The past year has been a challenging one for Canadian business owners, leaving many questioning the very survival of their operations in the face of COVID-19 and the financial challenges it brought to so many doorsteps. Now, as we approach the halfway point of 2021, and move forward into the second year of the pandemic, we’re taking a look at future-proofing and sharing some tips for continuity from Xero, the global cloud-based business platform.
In February 2021, Xero asked 800 small business owners across Canada about their business goals and concerns for the upcoming year. Chief among them were preparing for financial instability and clamping down on cash flow. Let’s take a closer look at each, and what you can do now to prepare for the years ahead.
Be financially prepared
According to a Xero survey, 38 percent of respondents said that they wished to be better prepared for financial instability in 2021. There are many aspects that need to be considered when it comes to being financially prepared as an entrepreneur, but at the top of the list is having a true understanding of your finances in real-time. Tools like Xero connect all of your business’s data in one place — including bank accounts and all of the different apps used to run your business — making it easy to plan ahead, stay on top of cash flow, and uncover insights into your business’s performance. From your runway and burn rate to the amount you can reasonably invest back into your business to drive its growth, the power of financial insights cannot be understated when planning for the future. Saving for emergencies is another crucial aspect of being financially prepared. Whether it’s cutting costs where you can or having a separate account where you deposit funds every month, saving money when and where you can, can go a long way in case of an emergency.
Working with an advisor, whether they’re a bookkeeper or accountant, and using cloud accounting tools that provide up-to-date visibility to your books can be a critical step in financial preparedness; by having the support of a financial expert, you can not only rest easy knowing you’re being proactive in your financial planning, but you can divert your attention to other areas of your business’s operations that may have been overlooked in the past.
Set a budget and stick to it
Budgeting is the number one rule of having a solid financial plan. Having a budget is more than just having a monthly allowance for your business; it’s having a full understanding of your cash flow and knowing where you’re spending your money. Sticking to a budget also helps in developing cash flow projections.
When asked, 32 percent of Canadian business owners identified clamping down on cash flow as their number one goal for the year ahead. To reach this goal, let 2021 be the year you not only stick to your budget but the year that you take your budget online and use the technology available to business owners for financial planning.
Plan for the future
2020 might not have been the best year for the business industry, but that doesn’t mean that 2021 can’t be. Dream big in the long run but, most importantly, set achievable data-driven goals for the short term. By defining your ‘north star’ of success, you’ll be able to put practical strategies and processes in place to guide your efforts and keep your ‘why’ top of mind. By leaning on financial tools and the real-time financial data they provide, you’ll have the added benefit of remaining flexible and adaptable in your month-to-month goal setting.
A successful entrepreneur is one who is able to adapt – especially within a business industry that is ever-changing and with new opportunities presenting themselves when they’re least expected. Technology and the support of a bookkeeper or accountant will be paramount in your ability to stay flexible and adjust the way you do business, especially in pursuit of future-proofing your business and reaching your ‘north star’.