How is your business going?

The festives are over and it's "back to business" time - with six months worth of figures, now is the perfect time to focus on areas of improvement, opportunity and potential disaster.

2010, a new year. No doubt we’ve all made New Year’s resolutions or, at the very least, pondered what we’d like to do or achieve this year. Perhaps the goal is to shape up, to trim down or to spend more time with family. Maybe it’s a resolve to step out of the comfort zone, to start an adventure or take a leap! Irrespective of what you have resolved to do, most of us have resolved to do something.

Does the fervour we start the new year with extend to our business life? During all the pondering and reflecting over the break, did you stop and think about what resolutions you should be making for your business? With six months of a financial year under the belt and a new calendar year just kicking off, it’s a good time to look back and analyse the last six months’ figures for your business. Identify strengths and opportunities to capitalise on any weaknesses or threats that can be mitigated or removed.

Cash flow – This is the biggest concern for most businesses, especially in these tougher times. Whilst the figures may show a profit, this does not necessarily translate into a positive cash flow. Businesses should consider the following in the attempt to strengthen their cash flow position.

Where possible, businesses should be discussing with suppliers the option to extend trading terms. If you have built strong relationships with your suppliers and have always been a good customer this could be a good opportunity to bargain better trading conditions for your business.
Review your own trading terms. Have you become lax in calling in debts? What category do most of your debtors fall into? For those debtors more than 120 days old, you need to be chasing, reviewing and making decisions as to whether that money is recoverable. If cash flow is tight, then your own trading terms should also be reduced because it is the money from your own income that pays the bills. Long debtor days mean that you will find it hard to meet your own obligations.
Review loans, loan terms and banking covenants that may exist. Discuss options with your bank.

Tax – As much as we might like to pretend that this doesn't exist, GST, income tax and fringe benefits tax can be one of the larger bulk payments or refunds that you will make /receive in a quarter or year. Late lodgements attract penalties and high interest charges, so it is in your best interest to make sure that GST, income tax and fringe benefits tax obligations are met in a timely manner. Some things to consider are:

Ensure that all BAS’s are lodged on time. If you know you will be due a refund then make sure that it is lodged as soon as possible after quarter end.
Consider early lodgement for the 2009 year end tax (if not already done), if you expect a refund.
If you are expecting to have a tax bill, we can prepare your tax work early so that you are aware of your liability and can plan accordingly. Lodgement of returns can be held off until due date.
Meet with your accountant to undergo tax planning strategies so you can understand what should be done in the next six months to minimise your tax liability for the 2009/10 financial year.
If cash flow is tight and you have GST, income tax or fringe benefits tax liabilities, you can contact the ATO to arrange a payment plan for your outstanding debt. We can also liaise with the ATO on your behalf.

Sales – What is the sales trend for the first six months of the financial year? Have sales increased or decreased in comparison to last year? Consider the reasons behind such increases or decreases and see if you can enhance the positives. Perhaps there is a seasonal trend that can be identified and strategies put in place to mitigate any seasonal down turns. In relation to sales, businesses should also readdress their pricing. There may be an opportunity to increase the price of the product or perhaps you need to be looking at how you can maintain the same price but find efficiencies in other areas to increase profit margins.

Expenses – Analyse business expenses to ensure that you are running as efficiently as possible. Consider your suppliers. Are the terms favourable? Are you getting the best product for your money? Have you considered changing suppliers or extending terms? Remember though, the cheapest is not necessarily the best value for money. You need to weigh up the cost against the quality of the product you will be receiving.

Stock – Review your stock on hand at six months. Do a stock-take. Are you in danger of holding obsolete stock by virtue of holding too much stock? Can you change your purchasing to ensure that you hold only what you need?

Generally speaking, January is a quiet time for a lot of businesses, hence a good time to sit back and review how your business has been tracking over the last six months. If you can understand the areas that you need to work on and the strengths that you can capitalise on, then you can put strategies in place now to combat or capitalise on the second six months of the financial year and hopefully end on a positive note, ready to start all over again.