Many small business owners fall into the trap of managing business operations in a routine way without looking at their “side mirrors” or “blind spots” where new opportunities might come into view. However, with the End of Financial Year (EOFY) just around the corner, it’s crucial small business owners use this time to take stock and analyse the business to try and find small opportunities or improvements that could be made, and make a strong plan for the year ahead.
It can be hard enough to run a small business at the smoothest of times, but the additional administration burden at EOFY can make the lead up to 30 June an extra busy and stressful time of year for many owner-operators. However, in order to keep your business goals in check, it pays to be aware of the strategies and opportunities that will improve your business and maximize growth over the next 12 months.
Economic indicators like the Westpac-Melbourne Institute Index and the ANZ Roy Morgan Consumer Confidence Index have received a boost following the announcement of the 2015 Federal Budget. This is an encouraging sign for small business owners and the savvy ones will capitalise on the improved sentiment by investing in areas that will support and grow their business. EOFY is an obvious milestone for small business owners to make some positive changes beyond tax minimisation.
Here are six ways that SMEs can use the EOFY to strengthen their business.
Take stock of the last year
It’s common for small business owners to use reporting throughout the year to track revenue, gauge sales trends and determine the success of promotions and discounts. However, it’s also important to review how your business performed overall the whole year and compare this to previous years.
For example, George Aspros, the owner of Mordeo Bistro & Bar, uses ImPOS and Yellowfin to create advanced reports to access historical data and compare this across different time period. “By looking at year-on-year sales and revenue we can see how public holidays or seasonal changes affect the business and enables us to do more accurate forecasting, rostering and budgeting for the year ahead. It also helps us make informed decisions on whether to spend now or later,” he said.
Take a long-term view on cash flow
Cash flow is king to any business, especially if your business is seasonal with peaks and troughs. Many SMEs believe they are too busy running the business to look at cash flow. However looking beyond tomorrow and investing your time in some advanced planning might be all that is needed to free up liquid assets and ensure ongoing profitability. Budgeting and forecasting 12 months ahead is the best way to prepare and ensure there is a buffer in place to keep the business afloat during low times.
Make the most of tax breaks
The Budget announcement of immediate tax deductions on assets costing less than $20,000 is a strong opportunity for those small business owners that qualify to invest in areas that will support growth. It’s an incentive to invest in areas that will benefit the bottom line over the long term. Investing in new equipment and technology that provide greater efficiency and productivity is one key area that can result in significant savings in the long term, which will offset the short-term cost.
Historically, similar investment allowances have led to a significant boost in businesses purchasing and financing, and a recent Fairfax-Ipsos poll suggested that a whopping 20% of Australians expect to make use of these new tax concessions. So if you aren’t planning to do so, you can bet that your competitors are.
Indulge in EOFY sales
Finance expert Carissa Babb from Geared Asset Finance says that businesses should consider using EOFY sales to invest in products or services needed to keep a business competitive. “The savings that a business can see from more productive and efficient systems can more than offset the cost on a finance facility. If the business doesn’t have the cash at the time to make the purchase, Low Doc Finance and Tax Effective Finance facilities are available for small business owners so they can take advantage of the EOFY sales. Getting approvals in place prior to the EOFY rush can help to secure funding and determine how much you’re able to invest,” she said.
Capitalise on low interest rates
With record low interest rates, cash reserves are currently not getting strong returns. And with indications pointing towards further cuts, it could be a good time to invest in capital equipment and paying off debts while keeping lines of credit open. Just be sure to budget for higher rates in the future.
Revisit business partners and suppliers
The EOFY is also a great time to review your current partners and suppliers to ensure you’re getting a good price for a quality product. In this day and age there are always new companies coming into the market with fresh and innovative ways of doing things, so be sure to do your research and renegotiate deals if you need. Such changes can lead to a positive impact on profit.
At the same time, don’t forget to engage with your own customers as they will also be reviewing financials and making their own strategic plans for the year. Show them that their business matters to you and you’ll be on the front foot.
All owner-operators are time-poor and it’s all too easy to stick to the same plan as last year. But no two years are the same and the competition is always changing, so it’s important to take time to reflect and embrace change when needed. So while you’re pouring over the finances for the last year, take the opportunity to make the tough decisions that will benefit your profit and productivity in the long term.
About the Author:
Sean O’Meara is the founder and Managing Director of ImPOS, a Point-of-Sale solutions provider for the hospitality industry.