Although this financial year isn’t finished yet, we need to look to next financial year now in order to be organised when it comes to cash flow management, especially for SME’s…
June 30th can catch SME’s by surprise, and cash flow management in particular, is one of the biggest problems for small and medium businesses at the end of each financial year.
It is not unusual to find SME’s rigidly sticking to certain ways of doing things throughout the year, even when small warning signs start to trigger major alarms, … Far too many claim they are too busy running the business to worry about things such as cash flow. Managing cash flow throughout the year is critical to the success of any business – small or large – and a bit of advance planning might be all that is needed to free up liquid assets and ensure ongoing profitability.
2015 is basically over, to help SME’s prepare for 2016 EOFY (End of Financial Year), here is a list of resolutions to think about:
1. Embrace change
What works one year might not work the next: Resolve to not only embrace change each and every financial year, but to adjust accounting and management practices to accommodate this change. Sticking with the same old way of doing things could limit growth, productivity and profit.
2. Leverage low interest rates
Cash reserves are not getting the return they were even just a few years ago but low interest rates can be made to work in an SME’s favour.
3. Cash up front and in advance
It is possible to save up to 10 per cent by shopping around and being willing to make a one-off, advance payment for services and utilities including insurance and phone plans. Paying for the following year in advance before the price rise can see a saving of 3-6 per cent.
4. Direct debit not direct debt
Set up direct debit accounts when discounts for this payment method are offered. Direct debit can lead to savings of around 4 per cent on fixed costs, but this will be more than wiped out if there are insufficient funds and the supplier and bank impose heavy penalties.
5. Time the annual return
If the tax office owes the business money, try and get it back as soon as possible after June 30. The refund might also beat the rush and take less time to process. Small companies lodging their own returns have until late February 2016 or October this year if there is a history of late reporting.
6. Choose the best GST option
Compulsory collection of the goods and services tax can artificially inflate cash assets by 10 per cent. Refunding that 10 per cent to the ATO as a one-off payment can blow a big hole in any business budget. To help maximise cash flow, choose a GST payment option carefully.
7. Off peak rates
Prices drop and there is more choice when holidaying out of peak season. The same can be said for financial and legal advice. Even if accounting and legal fees stay the same year round, seeking advice in off peak times can mean an adviser might be better focussed or more appointments are readily available.
8. Depreciation, deductions and donations
To make the most of a favourable depreciation deal, buy in July. Grab all cheaper directly deductible bargains right up until midnight on June 30th …
For more information talk to us…
