Do you feel like you need to fix an EOFY hangover, having been frantically getting all your tax and financial ducks in a row ready for the end of June finish line?
For some it may have been a smooth ride but many will be feeling weary from the annual EOFY flurry of catch-up administration, last-minute spending and activity, to get everything in order.
It doesn’t have to be this way. Instead, you can embrace the concept of BOFY – beginning of financial year. Think of it as a kind of New Financial Year Resolution, but with no need to go to a gym or eat salad every day. BOFY isn’t just about managing tax, or avoiding tax debt – it’s about reviewing habits, business processes and systems to build in efficiencies for the coming financial year while at the same time planning funding requirements.
With a few well-chosen questions you can make some adjustments, manage your business better and be on top of your data throughout the year, not to mention lightening the burden in 11 months time. Here are some BOFY questions to consider for your business:
How often do you review your numbers?
BOFY is the ideal time to bed in the habit of reviewing your business’ finances including cash flow, P & L (profit and loss) and balance sheet - preferably monthly, but at least quarterly. At Banjo, we know that what distinguishes the well-run, profitable SMEs is that they’re fully aware of their numbers and are managing them. Regardless of the fluctuations in your business, if you’re well informed, you’re well armed. Regularly reviewing your numbers means you can spot problems early on, make appropriate adjustments, or supplement with working capital to bridge gaps.
What’s your growth plan for this financial year?
If you don’t know, start with a growth planning and budgeting session with your broker, accountant, or senior staff to review and understand past and forecast data. Most popular accounting software apps have features that will enable faster, accurate analysis.
Do you know where the bottlenecks in your business are?
According to an MYOB report, 48% of Australian mid-sized businesses said they’re inputting data into multiple systems, thus wasting time. Explore integrated solutions that can be used to automate processes, and even potentially reduce head count.
How are you managing cash flow?
Map out your peaks and troughs in revenue to manage momentum and potential working capital needs over the coming year. For instance, has the seasonality in your business changed? Or have your sales smoothed out across the year, instead of peaked at Christmas?
If you’re considering expansion, have you looked beyond revenue?
The opportunity to expand must be accompanied by detailed analysis. The potential to increase revenue from expansion can look very appealing but giving away margin to expand may not be worth it. Look at forecasts and ensure that the revenue can deliver the right level of profitability. Also, if the business is poised for expansion, have proportionate increases in inventory, storage and/or staff been factored in to ensure growth can be managed?
Are you on top of debtors?
One of the ways to improve your cash flow is to get your debtors to pay. Perhaps understandably, many SMEs defer this task as it can be time-consuming. BOFY is a good time to bite the bullet, start making the phone calls, and negotiate with your debtors. It can take a few weeks, but the rewards are tangible, and it may instil better paying habits in those debtors. If the debt is unrecoverable, note that from a tax perspective debts will come off income in the year they’re written off, regardless of the year they were invoiced.
Have you considered the finance options available to you?
You may be unaware of your borrowing potential, or may have been put off by daunting, lengthy loan processes from mainstream banks in the past, or the need to secure property against the loan. Non-bank lenders like Banjo can provide faster, unsecured funding that you may not have previously considered.
Have you planned for the short and the long term?
While short-term tax planning is what most businesses focus on, long-term tax planning is just as critical. Discuss with your accountant how to use long-term tax planning in your business structure to minimise tax, and what type of investments can help you do this over the long term.
With some discipline and sensible planning, BOFY can become a business habit that’s transformative for your business. And next June, you’ll thank yourself!