Count Down to June 30 is on - get planning

With the countdown to New Year 2016 a distant memory now, Clive Barrett First Class Accounts Bookkeeping Executive Chairman said business owners needed to start thinking about a countdown of a different kind – the countdown to the end of the financial year.

While it may seem a little premature, Mr Barrett said the traditionally quieter start of the calendar year was the perfect time to begin preparing for tax time and take a hard look at expenses and devise methods to reign in over-spending.

First Class Accounts Bookkeeping

Problem is, research conducted by First Class Accounts, with 500 small business owners, showed only 40 percent of business owners consulted finance experts like accountants and bookkeepers with regards to how they could save money in the business.

“This is a troubling statistic as it shows a lot of people just relying on friends/ family (23%), the internet (18%) or no one at all (19%) to find solutions for how to better manage their finances.

“There’s not much you can do about set costs such as rent and rates however, there are many areas where savings can be made. The cost of labour is one obvious area. Another is electricity and phone. Do some research and see if you can get a better deal with another provider for these necessary utilities.

When asked what mistakes they saw small business operators commonly make that costs them, Mr Barrett didn’t hesitate to nominate superannuation.

“More and more I see small businesses struggle to meet their superannuation payment deadlines. This is concerning as the ATO is starting to clamp down on this area, and small business owners may find themselves facing hefty fines for not meeting deadlines.

“Heavy penalties like these are ill-afforded by small business owners, but they can be avoided by pre-planning and ensuring a little bit is put away every week to cover the obligation.”

“It is worthwhile investigating low-fee, interest-bearing accounts offered by some banks that are specifically designed to help small businesses save for PAYG instalments and superannuation payments.

“It can sometimes be a little too tempting to spend money that’s sitting in your everyday account. So by making regular direct deposits to a special ‘hidden’ account you will always have the money at hand to pay PAYG or super when it’s due.”

Another common mistake many business owners also made when times were tough was cutting back on marketing and advertising, however this is not an action Mr Barrett advises.

“When cash flow becomes a problem you need to increase the profile of your business to bolster sales. Again only 40 percent of business owners were planning to invest more into marketing.

“During slow times you should increase marketing, not decrease it, however, this of course is tricky when money is an issue. Instead, sit down and take a close look at where your current advertising dollars are going. Are you getting maximum bang for your buck? Look at where most of your revenue is currently coming from and concentrate your marketing endeavours there.

“Have you considered PR or social media in your activity as these can be very cost effective ways to gain further brand awareness?”

Social Media Marketing

Mr Barrett said comparing earnings from previous years was an imperative part of the review process.

“As the end of the financial year looms we all get very busy crunching numbers and there’s very little time for analysis or reflection,” he said. “So while there’s relative calm this time of year, it pays to look back at the third and fourth quarters from previous financial years and analyse the data for trends.

“You need to look for peaks and troughs in the figures, then ask yourself, why? Is there anything you can do to mitigate those losses in the upcoming third and fourth quarter? If there’s a noticeable slump in sales in April, you could perhaps increase your marketing spend in February and March or encourage staff to take their holidays during this period.”

“Are your printing and stationary costs blowing out? Could you cut vehicle numbers and reduce travel costs by performing more tasks online, over the phone, or eliminating them entirely?”

“It’s not too late to make a positive difference to the bottom line for this year but if a business owner misses the opportunity to plan and asses their situation it could end up worse.”

If you are unsure how to best manage your finances speak with a bookkeeper or accountant for more advice.