2020 will be here before we know it and then it’s just six months until the end of financial year. Have you thought about what you’ll do differently in the new year, when you return to work after the summer break?
Here are our top THREE considerations for business owners for a fresh start in the new year.
1. Advance tax planning
At the risk of stating the obvious, no business owner wants to pay more tax than is necessary.
The single most important benefit of advance tax planning is that it gives you TIME. Time to be proactive in the financial management of your business so that you have options for not only achieving tax efficiencies but for smoother cash flow and better personal prosperity outcomes.
Advance tax planning, as distinct from tax reporting which is an after-the-fact activity, involves considering opportunities and implementing strategies that create tax efficiencies that can include depreciating assets, bringing forward or deferring purchases of major plant and equipment and contributing to superannuation, among a host of other options.
Once your tax obligation is known, advance tax planning will also give you time – if necessary – to plan payment options and vary tax instalments to avoid disrupting your cashflow.
2. Increase your invoice value
Assuming that the best or only way to increase revenue is to increase your number of customers may be a little short sighted. Depending on what you read, common indications are that it’s around five times harder to acquire new customers and about seven times more expense than it is to sell to existing customers.
It stands to reason that making the most of what you’ve got can both save money and make money. And it could be as straight-forward as giving your customers the opportunity to increase the value of their invoices.
While introducing new products and services will bring additional income, your immediate endeavour should be to remind your customers of the value adding products and services you already offer.
While McDonalds is famous for ‘Would you like fries with that?’, it’s very likely that you also have products and services that could easily deliver additional revenue with very little extra effort.
Then, of course, there is the matter of a price increase.
If you offer a great product and excellent service, and you haven’t increased your price for a while, there’s every chance your customers won’t bat an eyelid. For those who question it, you’ll be able to easily justify the increase in terms of your consistently high-quality products and services. At the very least, all businesses should implement an annual minimum price increase.
3. Three-way budget
A three-way budget includes three complementary components. It first captures details about your profit and loss to indicate your costs and revenue drivers, average invoice value and more.
It also includes a cash flow forecast so you can avoid the relatively common situation of being unable to meet expenses despite being profitable.
The balance sheet component provides a snapshot of what the business owns (your assets) and what it owes (your liabilities). Naturally, your assets need to be more than your liabilities. Ultimately, you must be able to meet your financial obligations.
Together these three components provide a complete picture of the financial health of your business.
About us…
At Core we specialise in business advice and SMSF strategies for growing and mature family-owned businesses and small and medium-sized enterprises. We offer a logical 3-step advice framework that involves consultation, recommendation and implementation of business strategies designed to achieve defined outcomes.
Your next step…
To explore your business goals and implement business strategies for 2020 and beyond, please contact us on 5438 8088 or email mail@corebusiness.com.au
