Updated: Dec 11, 2019
Looking backwards to get a better vision of your future
The end of financial year is almost here. So, no doubt you're busy working on your accounts, and generating many different reports, numbers and financial statements to get a clear financial picture of the year your business has had.
It's always a busy time, but the insights you can get from this information can prove invaluable in making projections and planning for the success you want to have next year for your business.
Getting the best information
Obviously, the better and more accurate the information you have from this year, the more informed and accurate your projections are likely to be for the next. If you want to drive your business' success, utilising sound financial and management systems can be essential. The professional experience and advice of an accountant or bookkeeper is likely to be incredibly important for this, or you may use accounting software packages that keep track of all your costs and income and can quickly generate reports.
Reviewing your finances
When you're reviewing your finances there are a few key things you need to consider.
Watch your costs. While you're busy taking care of day-to-day things, it can be easy to lose track of your costs, especially the small ones. But these can really add up over a year and can often be a good place to start reducing expenses.
Cash flow. Is the flow of money coming in and out of your business giving you the income and liquidity you need to manage it properly?
Working capital. If your cash flow, income and financial products aren't giving you the funds you need, should you look at sourcing more capital?
Cost base. Always make sure your costs are covered in your sale price, and don't expect customers to cover the costs for any of your inefficiencies.
Business finance products. How well are your business loans working for you? Maybe it's time to review these and look for a more appropriate product, or one that has lower repayments.
Are you evolving? How can you change and adapt to the changing needs of your business and the market in order to grow?
Getting the right information.
Good accountants or accounting software can quickly draw up useful reports to give you a clear picture of the current financial position of your business. So, what are the most useful reports you can use?
Profit & Loss. This report looks at your company's revenue, costs and expenses to tell you your profit. Reviewing this report at least once a month may assist to ensure your profits aren't being whittled down by expenses.
Balance sheet. This is a snapshot of what your assets and liabilities are right now. Getting a monthly and yearly balance sheet can be one good indicator of the financial health of your business.
Statement of cashflow reports. It's important to see how the cash is flowing in and out to understand the short-term viability of your business, especially your ability to pay bills and staff.
Accounts payable and accounts receivable reports.
Depreciation reports. This is one way to have an updated breakdown of the value of the assets owned by your company.
Time to start planning.
Chances are, when you first started a business you made a business plan. Many business owners then file it away and while being busy with working and running their business, never look at it again.
Once you have your reports and a good picture of where your business stands right now, you can work out where you want your business to go - make a new plan based on real facts and projections. You'll know how much capital you have, what it's going to cost to get you there, and the ebbs and flows of cash along the way.
Of course, you're still busy on the day-to-day running of your business so it's always a good idea to get professional advice and assistance. An accountant is one vital way to make sure your finances and tax are being managed well. They can also be an invaluable resource in planning strategies for the future of your business.
In the same way, a broker like us is well placed to give you borrowing strategies to help manage your business' finances in the short-term and aim to create long-term growth and success.
Your Choice Mortgage Brokers Pty Ltd atf Halo Innovation Trust trading as Heart Mortgage Services - Australian Credit Licence 38643
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