5 tips to keep your business healthy this year
With 2017 already in full swing, the end of the financial year will be here before we know it. And despite the common New Year resolution to work more on the business than in the business, it’s sometimes not so easy to come up for air.
If you can, however, this is a great time of year to give your business a health check – assess your goals, put some budgets in place, and improve your cash flow.
We spoke to small business expert Simon Paterson, principal at Allan Hall Business Advisors, which recently won two Financial Review Client Choice Awards for 2016 – Best Accounting Firm and Best Professional Services Firm in Australia (both for revenue under $50 million).
Here are his five tips to keep your business healthy into 2017.
Define your long term business strategy
Regardless of whether you’re a micro business with one employee, a small manufacturer with 10-15 employees or an expanding online retailer, you need to have a long term strategy in place to keep your business on track. You might have a vague idea of what ‘on track’ means but unless you’re proactive about implementing your strategy, you won’t make much progress.
“Very few small business owners stop to consider the long term objective for their business,” says Simon. “Either they haven’t thought about it as they’re too busy working. Or they have a vague idea, but do very little to make it a reality.
“Maybe you’re planning to work ‘til you’re 50 and then sell the business. Or maybe you’re planning to hire a manager so you can work less. Whatever your long term objective might be, what are you doing to get there? If your plan last January is the same as this January, it’s time to be a bit more proactive.”
Simon advocates incorporating some business planning into your week, no matter how busy you are: “Knock off early one day a week or even every two weeks to spend time on the bigger picture. Keeping your plan in your head isn’t enough. Sit down with your accountant, draw up some goals and work out how you’re going to get there.”
Put some budgets in place and stick to them
Putting some proper budgets in place is also vital for the health of your business. If you only check your bank balance now and again, it’s time be proactive and measure your performance against some set targets.
“I use the analogy of driving a car to describe businesses without a budget. You need to understand what’s on the road ahead and plan to avoid it, rather than swerve suddenly to avoid a pothole and crash.
“Rather than having vague aspirations to double your turnover in six months, how are you going to do it?”
Again, Simon recommends making the most of this time of year to sit down with your accountant to review your latest profit and loss statements, assess your margins and set some realistic turnover targets.
Be more disciplined with cash flow
Many of us struggle with cash flow and bad management can make or break a small business. Simon recommends trying to smooth out your cash flow over 30 days rather than grappling with peaks and troughs.
“Could you invoice more regularly? Could you shorten your payment terms? Do you need to be more firm when it comes to chasing overdue invoices? Do you need to improve the way you communicate your goods and services to reduce disputes over payment? These are all really important questions to ask yourself,” says Simon.
And when it comes to your suppliers, look closely at their payment terms.
“Small businesses frequently pay their suppliers’ invoices as soon as they receive them. But more often than not, creditors’ terms are 14 or even 30 days. In many cases, even if you’re struggling to pay by the due date, a short phone call to explain you’re having unexpected cash flow issues will often buy you more time. And help you sleep better at night,” adds Simon.
Keep on top of your superannuation obligations
For all directors of Pty Ltd companies, one big thing to stay on top of this year is superannuation. If you’re audited, directors are now personally liable for any missing super contributions.
“Even if cash flow is really tight, super is the one thing that should have first priority,” says Simon.
Review your insurances
And finally, now’s a great time to review your insurance policies for the year ahead. When it comes to business insurance, it definitely pays to go through a broker rather than doing it yourself. And if you have organised it yourself, ask a broker to make sure you’re adequately covered.
“Too many times I’ve seen small businesses impacted negatively by being underinsured. Make sure you have good, up-to-date policies in place for all the insurances relevant to your industry.
“And if you’ve been in business for a few years now, consider getting audit insurance while you’re at it,” says Simon.
What are your tips for keeping your business fit and healthy this year? Share them here!