It is not uncommon for businesses – both private enterprise and government departments – to rush out the door and spend their remaining budgets before June 30.
Often business owners get caught in the trap of ‘I need to offset some of my revenue’ by buying plant and/or equipment that they have done without for the whole year and could probably do without for a while yet.
Government departments know that if they don’t spend their budget, it will be gone the following year, but that is not a way to run a business.
The mentality of spending
This mentality of spending to reduce tax takes away from what the end of the financial year should be about: Reviewing your business over the past 12 months and planning for the next 12 months.
Business is not a race to the finish, nor should owners focus on ‘just getting through the month’. This makes every month the same and no time is allowed for critical thinking and analysis.
Reviewing the past 12 months of business and planning ahead are vital ingredients in helping you grow and address the challenges you may encounter in the next financial year.
Pause and consider
Everyone needs to pause, and consider the macro and micro events that have affected their business. At the same time, examine functions like marketing, accounting, human resources, as well as internally reviewing pricing, product/service delivery and operational procedures.
Even if one day is put aside to make a start, this will make a big difference to the year ahead. The day should be structured into time and subject slots, with a clear agenda.
It is not until we stop to review what has happened in the past 12 months that we can begin to forecast ahead.
Changing your approach
A simple change such as putting a process in place to get your debtors to pay you quicker, will boost your cash flow and reduce unnecessary worry and stress.
There are a couple of solutions which can help you that. You might consider putting in place a debtor management system software that will help you chase your overdue debtors. This solution will help you improve your cash flow not only before the end of Financial Year but way longer after.
Meet with your accountant
End of the Financial Year is a good time to sit down with your accountant and look at your performance metrics, your payments and receiving cycles, as well as any new Government legislation that might affect you in the next financial year.
It is very easy to get caught up in the day-to-day running of a business. There is always something new to focus on whether it is an employee issue, supplier query, stock order or software compliance. It never stops.
Use a checklist
We can let the day-to-day running of a business consume all hours of the day, and all hours of the week, until the end of the year, but then the cycle just starts up again. It is imperative that every business has a checklist upon which the owner or senior managers can review at least once a year to ensure that there are no hidden problems or opportunities lost.
A checklist for a yearly review, which is timely given that the new financial year starts on July 1, may read something like this from both an external and internal viewpoint:
- Financials – Have we met our targets? If so, why? If not, why not? What worked? What didn’t? What do we need to change for the forthcoming financial year?
- Products/services – How have our products/services been received by our customers? Is there any way we can improve our offerings? Do we need both an internal and external review to find out what people really think of our products/services?
- Pricing point – Are we competitive? Is there any way we can offer loyal customers discounts? What are our competitors doing?
- Marketing – How are we promoting ourselves? Are we taking advantage of all the media channels available to us? Have we properly explained our products/services to new customers? Are they any new target markets we could tackle?
- Payment cycles – How often are our invoices getting paid? Do we need to shorten our invoice payment cycle? Are we paying our bills before we get paid?
- Human resources – Do we have adequate staffing levels? Do we have the right staff? Is our training sufficient? Do we have the right managers?
- Processes – Do we have effective internal systems? Are they allowing us to create maximum efficiency when dealing with both internal and external issues? What could we improve?
- Creativity – Are we allowing employees to come up with ideas to improve the working environment? Can they speak freely within the office?
- Office environment – Is our office environment conducive to maximising our employees’ productivity? Could we change our working hours/reporting structure/desk space to make people more comfortable?
Preparing a checklist is a great way to ensure nothing is forgotten and to save you hassle, we have prepared MYOB Exo and MYOB Advanced EOFY Checklists free to download on our Training Portal. Download yours now and ensure this EOFY is stress free.
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Put a long-term plan in place
While it is difficult to take time out from the daily chaos of putting out the bushfires, a long-term or strategic plan is essential to guide your business to success. Long-term planning is essentially divided into two parts:
- What is in my control (inside the business) that I can improve on.
- What is outside my control (the external environment) that I must react to.
Once you have established what these internal and external factors are, a classic approach to strategic planning is to combine these into a SWOT analysis. (Strengths, Weaknesses, Opportunities, Threats). Having identified the things you can improve on, put plans in place to do this. Then, use your strengths to offset any threats you have identified. Strengths should also be used to take advantage of any opportunities you have identified in the external environment. Try to avoid matching weaknesses (the things you are not good at) with opportunities, as this is likely to lead to failure.
Remember that performance improvement is incremental. Sharpen the spear, and go one step at a time.
Check out our Everything you need to prepare for EOFY page including specialised Training Courses, useful content and our valuable checklists to make sure you are ready this EOFY!