Running your own business is a major commitment. It involves not just the work, but the administration, and time can slip by quickly when you’re knee-deep in business activity.
The end of each quarter can by trying for business owners. Creating a quarterly checklist or routine can help relieve that burden and make the whole process less painful — and hopefully your business finances much healthier.
Here are five key things to tick off.
1. Action your BAS report
The business world is full of horror stories about business owners who ignore their BAS reporting and end up entangled in runaway debt and an administrative nightmare. In many cases, this can kill an otherwise viable business.
“This is a very common problem for SMEs who are time poor and of course have their primary focus on managing cash flow,” says Neil Slonim, founder of The Bank Doctor, a website that helps small business.
“Reporting often becomes a secondary priority, but if you’re not generating cash, there’s not a lot to report on,” says Neil. “This is where it’s just so important to be able to rely on your systems and the people who maintain them.”
Good reporting equals better cash flow
If the BAS task is tackled effectively, good reporting can actually help the business’ cash flow. It can also make end of year reporting much easier.
Take a deep breath, turn off the phone, and tackle the end of quarter systematically — even if you have to do it on a weekend.
One of the first things to understand is that reporting quarterly is by far the best course of action.
Annual reporting puts you, your accountant and staff under too much pressure. It can also lead to a lot of key information just falling through the cracks, most likely to your detriment.
The lack regular visibility about your financial and cash flow positions means you are out of touch with your business.
2. Review your debtors
This is actually better done each month so that you don’t get to the end of the quarter and realise that there’s a sizeable amount still owing and you’re stuck paying your own debts to staff, suppliers, superannuation and the ATO.
If there are outstanding debtors who are slow payers, send them a friendly but firm reminder so you don’t let things drag on. In the worst cases, think about contacting a collection agency. The goal is to make sure the cash keeps flowing.
3. Reconcile your accounts
Thoroughly reconcile all your accounts, comprising not just your debtors’ ledger but GST, PAYG obligations, and superannuation payments to staff. Check to see if you have paid all your own suppliers within the agreed terms.
Reconciling the GST and PAYG are the two big ones here, and if you have a business partner or someone you trust, get them to check your figures to make sure you have it right. Also remember that if you are dealing with customer or buyers overseas, there is no GST component on any of those transactions.
4. Pay your own super and expenses
Superannuation is crucial.
If you draw a salary from the business, as you probably do, make sure you pay your own super. Not doing so is a common mistake as some business owners gloss over this liability and think they are saving money. Wrong.
Make sure you also go through all your personal receipts at this time. Did you buy some equipment with your own money, some stationery or take a contact for coffee or lunch? If so, tally all this up and pay yourself out of petty cash. Not doing so is just cheating yourself.
5. Do some projections
At this point, you might like to do some projections on how the business is tracking on a yearly basis. Are you hitting targets and making your budget, and is the business going well enough to afford that extra employee or piece of new or upgraded equipment?
If you are looking at a profit, what are you going to do to minimise or use it? Small business owners pay a 15 percent tax on profits when they are put into superannuation. It might make sense to think about a new vehicle in one of the end of financial year sales.
Beyond that, it wouldn’t hurt to do an asset stocktake to ensure that you have all the assets and equipment that are on your books. Perhaps you are still carrying computer equipment on your books even though you got rid of it months ago. This is not part of the BAS activity statement of course, but it is part of good financial management.
Neil Slonim’s two pieces of key reporting advice for SMEs are:
- Have in place a plan which ensures all your obligations are met in an accurate and timely manner.
- Ensure your systems and the people managing them are up to the task — then trust them to do the job so as to allow you to get on with the job of running your business.
Stick to your plan and you’ll pass the end of quarter test with flying colours.