting a loan.
Implement data analytics for better business decisions
It could be challenging for Finance to get the reports and data from employees across all departments in an organisation, especially with traditional in-person processes. Even when getting this data is possible, a lot of time is spent on back and forth with the employees to clarify the reports. All of this takes up time that you should use to analyse the data and gain meaningful insights.
Using data analytics tools and software would automate the analysis process and make it real-time. It will give the Finance teams the needed data and actionable insights without additional effort or time. This also provides access to control and high visibility to spending, making it easier for Finance teams to make decisions that reduce overspending on operational and business costs.
Recover unpaid debts
It is vital to have as much cash in hand at the beginning of the year. It is always a good time to get in as many outstanding payments as possible. If you find that it will take up time, you can use a debt collection agency for the task.
Any transactions going into 2022 always have a sale agreement, so there will be reduced cases where you have to chase down debts. Your terms should include how long the customer has to pay the debt and any possible percentages you will apply in overdue payments.
Use financial risk reduction processes
It is essential to imbibe a culture that sees risk management as a continuous event instead of a quarterly or monthly event. Every time you audit, forecast, audit, or make insurance payments, it is crucial that you check the risk mitigation measures in place. Doing this will also help you keep an eye on other business activities.
Manual processes do not give any insights into the company’s expenses. Preventing fraud will therefore become a challenging task that they have to handle. You can solve this problem by using expense report software to automate these tasks, and your Finance team can become policy compliant with one button. It also acts as a failsafe for other financial leaks you may not know about.
It is crucial to start the new year better than the previous one. Quickly identifying your previous finance shortcomings can help you put checks and balances in place to reduce such occurrences and lead to a more productive year. Don’t be afraid to adopt technology like automation to simplify processes and avoid errors in 2022.