Is Your Company Financially Fit? 5 Steps to Financial Fitness
AdminAssistOctober 26, 2020
If your fiscal year ends on December 31st, then you might be looking at a last-minute frenzy for the next few months! The end of the fiscal year is an important time in every staffing company’s calendar. It’s a time to get documents in order, ensure that invoices are paid, and look back on lessons learned. Financial fitness is not something that can happen in a matter of months, however. Instead, financial fitness is a mindset that should infuse every single decision that your recruitment business makes.
While you focus on wrapping up this fiscal year, don’t forget to keep an eye on the general state of financial fitness. This means budgeting, reviewing, digitizing, reporting, and long-term planning. Here are the 5 steps that can get your business to financial fitness.
#1 - Set and Stick to an Annual Budget
Budgeting is the bedrock of every successful staffing and recruitment business. If you don’t understand the flow of money in and out of your organization, then you will not be able to make thoughtful decisions about hiring, product development, or marketing. Of course, most companies have a budget, although one study revealed that 61% of small businesses did not create a budget in 2018. A budget is often discussed among executives and then tucked away into an electronic folder to be reevaluated during quarterly meetings. However, this is a misguided approach to budget-setting.
Setting your company’s budget is a great opportunity to involve your entire staff in a discussion about priorities and efficiency. You might discover there are ways you can save money and perform better. Once you hammer out a budget, the next step is to make your budget a live document. Put it somewhere that people can refer back to it. This helps people stick to the budget rather than working from memory or rounding up to the nearest thousand dollar mark. Your budget should be updated constantly to reflect accurate figures so you can spot any financial discrepancies before they become huge problems.
It’s not a bad idea to review your company or departmental budgets on a quarterly basis. Keep in mind that it can take more than one quarter to see results from any given initiative, so don’t be too hasty when cutting off funds. However, it’s worth checking in with your team to understand how the budget is working for them and how closely they’ve been able to stick to it.
#2 - Review Your Books
Many businesses are so focused on delivering great results for their clients that they forget to review their books until the annual tax deadline rolls around. This isn’t the best way to grow your business. If your internal accounting person is too overwhelmed with company business to facilitate this process, then it might be worth outsourcing to a full-service accounting firm.
Reviewing your books should not be a one-time affair done in a frenzy at the end of the fiscal year. Instead, calmly and regularly assess your finances to get a grasp of the financial cycles of your business. If this feels daunting, challenge yourself to simply sit down with the spreadsheet once per month. You don’t need to take any action in the beginning but it’s important to familiarize yourself with the nuances of your books.
#3 - Digitize (Go Paperless)
There are so many reasons to digitize your accounting. For companies who want to minimize their ecological footprint, digital records and payments help save on paper. Today, there are plenty of excellent options for safe and efficient record-keeping that do not require cutting down trees.
Digitization is the future, and there’s no way around it. From interviewing and paying your team to working with vendors, your business should be able to handle all types of communication and payments in a completely virtual environment. Not only are digital payments faster and often more accurate, but they provide a digital timestamp that’s easy to search and track. Financial fitness means no more messy drawers full of receipts and accounts payable.
#4 - Reports
Great reports can make or break your business. A clear and legible report makes it easy for information to be understood, which leads to better decisions from key leaders. When insights are made obvious and the data is straightforward, your business is set up for success.
From a staff perspective, clarity is absolutely essential when it comes to payroll processing, invoicing, and commission reporting. People need to understand exactly what they are being paid and why they are receiving that amount of money. Great reports build trust with employees and thus increase retention. That is a critical component of financial fitness.
#5 - Long-Term Planning
Finally, it’s wise to think long-term. Every business needs to make sure they can pay people, of course. But it’s not enough to simply keep the lights on. Long-term planning is an essential component of your company’s financial fitness. Ideally, your company should keep some money aside in an emergency fund. These should be liquid assets that you can utilize in a worst-case scenario.
It’s also smart to think about building strategic partnerships that can grow and sustain your business through any rough patches. Think about your vendors and clients as long-term partners, and invest in those relationships accordingly. Offer help when it’s appropriate and imagine how your professional relationships could evolve into the future.
By preparing for the future and keeping a close eye on the present, your company can achieve financial fitness. It’s not enough to assume that tightening your belt or raising prices is going to solve your budget problems. Instead, staffing and recruitment agencies should take a comprehensive look at their financial situation. Seek support from a full-service accounting firm like AdminAssist to ease some of the burden on your overhead budget. Ensure that you are meeting the demands of the future with digitization and clear reporting. Financial fitness is the key to your business’s success, and there’s no better time to start than now.