How to Optimize Your Business for 2021

As the shock of 2020 slowly fades, business owners need to be brutally honest… 2021 is going to come with challenges of its own. Hopefully, we'll see a significant recovery this year, but it's always wise to hope for the best and prepare for the worst.  

Fortunately, there are steps you can take to prepare. Steps to make your business more agile, efficient, and resilient in challenging times. Here are four steps you can take right now to optimize your business for 2021.

Get in the Cloud

As businesses grow, they go through a lot of changes. Some don't change as quickly as they should and get stuck with outdated methods or technology. This can be a significant source of growing pains. 

If you're still running your accounting and back-office functions with desktop software, you're missing out on the power of the cloud. This became clearer than ever with the work-from-home movement required for much of 2020 and still going strong for many companies. If you're not sure who will or will not be able to work from the office, needing to be in the office to work with the financials is a significant disadvantage.

Modern, cloud-based accounting tools like Xero give you all the security and functionality of desktop platforms. They offer total location flexibility and a knack for integrating with apps and software specific to your industry. 

Cloud-software not only allows your team to work remotely - which is a big deal right now - it also makes it easier to add non-employees to your team. You can easily share your books with an outsourced accountant or bookkeeper, which gives you financial insights and up-to-date data at a fraction of the cost of an in-house employee. Consider working with an outsourced team rather than an individual, and you'll buy yourself a lot of flexibility. At a time when quarantines and test results can take someone out of the workforce instantly, you don't want to be dependent on one person. 

Cash Flow Forecasting

It may sound almost too simple, but one of the first things you need to do is make sure you've got the money to pay the bills, pay vendors, and cover payroll when you need it. No matter how certain you were about cash flow in the past, it's a new ballgame now. 

Even if your business is highly profitable, cash flow is another issue entirely. A profitable bottom line won't help if you're not collecting real cash before you have to dish it out. You need to make sure you're tracking your cash flow in real-time, and more importantly, that you're forecasting it for the future. 

When your accounting information is up-to-date, your accountant should be able to create a cash flow forecast for at least the next three months. Update it monthly to ensure you always have ample time to plan. 

Review your cash flow plan with your accountant regularly and make sure you're proactive with the findings. If you've identified a cash shortage coming up, you'll have time to reach out to vendors or arrange for a line of credit with your bank. If you've got a surplus coming up (well done!), you can use that money for needed growth or a cash cushion, so it doesn't quietly disappear into wasteful expenses.  

Budgeting

Speaking of expenses now is the perfect time to start implementing a budget or dialing in the one you have now. No expense should go unscrutinized, and you shouldn't go more than a month without making sure you're on track. 

Although a budget can seem restricting, it's actually a source of freedom for many businesses. It guarantees that you're in control of your money, rather than passively watching it come and go. 

Each item on your budget should be giving you a return for your money. If you find that you're spending too much in one area, now is the time to refocus and allocate your money in the right place. Marketing budgets are a great example of this. When you dig down and look at the results, you may find that you're getting a poor return from one marketing channel and a better one somewhere else. With good visibility on your budget, you can reallocate your spending to the most efficient channels and save a substantial amount of money.   

Seek Expert Advice

If your business is still in the growth phase, you may be outgrowing your bookkeeper but not yet have a CFO in place. As the financial decisions become more complex and the economy becomes more demanding, it's essential to have sound advice. 

Fortunately, you don't have to hire a full-time CFO to get the kind of strategic guidance you need. Instead, you can outsource your controller and CFO functions based on the needs of your company. A fractional controller or CFO can give you the strategic advice you need without breaking the bank. And they can do it remotely, no matter where you and your team are working. 

An outsourced accounting team can make the first three tips a breeze, help you make better decisions to thrive in a challenging environment, and see you through until you're ready to install a full-time CFO. Many companies find that it works so well they don't even need a full-time CFO.  

Hard times cause their share of business casualties, but they also create a space for some raving successes. With the solid strategy in place and the right tools and resources, you can be one of the "lucky" ones in 2021. You just need to be proactive, keep an eye on the numbers that matter most, and leverage the right experts' insight when you need it most.