As inflation bites and interest rate rises begin to take their toll on consumer spending, you as a business owner may be wondering, “Is my business in the best shape to weather any economic storm?” The time to take a snapshot of your finances and ensure you have the fundamentals in place to not only survive but thrive is at the end of a financial year. Here we present five tips to make sure your SME business is in tip-top shape for the financial year.
If your business is using a spreadsheet to do the accounts, you’re living in the last century. Cloud accounting like Xero can help every type of business keep on top of payroll, GST, and BAS accounting, receipts, and reconciliations. Cloud accounting can also provide business intelligence into cash flow, overheads, liabilities, and assets. Mistakes in your bookkeeping can be costly – and paying an accountant to sort them out may cost you more in the long run, especially if you can avoid an audit from the ATO. Financial “busywork” can also be automated through the cloud, which can also reduce admin overheads.
At this point, you should consider using an external accountant as a resource to assist with the books on a monthly or quarterly basis. This is also a great investment to ensure your business is in top shape come to the End of the Financial Year.
Another way to protect your business is to look at your business insurance and see if it covers you for everything that could go wrong. Though worker’s compensation insurance is compulsory, you need to look at the two most important types of business insurance: public liability and professional indemnity insurance.
Public liability insurance protects your business from claims of injury or harm to the public that customers may say happened on your property because of negligence. Professional indemnity insurance is also important. It protects you from claims of breach of duty or negligence because of bad advice or the way you run your business. Both pay for the cost of restitution, compensation, or legal fees.
The following types of insurance premiums may be useful depending on what business you run. Commercial property insurance covers your business premises in case of damage, which is vital if you run bricks and mortar business. Almost every business will need cyber liability insurance, which covers you if you’re hacked and customer data is stolen and put up for ransom. If you sell products, you’ll need product liability insurance, which covers your business if you cause illness or injury to a customer, as well as any ensuing legal costs. Going through an insurance broker or agent can assist with getting the right amount of coverage for your unique situation and make sure you aren’t paying too much.
Cashflow is the blood that pumps around your business to keep it alive; and if it stops, so does your business. Most, if not all businesses experience cycles of high and low demand – though some preparation can help smooth over the low activity periods and prepare you for busy times, or even growth. Having a line of credit or unsecured business finance at the ready can help you with keeping cash flowing through the business.
Another tip is to use your accounting software to only pair long-term asset purchases with long-term liabilities (loans) and do the same with short-term assets. Crossing the two over can land your business in hot water with creditors. You may also want to look into invoice factoring, in which a lender fronts up to 85% of your unpaid invoices, with the rest (minus fees and interest) given to you when the debtor pays.
Do you have a lot of staff doing nothing some days? You may want to look into automation or software that rosters staff using sales, traffic, or other data. If you run a hospitality business and Mondays are especially quiet, rostering one fewer staff member could save thousands in the business over a year or two. Outsourcing some business functions like bookkeeping could also recoup losses in productivity, especially if you are doing it yourself while juggling three or four other jobs at the same time! The same goes for digital marketing, administration, social media management, and other non-core business functions.
There is always ample opportunity to reduce overheads by looking at your profit and loss statements – can you consolidate outstanding loans? Are you able to find cheaper telco or internet providers? Will changing banks give you better fee structures for card payments? Looking at different utility providers every 12 months can save a lot in overheads. You may also want to downsize your office and have some of your staff work from home, instead of paying too much rent.
With all these tips, your business can be fighting fit this Financial Year.
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Disclaimer: The information provided on the website is only for informational purposes and is not intended to, constitute legal advice, instead of all information, content, and other available materials.