While getting ready for tax time might be top of mind right now, preparing your business for the new financial year is often forgotten. More than 70% of Australian business owners say they plan no more than six months ahead, and that includes almost one in three (31%) who take things one day at a time.
There’s a direct correlation between business owner’s that plan in advance and the businesses that thrive (not just survive). Set some time aside over the next few weeks to look at the six areas below and you’ll enter the new financial year with confidence.
Concentrate on cash flow
Creating the space to plan can be especially hard when cash flow concerns root you to immediate issues. That’s not unusual. There are steps you can take to improve your cash flow – such as invoicing immediately, requesting deposits on jobs, and using automated reminders to chase overdue payments.
Quick win: If you send online invoices through Xero, try including an online payment option, such as those provided by Stripe or Paypal. This can give customers and clients a quick and secure way of paying you, and help you keep cash flow positive.
Review your expenses
Don’t pitch this coming year’s success on increasing sales alone. Finding ways to lower your expenses is equally important. Coming into each new financial year you should look at all your costs and review your supply contracts. Think through:
Is this service still necessary? Is there something better on the market I can switch to (like electricity; phone and internet contracts)? Review your subscription services, are they all relevant to your business? Can I align payment dates that work better with my cash flow (rent, tax payments)?
Become more digitally connected
Digital solutions have been available to small business owners for some time now, and recently they’ve started to become compulsory too like the ATO’s, Single Touch Payroll (STP). It’s a way for employers to lodge tax and super information of their employees directly to the ATO via their payroll or accounting software. STP is already mandatory for businesses with 20 or more employees and from 1 July 2019, all Australian small business owners will be required to report their payroll information to the ATO.
Quick win: As business becomes more digital, spend some time getting to know your own system setup and fine tune any parts of the process that can still be automated. There are hundreds of solutions that can help your business work smarter as you identify your key points of focus for the future.
Probe your financial year performance
No small business owner can effectively plan for the future without having a good grasp of their numbers to date. The end of a financial year is a good opportunity to review your business performance over the past 12 months, identify trends and concerns, and use these insights to create a consolidated plan going forward.
Quick win: You can create custom reports in Xero to compare different years, jobs, staff, clients, job types and much more. If you’d like professional help with analysis and forecasting, you can invite an advisor like us into your Xero account.
Revisit your strategic plan
Your strategic plan should be reviewed and updated regularly, ideally every quarter. But, if that’s a push, doing it at the end of the financial year is paramount. This will help you refocus ready for 1 July.
Take a step back to evaluate your business and industry, and rewrite or adjust your vision, goals, priorities, and action plans where necessary. Are your strengths and weaknesses still the same? What are the new industry trends you should take into consideration? Has your competition changed? Do you need to innovate?
Update your forecasts and goals
As well as revisiting your strategic plan, you should also update your financial forecasts and goals. This should cover sales and expenses, and projected cash flows. Base these on previous data over the same period for accuracy. Creating new forecasts will give you a good idea of what you’re going to make and what your costs will be over the next 12 months and will help you plan and manage your finances better.
Once you’ve created your forecasts, you should then set your financial goals. These could be related to profitability, margins, cash flow, or a different metric that’s specific to your business.