Freshening up your finances for year-end

For many business owners, the end of the financial year means simply contacting your accountant and getting your books up to date. Savvy business owners know it’s often a little more intense. You’re not just winding down the financial year; you also need to start planning for the next, improving operating efficiencies and setting your business up for financial success.

That’s why along with your growth plans, marketing plans, and whole of business strategy review, you should also be making a year-end to-do list—and checking it twice.

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Here are five things that should be at the top of your end of financial year list.

1. Rein in the Cash

If “cash is king” in business then cash flow is the blood that keeps the heart of the business empire pumping. It is one of the most critical drivers of success for any business. Without it, profits are meaningless. Many profitable businesses on paper have ended up failing simply because the amount of cash coming in doesn’t compare with the amount of cash going out. Entrepreneurs that don’t exercise good cash management may not only end up having to borrow funds to operate, they will not be able to make the necessary investments to remain competitive in the marketplace.

Getting a stranglehold on your cash flow can take some planning, especially when it gets closer to June 30. The importance of having a dedicated in-house bookkeeper or outsourced firm is paramount to having timely records. Reviewing all your transactions for the year, receivable ageing (debt turn), credit notes, bad debts, bank reconciliations, assessing existing assets and loan facilities are all critical components to having a clear snapshot of your business health.

It’s important to remember that even if you’ve had a good year, cash is not the same as profit. You don’t want to get hit with a big tax bill on June 30 that’s going to deplete your cash reserves and end up distracting you with tax office negotiations. The end of the year is an excellent time to review your balance sheet.

2. Consider Outsourcing

Businesses that have gone through a growth phase or are gearing up for future expansion, without a full-time CFO should consider moving to using an outsourced provider, who can also objectively review your operation prior to June 30. I see business owners too quick to pull the trigger on hiring a full time CFO without any experience or thought behind what their specific role is going to be or if the timing is right. Outsourcing the CFO role can help build up the businesses owners’ confidence and knowledge of the CFO role without the expense. When the time is right to move to a fulltime in-house CFO you’ll be in a better position to make the right hiring decisions instead of making costly decisions and increasing distractions.

3. Retire the Legacy Loans

Reviewing loan facilities is often overlooked and changes in business conditions or previous trading performance can significantly give you a better chance of either refinancing or taking on new loan facilities at more competitive rates. Simply leaving existing lines of credit or cash flow facilities in place from previous years could be costing more than you should be paying, especially if you have traded the business well leading up to June 30. Presentation of company records to finance providers such as banks or alternative lenders is a key driver in assessment of rates, which again highlights the importance of ensuring your books, and records are handled professionally resulting in higher year-end profits.

There has been a significant rise in alternative lending sources within Australia in the past two years, which has led to a far more competitive marketplace. As business owners look to take on new loan facilities outside of traditional banking, further development in loan products such as private mortgages, peer-to-peer lenders, invoice financing and trade finance providers, will look to offer more competitive rates to compete for business.

4. Get Up-To-Date

Just like you make New Years resolutions in January, June 30 is the perfect time to get your operations up-to-date. Eliminate insurance headaches by giving your agent a call and make sure you’ve got the latest cover. Look to update things like, workers’ compensation insurance, business liability, personal indemnity, keyman insurance or third party fidelity.

Another great way to detox your finances is to review your suppliers. You may be paying more than you have to. In today’s market, cloud computing and software can you save you a substantial amount. Online providers can help you manage customer relationships, content, and expenses and are all typically less expensive than traditional software. Taking advantage of early payment discounts is an excellent method of increasing margins from within.

Finally, review your credit policies for all debtors. Engaging a professional to help structure correct procedures when taking on new customers can be invaluable to your cash flow. Time and time again I see business owners take on new customers without so much as a credit check or having payment terms agreed to. There’s no excuse for not having up-to-date credit policies, it might not seem important in the early stages, however, as the business grows, complacency can manifest itself very easily leading to significant losses. With the start of a new financial year looming, now is the time to announce to your buyers that a new credit policy is coming so that you can ease the transition.

5. Never Forget the Big Picture.

While taking care of the nitty gritty, take a step back to work on the business. Build your company road map or have a general meeting to realign your team. You need to have a vision for the future. Where is your company going in 2016? What are your goals? How will you use what you’ve learned so far to grow the business?

Business owners that take time out to plan for year-end and maintain accurate financials will perform at their peak level; being able to adapt, stay nimble, avoid unnecessary distractions and efficiently plan where funds should be spent for future growth.


Guest Expert:waddle_icon

Leigh Dunsford is the Co-founder of Waddle. Waddle is an Australian based financial technology (FinTech) company that leverages deep analytics from accounting & banking data to provide automated revolving credit lines to business. Waddle was founded in 2014 and integrates with Xero, MYOB and QuickBooks Online.

Naritas is an accredited introducer partner for Waddle loans. To get started with a Waddle business loan using Naritas, click here.