END OF FINANCIAL YEAR BUSINESS FINANCIAL HEALTH REVIEW

Author: Helen Baker Financial adviser

www.onyourowntwofeet.com.au

Helen Baker is a licensed Australian financial adviser and author of the new book, On Your Own Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at www.onyourowntwofeet.com.au

With the end of another year –particularly one with more normal trading conditions after the disruptive COVID years – comes your chance to take a step back and work on the business, not just in it.

Given the craziness of the past couple of rotations around the sun, you probably haven’t had a proper chance to take stock of how your business is going. With so much change, it’s crucial you do so – and there’s no better time than the present.

Review Costs

With the soaring inflation, tracking expenses has likely been more difficult this year than previous ones. Investigate where the increases have hit hardest and what can be done to limit their impacts, including:

• Interest rates – If you haven’t already, review your loans to see if refinancing and/ or switching lenders could drive down ballooning repayments.

• Labour – explore ways of attracting/ retaining skilled workers without blowing out your wages bill e.g. staff discounts, additional leave, training, or informational resources (like a copy of my book On Your Own Two Feet) to help them battle rising costs at home and at work!

• Business premises – right-size your premises to the company’s current needs. If most staff are still working remotely since COVID, consider downsizing and pocket the savings. Alternatively, sub-let unused office/ warehouse/parking spaces to offset costs.

• Marketing – social media, advertising etc. are money pits if their costs and returns aren’t properly tracked. Review these objectively to see if you’re actually reaching your intended audience and generating cut-through.

Get Forecasting

Armed with your numbers from 2022 and 2023, you can have a good go at forecasting for the year ahead.

Pay particular attention to:

• Taxes and government benefits – the new federal government’s first Budget was recently delivered, so things may have changed or soon change for your business.

• Pricing – charge what you’re worth, reflecting both the value you deliver and your actual cost base.

• Exchange rates – avoid wild FX fluctuations by implementing stop loss orders and other control mechanisms in advance.

Revisit Contingency Plans

Renewed east coast flooding, the Ukraine war, and COVID are examples of why contingency plans are needed. How adequate are yours?

Be sure to revisit:

• Insurances – if you’ve had to claim for fire or flood damage in recent years, your premiums may now be higher and/or your coverage restricted. Determine whether you’re paying more but getting less, and what alternatives are available. Also, if your business has grown and/or acquired new stock, update your coverage or risk being underinsured.

• Cash flow safeguards – planning in advance for lulls in cash flow will enable you to act faster and in a less knee-jerk way.

• Emergency fund – have an emergency cash stash set aside. If you’ve had to dip into it, plot out how to replenish the money.

• Crisis procedures – plan for natural disasters, power failures, cyber-attacks, unexpected staff absences (including your own) etc.

Streamline Expenses

A major cash flow drain come year’s end is employee expenses – everyone lodging months’ worth simultaneously before disappearing on holiday.

Reduce this burden by streamlining the process and encouraging staff to lodge claims more regularly:

• Digitise your systems – expenses apps make it as easy as photographing a receipt at the point of purchase and submitting the claim instantly.

• Weekly reminders – a simple prompt can nudge people into action.

• Company credit cards for key staff –(provided you can repay them on time.) Track spending in real time and earn rewards points for offsetting travel/other expenses.