Tidy up your business for the new financial year

Now it's the start of the new financial year, it is a good time to look at putting in place some new practices that can improve your business' internal mechanics, which will bring with it with much greater efficiency for the rest of the year.

It can sometimes be challenging as a small business owner, as you may have several roles to fill, which normally would be taken care of by a number of different people in a larger business. At times it may feel like you can't get ahead of things, with one thing coming up after another.

The beginning of financial year, gives you the opportunity to wipe the slate clean and start afresh by implementing better internal practices like bookkeeping, accounting, corporate structure and legal. Also, given the impact Covid-19 has had on their business, it is a good time to regroup and 're-set' with a new focus for the upcoming year.

Here are some key pointers on how to approach the new financial year, after the rush of EOFY and the stress of the last 6 months dealing with the Covid-19 pandemic.

1. Clean up your "books"

For many small businesses, 'you' are the bookkeeper. But if you're spending all your time paying invoices, tracking expenses, chasing customer payments and processing payroll, and struggling to do it yourself, who is focusing on your operations and growing your business? And unless you are trained in bookkeeping, you could end up with a mess: with mistakes made, important details lost or forgotten, transactions unrecorded, left to pile up until the end of a financial period.

If you want to keep up with the latest online automated accounting technology and cloud computing, now is the best time to look at moving to a modern bookkeeping service. They can get your books ‘clean and tidy’ which can also help your business in a few key areas.

* Save time Bookkeeping is skilled job, and your bookkeeper will do it much more quickly and efficiently than you can. They will take care of processing all receipts, expenses and payments into your online accounting software, and produce business reports so you can get a detailed picture of how your business is travelling.

* Understand your business Your bookkeeper can share insights with you on how your business is travelling as they are dealing with the day-to-day accounts and know your business’ financial position inside and out. A good bookkeeper can monitor your finances and keep an eye out for any signs of trouble so you can make decisions in real-time to be able to do something about it.

* Manage cashflow Because your bookkeeper sees your accounts every day, they can keep a close eye on things. They can help keep your cash flow under control as with up to date and accurate information, they will see cash flow problems emerging eg late invoice payments or slow paying customers.

* Document management Your bookkeeper can help you collect and manage all those source documents you need to keep to meet all your compliance requirements. All invoices, statements, purchase orders, wage records, the list goes on and on. But with the use of online accounting systems, your bookkeeper can ensure all information is securely stored and organised for easy access in the cloud, at any place or time you need them. Very handy when the tax man comes looking to audit your business 5 years down the track!!

2. Seek specialist advice

When you try doing everything yourself, it's easy to look for shortcuts to save time & money. But ask yourself, how long will it take you to do these tasks & is that the best use of your time? There’s the risk you’ve made errors – especially if you’re multi-tasking like most small business owners.

Your specialty is running your business so leave specialist services to the experts. Build a team of high-quality professionals you can rely on for accounting, legal, marketing, human resources, IT & insurance etc.

Some key areas an accountant can help your business with are:

* Legal structure An accountant can explain the business structures available & recommend the one that suits your needs. While reducing tax is one thing to consider, you should also confirm ease of understanding & administration, asset protection, flexibility for new or exiting business partners.

* Help with the finances An accountant can help you monitor & understand your business' financial situation & key business performance metrics. A good accountant will use cloud-based accounting software, such as Xero, to keep track of important things like cash flow & profitability.

* Dealing with government A good accountant can help you with more than just tax returns. They can prepare & lodge compliance documents, keep you up to date with the latest tax laws, prepare your annual financial statements & handle your payroll to ensure all recorded and reported correctly.

* In case of an audit

While it is statistically unlikely you company will be audited, but if it does happen it can be stressful and time-consuming and may be a costly exercise.It is better to have an accountant on board before an audit comes up.They can advise you from the start on how to run your business to ensure if an audit does come up, you already have in place good accounting software that includes an audit trail and give advice to make sure you don’t accidentally violate any tax laws in the first place.

* Before buying or selling a business Always consult an accountant before buying a business as they can check the business accounts in detail for anything that looks wrong.

If selling your business, your accountant can ensure your books are in order & produce accounts to show your company a good position. An accountant can help you structure the sale to get the best result as well as minimise tax on the sale.

3. Re-evaluate your tax-minimisation strategy

Rather than leaving tax planning and management to the last minute, start looking at what can you can do at the start of the financial year. Develop strategies and put in place internal practices that decrease your business' tax liability, so managing your business’ tax will be a breeze when the going gets tough for everyone else.

Review your structure to ensure you are using the right entity type for your business and distributing your profits wisely. If you do need to restructure, it is easier for you (and your accountant) to time this so that you change structure at 30 June, so planning ahead is key.

Ensure you take advantage of all tax breaks available for your business, including the instant asset write-off, accelerated depreciation, bad debts and keep track of your stock levels. But also remember that in some cases it is ok to pay tax, it is the sign of a profitable business. Just spending money to save tax doesn’t always make sense.

Pay your employee super guarantee contributions monthly instead of leaving to the due date (the month after the end of the quarter). This will help managing your cash flow through the year as you will be paying smaller amounts and ensure your super payments are fully tax deductible.

To help manage your obligations for tax, GST, employee super and PAYG withholding tax, keep a separate business account to build up a pool of funds from your everyday working account. At regular intervals, transfer in a percentage of sales eg 10% which you can then draw on as you need to pay these obligations. Taking proactive steps to emphasise these areas will help increase your business cash flow in the short term, reduces the madness associated with EOFY, particularly if you find yourself with a tax problem but with no money to spare. You will be able to adapt and respond with ease to any urgent or challenging issues.

4. 'Set Clear Goals and Targets'

The start of a new financial year is a good time to look back over the last year, see how your business performed and see if anything can be done to get better results. If you didn’t like what you saw, then you might be like many business owners: you know exactly what you want—a bigger business, larger per-customer sales, more leads, higher profits—but you struggle to meet your goals.

To deliver better results this year, set goals and clear sales targets for the year and sharpen your focus. Use the SMART goal system to clarify your goals, focus on what you are trying to achieve, use your time and resources effectively and increase your chances of achieving your goals. Set timelines for when you’d like to achieve these goals for even more impact. Consider writing the goals down and reviewing them on a daily basis.

Specific: Make sure that your goals are clear and specific, otherwise it will be difficult to focus your efforts or feel truly motivated to achieve them.

Measurable: Make your goals are measurable to allow you track your progress towards them. It helps you to stay focused, to meet your deadlines, and feel and see the excitement of getting closer to achieving your goals. Consider setting KPIs (or “key performance indicators”) for each goal.

Achievable: Your goals need to be realistic and attainable but shouldn’t be too easy. You need put some effort in to get there but don’t make it impossible.

Relevant: Ensure that your goals matter to you and aligns with other relevant business objectives. Make sure you retain control over the goals, use your plans to achieve your goals and to drive the business forward.

Time-bound: Set targets date for your goals to give you a deadline to focus on working towards, to help to prevent everyday tasks taking priority over your longer-term goals and objectives.

Once you have your list of goals to help you achieve them, put systems in place to automate reminders and reviews as much as possible. Use an online calendar and to-do lists for you and your team to organise tasks, set deadlines, and prompt you for recurring actions. To keep your key goals in mind, make a poster listing your goals on your office wall. Schedule time to review your goals and milestones regularly, not just once a year. This will allow you to regularly check to ensure you are making progress and are on track, and if you aren’t, to resolve and improve any issues.

Finally, don’t choose too many goals or you risk spreading yourself too thin.

5. 'Plan monthly actions'.

Goals and targets are great but can only be met if you take action towards achieving them. The business year can fly past so quickly it’s important not to let months slip by without achieving your goals.

From your list of short and long-term goals, set up a rolling plan of action for the next 12 months. Break down your long-term goals into milestones to be completed over progressively shorter time periods.

Check your progress against the important goals at the end of the month and set new goals for the coming month that align with your overall plan. Don’t forget to reassess the plan as a whole and avoid the temptation to stick to the plan, no matter what. The best plans are fluid and you shouldn’t be afraid to make changes when you need to.

Ask yourself, did anything major occur during the month that requires a change in direction, or do you need to add anything to your plan? Do you need to change your goals as a result? Thinking about these things on a regular basis also ensures that they are at the front of your mind during the month.

Monitoring your business financial performance for most should at least be on a monthly basis. Below are the key tasks that should be part of your monthly action plan review.

* Prepare a monthly profit and loss statement, balance sheet and cash flow statement. Monitor how the business is travelling and look for emerging problems in time for you to take corrective action.

* Conduct a monthly review of all your debtors.

Ensure you invoice customers as soon as you can after goods or services are delivered. Reconcile customer payments promptly so you can identify problems and resolve any issues with any slow payers.

* Conduct a monthly review of all your creditors.

Reconcile supplier payment with other records such as purchase orders to ensure you only pay for goods you’ve actually received. Make full use of payment terms and communicate if you need some extra time.

* Prepare monthly cashflow forecasts to predict whether your business will have the cash it needs for expansion, to support the business operations and any likely gaps.

Prepare monthly sales and expense forecasts & use ‘what if’ scenarios to test impacts on your business cash flow.

* Review and analyse the financial health of your business against metrics, financial ratios and your key performance indicators.

Look for trends showing under-performing areas to help prevent serious losses.

6. Review your customers

The start of the financial year is the perfect time to assess your customer base and market positioning. Your relationship with your customers is key to your business. A good customer relationship will create loyalty towards your business, with these customers returning to your business time and time again. Long standing customers form the backbone of a strong, well-established business. Your mission is to ensure that the vast majority of your current customers stay with your business for many years to come.

Once you find customers, you must consider how to manage your relationship with them. There has been a power shift in the relationship between businesses and customers, as today, customers have more control, more options, and higher expectations than ever. So take a proactive approach to how you interact with you customers, provide them with extraordinary and efficient service from your business. * Review existing client base - the market you intend to sell and target, the nature and geographical distribution of your customers. Look for any changes in your market including new and emerging services, changes in customer needs, external factors such as the economy, imports and new technology and change in your competitors. Categorise your customers into the most profitable, the best to deal with, frequent buyers who help your cashflow and categorise by their lifetime value to help target your efforts.

* Build stronger customer relationships will benefit your business in a number of ways including building goodwill, increased customer loyalty and attracting new customers with good word of mouth.

Communicate regularly and share your knowledge with your customers to build their trust in you. Build customer profiles to identify the best ways to communicate with your customers. Focus on providing superior service which will encourage customers to return and purchase from your business again, procedures for greeting and serving customers to resolving complaints. Seek feedback from your customers to gain valuable insights into your business to help you improve your offering and build a better customer experience.

* Maintain strong customer relationships by implementing customer relationship management (CRM) to manage your customer relationships. CRM tools collect data and assist you in connecting with and understanding your customers. Features you should look for in a CRM include the ability to collaborate with customers 1-to-1 with live chat, lead management, track sales, automated self-service processes, knowledge base of help articles questions and social media integration. * Measure customer relationships by seeking customer satisfaction with the customer service provided. Through customer surveys integrated with your CRM you can gather information to understand a customers’ individual experience of your business. Use responses to improve your products and create a better customer experience.

7. Review (or get a) marketing strategy

If you don’t have a marketing strategy, now is the time to reconsider. Marketing is essential to any good business to reach and connect with your target audience and will ultimately help you grow your business in the long run. Without marketing, your business simply will not go anywhere because it won’t be seen.

Your marketing strategy will define your vision, mission and business goals, and the steps to take to achieve these goals. Your marketing strategy guides you in just about every business decision you make affects the way you run your entire business. It is a comprehensive planning tool that describes your business and its products and services, explains the position and role of your products and services in the market, profiles your customers and your competition, identifies the marketing tactics you will use and allows you to build a marketing plan and measure its effectiveness.

Digital marketing is likely to be major part of your marketing strategy today given how integral technology is in the lives of consumers. Consumers are almost always online using social media on their phones or other electronic devices and you want to be able to reach them and observe their behaviour where they spend their time.

Your marketing strategy will help you realise your business's goals and build a strong reputation for your products. A good marketing strategy helps you target your products and services to the people most likely to buy them. It usually involves you creating one or two powerful ideas to raise awareness and sell your products.

Your marketing strategy should be focused and allow the outcomes against what you are trying to achieve to be measured. The components of the strategy should include:

* Identify your business goals so you can define a set of marketing goals that will support them eg increasing awareness of your products and services or reaching a new customer segment. * State your specific marketing goals based on the business goals you listed above eg increased market penetration (selling more existing products to existing customers) or market development (selling existing products to new target markets). These marketing goals should be clear, measurable and have time frames for achievement. A good marketing strategy should revised when your strategies have been achieved or your marketing goals have been met or if your external market changes due to a new competitor or new technology, or if your products substantially change. * Research your market such as its size, growth, social trends and demographics (population statistics such as age, gender and family type). It is important to keep an eye on your market so you are aware of any changes over time, so your strategy remains relevant and targeted. * Profile your potential customers you are targeting and identify their needs, reveal their buying patterns, including how they buy, where they buy and what they buy. Again, regularly review trends.

* Profile your competitors to identify your competitive advantage, the strengths and weaknesses of your own internal processes to help improve your performance compared with your competition. * Develop strategies to support your marketing goals, target markets eg to increase young people's awareness of your products. Strategies could be to increase online social media presence by posting regular updates about your product on Twitter and Facebook; advertising in local magazines targeted to young people; and offering discounts for students.

Every business needs a website, even if you don’t sell products or services through it. A website serves as an online brochure of the goods and services your business offers. When people are online searching for a product or service they need to be able to find your business. When did you last refresh your website?

At the very least read through your website and update any outdated information.