Your End of the Financial Year MOT
They say that the only things certain in life are death and taxes, and whilst neither of these are the most cheery of topics, we felt that there was one that would resonate a little more with our readership. Just as soon as you begin to enjoy the first signs of Spring – the daffodils shooting up, the evenings getting lighter – you realise this means it’s also the end of the tax year. Whilst the process can be an administrative nightmare, it can also be a refreshing time to take stock of the company’s finances, looking back on the year just gone and adapting for the year ahead.
Assess your investment in advertising
Whether your business is built on offering a service or a product, as your company scales you will notice that marketing and advertising will become a focal point of your overheads. For this reason, it’s crucial you can track which channels are the most effective in reaching and converting your target demographic and the end of the financial year is a great time to take stock of that. Aside from your Google Ad spend, it is important to look in to your expenditure on other platforms such as Facebook, Linkedin or Bing. Using Google Analytics it is simple to import that data in to your Cost Analysis reports and here you can easily see how each initiative performs and what your return on spend is when you compare it to your commercial goals. It would be easy to just focus how these campaigns are driving volumes of sales. but it’s also good practice to drill down in to the quality of those transactions. Map the information that Google Analytics gives you back to your own system to understand whether you have found a repeat buyer from one spend on a specific platform, which will give you a more accurate cost per new customer acquired. In doing this, you will naturally hone your business’s idea of what you consider to be good value for money when assessing your expenditure on customer acquisition or retention.
Wrap your head around your refunds
To truly get an idea of your business’s financial health, you also need to put a magnifying class to your products return rate. There are certain times of the year that this return rate will be more prolific than others, but it is crucial that you take a holistic look at this area of your business at the end of your financial year. If you solely focus on the revenue made by your sales rather than assessing how many sales are resulting in a refund, it can be misleading, especially if you are funding the postage for returns as well. Not only will this enable you to have real clarity on your bottom line for the past year, but it can help you properly strategise for the year ahead. Identifying certain product types that have a high propensity for being returned is priceless for your product team in charge of quality control and your marketing team will also be able to factor the information to their ad spend budget – and they will be able to use certain products as potential loss leaders.
Pin down the effect of the Pound
If you have an international customer base, the recent political uncertainty could have affected your bottom line in numerous ways. The last 12 months have been a rollercoaster ride for the pound (thanks Brexit) and fluctuation of our poor, disorientated currency could have impacted your business in numerous ways. In a period of inflation, the purchasing power of a small business is decreased and it may have hit any import or fulfilment costs that you have. These increased costs may have been reflected in your pricing – If you have tested various price points during this time, the end of the financial year is a good time to reflect on the learnings these varying price points have taught you. Did you discover an ultimate high point above which people consider your product too costly, resulting in a loss in sales? Or maybe at the other end of the spectrum, you realised the lowest price you can go to, beyond which you’re not even breaking even?
It’s very unlikely you’ll have all of this information in one place or even a single person looking at it on this holistic level, so taking the opportunity to periodically bringing all of this data together can be enlightening and really help amend existing strategies or inform new ones. the 5th April could be a great time for you to give you finances a MOT and you will be sure to feel the benefits long into the next tax year.
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