Well-organised businesses undergo financial housekeeping to minimise risk and maximise profits and growth. Using these pointers can help improve your own business.
The objectives you have for your business and personal life are reflected in your strategic plan. After checking your business' financial health, reconsider your strategic plan including analysing your market and trending future developments.
Your strategic plan should address the weaknesses identified in the financial health check (see Point 7 below) and include a work plan, accountability and deadlines to be implemented and monitored throughout the coming year. It need not be a length plan like most think.
Short, concise and meaningful are the key attributes of a great strategic plan. Strategic Planning need not be costly or time consuming; the most important element of strategic planning is that you do it!
A+ for marketing
TIP: By way of a reminder, your marketing plan sits alongside your strategic plan and should support your business objectives. Remember to look at what your competitors are doing as well as what is happening globally, even if you only manage to do this at EOFY time.
Strong cash flow is an enabler of business success, therefore forecasting for cash is fundamentally good business practice. Ensure that it aligns with your budget and is monitored quarterly (minimum) or monthly (even better).
Your budget also needs to align with your strategic plan so resources can be allocated to achieve set objectives. If budgeting shows an objective is not affordable, either modify your strategic plan or seek additional resources for that objective eg through borrowing.
List assumptions when setting your budget and stress test potential scenarios before locking in the final plan. Both your budget and cash flow forecast should be regularly monitored against actual results and variations queried.
There is a strong link between technology and business growth, with businesses selling online, using social media and investing in technology being significantly more likely to grow than other businesses.
If digital is already part of your business, check in with us to see if what you are doing is working optimally. However, if digital is not yet part of your strategy, speak with Collins Hume about how to incorporate it into your strategy, implement it across your business and develop the capability to best exploit digital technologies. Identify your technology needs and invest and if you're uncertain, check with us about what technology may be best for your business and your capabilities.
Always have appropriate risk management strategies in place to cover your back through good times and bad. Whilst risk affects businesses belonging to particular industry sectors in distinct ways, typically you should be aware of and manage the following as a starting point:
- too heavy reliance on a small number of major customers or one supplier
- selling on credit
- cyber security
To fund ongoing operations and growth, most businesses need finance which can be provided from debt, equity or internally generated cash flow. The purpose for financing an asset purchase, for example, will help determine the type of finance you should access.
If you borrow from a lending institution, EOFY is the perfect time to meet with a Lending Specialist to discuss your business plans for the coming year. You may find they can offer better options to finance your plans.
TIP: If you can manage it, have some surplus finance available to cover business contingencies such as taking advantage of new opportunities.
Generally a rule of thumb is to 'record-separate-keep'. Failure to do so opens up common traps that the ATO is seeing as mistakes:
- RECORD cash income and expenditure; personal drawings and goods for your own use
- SEPARATE private expenses from business expenses
- KEEP adequate stock and motor vehicle claims records; valid tax invoices for creditable acquisitions when registered for GST
Review your financials and calculate key metrics such as liquidity, solvency, profitability and return on investment. Comparing results against previous annual figures and peers in your industry will help you understand strengths, weakness or potential threats to your business.
Review business profitability
Issues impacting business profitability may be unearthed in your financial health check, strategic plan review or draft budget. Other factors affecting profitability may also be found by reviewing staff productivity, production processes, supply chain, use of business assets and/or costs.
Consider measures to improve profitability across your business such as reducing costs or better reporting transparency and seek Collins Hume's advice on effective tax strategies.
FINAL TIP: during this coming financial year be open as much as possible to new opportunities consistent with your strategic direction that can be properly funded.
See our Business Advisory services or call us on 02 6686 3000 to learn how Collins Hume work with our business clients to achieve business success.
Article adapted from Intheblack.com. (2019). 11 EOFY resolutions for your small business. [online] Available at https://www.intheblack.com/articles/2019/06/07/11-eofy-resolutions-small-business-2019