Most business owners do not know that the SME sector in Australia has wasted millions of dollars due to inefficient cost, most of which can be attributed to the complex bookkeeping process. As the financial year is coming to an end, here is a guide to help business owners save the unnecessary cost and improve the company performance in a period when financial management is very much needed.
To improve the existing financial management process, you will first have to evaluate the system. Take a minute and think about how you control your financial process right now. Most SMEs have the same mistakes listed below:
They fail to realise how important financial management is. Businesses with poor financial management tend to suffer from poor cash flow and profit margins, ineffective debtor control, and an inability to meet their business’ commitments;
They are unaware of alternative solutions such as hiring an accountant or implementing an accounting system. If crunching the numbers is not your strength, either hire or outsource to an accountant or bookkeeper who will deliver regular and reliable information and advice that you can use to manage your financial position;
While many businesses are in the field of IT, it is surprising how backward their accounting systems are. Stacks of receipts, manual ledger books, simple Excel sheets, messy financial transactions and reports, and overdue BAS and tax returns are common among start-ups with bad financial management;
Businesses owners tend to focus on their products, ideas, and clients, often neglecting the fundamentals of their business. I have never seen a successful business that does not have strong financial management.
As a matter of fact, most people fails to realize their mistakes until it’s too late. If you are a small business, it is highly likely that you need to do everything to manage your business, from administration, marketing to bookkeeping. It is seemingly running well and you believe you are able to manage it until the end of financial year approaches. One client shared with us that EOFY used to be her nightmare and she was always lost with massive paperwork. Only until the end of financial year does your disorganized bookkeeping system come back to bite you. To avoid this scenario, though, here is the EOFY to-do list from our executive director.
1. Undertake analysis
To see if you will achieve your budget in the last quarter. If you haven’t made budget, consider what you can do? Cut costs? Improve sales? Or lower your expectations?
2. Review your financial performance from July to end of financial year
The best report in any accounting software is multiple period profit and loss. This report compares monthly performance so you can see which month is the best and which one is the worst. It also helps you to monitor recurring costs and highlights if costs have spiralled in any particular month.
3. Cash is king!
Review your cash flow to include big ticket items so you don’t get any surprises towards the end of the financial year. Make sure your cash flow includes last quarterly BAS; last quarterly super; FBT; company tax return; personal tax return; accounting and/or auditing costs.
4. Business plan
Review or prepare your business plan for the next year and 5 years and ask yourself following questions.
Review your budget and cash flow for next year and 5 years. Assess your goals. What do you want to achieve in the next five year?
Assess your goals. What do you want to achieve in the next five years? Retire? Achieve $1M turnover or just slow down?
How much do you want in your super fund when you retire? Make sure you include your family or partner in the plan.
5. Cloud solutions
Local business owners can customise cloud solutions to meet their business needs and environment―for example, Vend has become a popular Point of Sale choice among local retail businesses because the software is straight-forward and very easy to learn. First-time users are able to get oriented to the system within a day! Additionally, with functions such as product register, stock management and sales recording integrated into the “Vend HQ” interface, business owners can manage sales centrally. The owner of one of my favourite gift shops shared with me how Vend saves her an hour each day by populating payment receipts and e-mailing them to customers automatically.
Receipt Bank is another app that many business owners love. Collecting and sorting receipts can be a nightmare during tax time. Receipt Bank is so popular because it saves hundreds of hours by eliminating the hassle of digging out receipts and invoices left carelessly in car trunks or shoe boxes. Simply upload photos of receipts or invoices using your mobile phone, and Receipt Bank will extract and process the key information (e.g., invoice number, date, GST, etc.). The information is subsequently published to your cloud accounting package (e.g., Xero or Intuit QuickBooks), which saves time and money all thanks to automation.
While cloud technology offers significant benefits to small business owners, it is crucial to consider the following factors as not all cloud services are suitable for your business needs and environment: What are your business categories? Where is your major revenue coming from (online/walk-in)? Which business activity do you spend the most time on (and is it extremely important or extremely time-consuming)? Keep in mind that when choosing a specific cloud product or service, you need to consider the eco-system that it operates in as well. Just like preparing dinner for an important guest, your decision to cook a beef steak as the main dish will significantly influence your choice of wine. Hence, before cooking, it is better to find out if your guest prefers beef to other meat choices.
In Tailored Accounts, we offers a professional service that checks all boxes above. As our employees is dedicated and tech-savvy, we offer the latest technology in the accounting industry with the lowest overall cost. Should you be interested to outsource your accounting and financial system, give us a call at (02) 6169 5196. Tailored Accounts is the accounting department of Canberra and the preferred choice among small businesses.