IT IS about this time of year that business owners start to think about their financial statements and what they are going to do about their tax. But the end of the financial year isn't purely about the Tax Office - closing off your books is an opportunity to look at a factual picture of your business and to make changes.
Here is my eight-part template for fine-tuning a business:
Along with the financial targets - earnings, margins, market share, etc - are the more difficult goals that are not easy to write on a whiteboard. For instance, how to set goals for your employees how to define what success is within your business by including non-financial elements how to ensure that fulfilment and development are offered as readily as pay rises. It is worth talking about these things, and never forget about the owner's goals: you have to know your own goals and what kind of income and fulfilment you desire from all your hard work and risk.
How good are your systems? Do they give you clear and regular reporting? Do they give you measurements against your key performance indicators? Do you use all your enterprise system's capability? Do you need a new system or do you simply need to know more about the system you currently run? Financial and operational reporting is not the only knowledge issue: increasingly, businesses should be identifying value in their intellectual property. Do you measure your IP?
June 30 is a good time to reassess your debt, your retained earnings and equity as it relates to partners, shareholders or yourself and your family. Whether it is equity or debt, capital comes at a cost and you should look at how it is performing and what needs to change in terms of budgeting, dividends and cash-flow discipline.
Business owners are generally busy, preoccupied people and so they often overlook basics such as insurance, disaster-recovery plans and contingencies for business continuance. In my experience it is best to seek expert advice on these matters from accountants, solicitors and insurance brokers or a mix of these three. If you employ people, they and their families are vulnerable should anything happen to the business or to you. This is quite aside from the fact that your family might also rely on you. Have a plan and talk to experts.
This is the time to look around and assess what broader environment the business operates in. What is the Reserve Bank saying? Where are inflation and interest rates heading? What outlook do the trading banks' economists have? What is happening to your competitors? Is the government talking about your industry? What foreign forces will affect your business? It doesn't matter how small your business, every owner can start a new financial year with a brief written outline of where their industry sits in the economy and what that means for them.
It is not unusual for business owners to go for years with a legal structure that is wrong for their business, inefficient for tax or inflexible in terms of succession and equity and divestment. It is worth the expense to have an accountant or solicitor look at your structure and advise on what you could be doing as an alternative. The law provides you with options for how you carry on a business, and you should ensure you are in the structure that best suits you and your plans.
This is the time to look at growth strategies, which means revisiting your marketing plan, taking on PR consultants or talking to an advertising agency. Should you be looking to acquire another company? Or can you expand from your current operations?
In the end, you are the person putting in the risk capital and working your tail off. There has to be a pay-off. You need an insurance broker to ensure you have the key person and life-insurance products that cover you as a director and business owner. Then you need advice on how to alienate assets from the business, separate business finances from personal, and make some investments that are not in your business. You should also be converting your hard work into a retirement plan. The law recognises that business owners put so much of their own capital into the enterprise that they often don't have much super, so they can put the proceeds of a business sale into super and do other things that give them relief from capital gains tax. There are also self-managed superannuation funds. However, all the superannuation exemptions and concessions for business owners are tightly controlled and you must have an accountant and solicitor operating on your behalf.
Use this time to at least give these matters some thought.
Mark Bouris is the executive chairman of Yellow Brick Road Wealth Management, ybr.com.au.