It’s the NEW YEAR so lets have some 2021 resolutions!!! Woohoooo!!!
2020 was really something wasn’t it? Back when I was a kid I used to imagine that in 2020 we’d be living in high tech cities, have flying cars and have achieved global utopia.
Instead we have a raging pandemic, a precarious global economy and the world’s two largest superpowers giving each other the stink eye. Yikes! There’s not much we can do about those things though. So instead of writing about all of the above, I’ve decided to put together a list of things that you can do as a business owner (or someone looking to start a business) to get on top of your finances in 2021! Get these things done and you will have ‘won’ 2021 (get it, won twenty-twenty ‘won’. heh.).
1. Get all your receipts and invoices in order!
Here’s a great 2021 resolution – tidy up your paperwork! Get all your receipts and invoices in order! If you are already using accounting software to keep track of your incomings and outgoings – good for you! If you haven’t, now is a good time to start using one!
For folks based in Oceania, MYOB and Xero are two of the leading accounting software packages in the region. Both of them can even link up with your banks to provide REAL TIME bank feeds which means that you don’t have to worry about bank statements. As a bonus, both software also allow for matching bank transactions to invoices, which means you will be on top of your customer and supplier invoices.
If you are based in Malaysia, Simpankira is an awesome cloud based software which digitises your accounting work for you. No bank feeds for now unfortunately, but I’m sure Malaysia will catch up soon!
If you are a die-hard shoebox fan and love stuffing your receipts and invoices in a shoebox – do yourself a favor and get a proper filing system! The best choice is to always use software, but if you really hate computers, get some files and categorise your documents by type and chronologically. This will save you some headache when you (or your accountant) is preparing your end of year tax return.
2. Budget and plan ahead!
The start of a new year is always a great time to budget (especially if you didn’t do it last year!). Budgeting at the beginning of the year is the easiest 2021 resolution you can keep! Budgeting ahead always involves looking at your business’ financial performance for the last year and then planning ahead what sort of costs you will be incurring this year.
The most basic way to budget is to look at all your expenses for the previous year and say, YUP that’s what I expect to be spending in the coming year. And then kick yourself at the end of the year when you go over budget.
Ok, no, don’t do that.
If you are looking for a really simple budget hack, do this instead:
Simple Budgeting Hack
- Look at your expenses from the previous year and circle the five LARGEST expenses
- Ask yourself WHY did you spend so much on those expenses.
- Figure out if you will incur the same amount in this coming year. If you will, then put down the same amount
- If you realise that you don’t need to spend as much on that expense, go ahead and budget anywhere from 10% to 50% of it for this year. Conversely, if you think you will spend more on it, increase it by 10% to 50%.
- For all the other smaller expenses, go ahead and budget about 30% of the total of the five largest expenses (from the last year) as ‘other expense’.
For example:
Sam bought a whole office setup and brand-new computer for his business in 2020 – which cost him $3,000. At the end of the year, he has about $3,000 worth of office expenses sitting in his financial statements. This expense category is one of his five largest. He knows that he’s unlikely to buy another office setup and computer again this year, so he goes ahead and budgets only 20% ($600) for office expenses this coming year.
He then calculates the total of his five largest expenses to be $10,000, so he budgets another $3,000 as ‘other expenses’ that he needs to plan ahead for.
Note that if you have annually or monthly recurring payments, you can go ahead and budget the exact amounts for those.
3. Don’t worry about money!
Ok, so I appreciate the irony of telling you not to worry about money when I’m writing about money. But seriously, money is just a means to an end.
So, instead of making a 2021 resolution to make more money, make a resolution to worry less about money!
Money is supposed to work for you, not the other way around. Money won’t bring you happiness, but money can be used on things that make you happy.
Don’t obsess over money – rather, treat it as an outcome, instead of the goal of your business.
So, instead of saying “I will make $500,000 worth of sales this coming year,”
Say “I will add new clients to my business every month and keep adding value to my existing clients,”.
New and happy clients will obviously = more money. But the point is that you are focusing on what makes your business good. Money doesn’t make your business good, delivering on customer expectations is what will!
So that’s all I have to say to kick off this new year! I hope you find these 2021 resolutions helpful and that you put them into practice! Needless to say, I will be taking my own advice and following these tips this year as well.
Here’s to an awesome 2021!
And as always accounting fans,
Stay positive!