While getting ready for tax time might be top of mind right now, preparing your small business for the new financial year shouldn’t be overlooked. Paying attention to your finances in advance – what they’ll look like and how you’ll manage them over the coming 12 months – will put your business in better stead to not only survive but thrive. Set some time aside over the next few weeks to perform these five steps and enter the new financial year with confidence.
1. Rethink your financial systems
Are you happy with how you currently manage your finances? If there’s room for improvement, now is the perfect time to consider moving to the cloud and automating some of your financial processes. Cloud-based accounting tools, like QuickBooks Online, automate a number of financial activities, such as payroll, invoicing, payments and expenses. Turn on Goods and Services Tax (GST) tracking and it will even automatically track and calculate your GST so, when you’re ready to lodge your Business Activity Statement (BAS), it’s quick and simple.
2. Review your expenses
Don’t pitch this year’s success on increasing sales alone. Finding ways to lower your expenses is equally important. One way to claw back the costs is to review supply contracts, such as electricity and telephone contracts, that are coming to an end and negotiating lower prices or switching suppliers. Other ideas include buying in bulk, pooling resources with other businesses, paying invoices early in exchange for discounts, and rewarding staff with non-monetary bonuses such as flex-time.
3. Refine your cash flow strategy
You’re not alone if managing your cash flow has become a constant struggle. Unfortunately, cash flow woes are one of the most common reasons cited for business failure. That is why coming up with new plans and tactics to prevent your cash flow from falling short should be your priority. One way to do this is by minimising late payments. This might include sending your invoices on the spot, shortening payments terms from 30 days to seven or 14 days, and setting up electronic payments with services like PayPal for customer convenience.
4. 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 July 1. 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?
5. 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. This 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.