At Square Mile Accounting, we’re passionate about sharing our advice with contractors on how to run your limited company. For lots more advice to help you to increase your income and productivity, reduce your costs, and become a success, please also explore our Free Toolkit.
Power in the Numbers: It is vital that you use small business accounting software to keep your business records current and regularly review your financial statements. At Square Mile Accounting, we use the world’s best online accounting solution – Xero. Long gone are the days of boxed-type software that becomes easily out-dated and costly, excel spread sheets which are burdensome and time consuming.
Budget Annually, Review Periodically: Create your business budget for the upcoming year, and then review it throughout the year to compare actual results with budgeted amounts. With a budget, you can predict when cash shortfalls may occur, enabling you to plan in advance whether you will need to source financing, tap into a line of credit or make adjustments to your expenses. You can plan large expenditures (including CAPEX) more strategically, rather than being caught unprepared when these needs arise. Ultimately, you will have a better handle on your cash flow, which will increase your overall financial control.
Forecasting: This is a power tool in predicting your cash flow. Forecasts will also show you when and how much you may need to borrow, and this will help you to negotiate the necessary facility with your bankers well in advance of the event. Professional Support
Your Prices: Pricing your professional services is a quandary that all independent contractors face. It can be challenging to put a monetary value on your time and your experience. Unfortunately, pricing your skills, services and experience is not an exact science. There are many variables that come into play, and you may find that you need to price different projects in a different way so that you are profitable. We cover the factors you should consider when pricing your services in this article.
Saving Money: Take the necessary steps to reduce your costs. Think about expenses which could be cut. Where can you save money? Are your purchases well thought-out? Do you waste money on high supplier fees? What is absolutely necessary?
Time: Time is possibly the most abused and miscalculated asset for many contractors. Poor time management can cost your business – especially if you are the only shareholder. It is very important for contractors to fully understand how they spend their time, and analyse which activities add the most value and profit to their business and those that add the least.
Credit Control: There is sadly an abundance of potential clients in the market who can unintentionally or purposely cost your business a great deal of time and money by not paying your invoices. It’s one thing having no work – but having lots of work and not getting paid for it can be very stressful. There are precautions you can take to minimise the risk of this happening to you:
- Generate your invoices on time – not only is this necessary to establish the correct date for VAT purposes, but it also starts the due payment clock ticking.
- Hold a monthly review to keep a tighter hold on credit control.
- Raise your bill as soon as the bulk of the work is done, rather than waiting for clients to come back with possible questions.
- Set up a fixed fee arrangement so that your client will be expecting the amount and payment schedule.
Clients: Identify those contracts or clients which are most profitable for you and concentrate your sales efforts on trying to repeat or replicate them.