Using EOFY to strengthen your business

McAdam Siemon Business Accountants Upper Mt Gravatt, Noosa Heads & Maroochydore. Specialising in Accounting, Taxation, Management Rights, SMSF Administration, Business Advisory, Business Valuations , Management Rights specialist accountants

Using EOFY to strengthen your business

(source: Sean O’Meara) 

With the end of the financial year quickly approaching it is critical that small business owners use this time to make a strong plan for the year ahead. It is vital to analyse your business and try to find any opportunities and improvements that can be made, no matter how small they may seem.

The additional administration time required at EOFY can make the lead up to 30 June extremely stressful. So the keep your business goals in check. Here are some strategies that will improve your business to maximise your growth in 2016/2017.

It’s time to review your businesses situation 

You are probably already using reporting throughout the year to track your revenue, gauge your sales trends etc but it is important to take a second look at how your business performed on the whole and compare this to previous years.

“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,”

Take advantage on the low interest rates

Interest rates remain low so it could be an opportunity to invest in capital equipment and paying off debts. 

Review business partners and suppliers

Ensure you are getting an excellent price for quality products. New businesses keep coming into the market, so be sure to do your research and renegotiate with your present partners and suppliers.

Your customers are probably reviewing their own strategic plan and making changes for next year so don’t forget to let them know that their business matters to you.

Take a long – term view of your cashflow 

  • How is your cashflow?
  • Is your business seasonal, with peaks and troughs?

Do some advanced planning -review your budget and anticipate what may happen in the year ahead. It may be all that is needed to free up liquid assets and ensure ongoing profitability. This is the best way to ensure you have safeguards in place to keep your business afloat during low times. 

Capitalise on tax breaks 

  • Have you any expenses that can be pre-paid?
  • Think about maximising your superannuation contributions to the relevant caps.
  • Consider investing in areas that will support your business; new equipment and/or technology that will provide your business with greater efficiencies and productivity The Government still has an immediate tax deduction on assets coasting less than $20,000.

Don’t hesitate to give us a call if you would like to discuss anything EOFY’s.

Kind regards

The Team at McAdam Siemon

Accelerate your cashflow

In a typical business your cash cycle looks something like this.

Accelerate your cashflow diagram

While this can vary slightly from business to business the difference would usually only be in the addition or subtraction of one piece of this cycle. In our model you start your business by investing cash, firstly in your plant and equipment, and then into stock. Next you make some sales, converting your stock into debtors. Once you are paid by your debtors it turns back into cash and the cycle begins again.

The more you can accelerate your cash cycle the faster you turn your profits into cash and the easier it is to manage your liquidity position.

Here are some tips to manage cash flow:

  • Plant & Equipment – don’t have too much money tied up here. Avoid surplus plant and don’t invest in plant that is significantly in excess of your capacity requirements. Sometimes it is a good idea to lease plant rather than having a lot of your capital tied up in this area. If you have surplus plant to your requirements consider selling it and turning the asset back into cash.
  • Stock – be careful about how much capital you have tied up in stock. Generally the more times you can turn your stock over in a year the more efficient and profitable you will be. Also avoid holding obsolete or slow moving stock. You should be aiming to have your stock levels as low as possible without impacting on the efficiency of your business.
  • Debtors – this is an area where lots of businesses have their cash tied up. You need to be on constant alert here and really police this area. Once you have agreed trading terms with a customer, ensure they stay within them. If you allow them to drift out not only are you incurring additional costs but you are also risking a bad debt – and that can really be costly to your business.

Here are a few ideas to help accelerate your cash flow cycle:

  • Buy stock on a consignment basis
  • Arrange with your suppliers to hold stock for you with the capability to deliver within a day or so of order
  • Keep good records on your stock position so you know exactly when you need to order replacement stock
  • If you have seasonal stock then be prepared to adjust your price toward the end of the season to avoid having to hold over the surplus stock
  • Unless there are significant quantity discounts for buying volume stock only purchase what you know you will need within the immediate future
  • Encourage customers to pay cash on delivery (COD) rather than operate on an account
  • Offer settlement discounts for account customers who will pay you within seven days
  • Avoid opening accounts for small customers or those who only buy from you on an occasional basis
  • Allow your customers to buy from you using their credit card
  • Always issue your invoice immediately on completion of the job
  • Be prepared to stop supply if a customer does not pay you within agreed trading terms
  • Always complete credit checks when you are opening new customer accounts

Call or Contact us us if you would like some more information.

Brisbane: 07 3421 3421 (Rob & Sam)

Sunshine Coast: 07 54748955 (John)