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Preparations for BOFY (Beginning of Financial Year)

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That time of the year when every business is advertising their product or services, taking advantage of the “End of Financial Year”, has just ended. It’s great to be up to date with as many tax deductions as possible, but what plans are you making for “Beginning of Financial Year”, which started this July?

Most probably, if you are running a business, you aim to improve your profits. Here are the important things that businesses should pay attention to in order to achieve sustained and higher profits this year:

Sales / gross profits

Study your sales and profits by region, product, service, customer, etc. to identify which ones you must pay attention to this year. Maybe you should scrap some that are slowing your business down. Consider new prospects that open as a result of shifting business conditions.

Do not be a victim of “Digital Disruption.” Learn to survive it and take advantage of it by seeking help in the area of online/digital marketing. Unless your business only targets customers that are more than 65 years old, you need to establish an online presence. Meet with your staff to conduct a strategic planning session or hire someone to help you. Discuss ideas for achieving sustainable sales growths.

Costs

Explore ways your business can obtain supplies more cost effectively and efficiently.

For service businesses, labour hours is a great opportunity to attain improved productivity. Carefully review the productivity of each team member, i.e. how much of their working hours are you able to bill to clients? Profitability can be heavily impacted by minor changes in work practices. Find out if you are selling all the hours that you’re paying for.

Pricing

Give honest answers to these questions:

  • When was the last time you raised prices?
  • Are you feeling worried that customers will abandon you if you do this?
  • Will you be able to continue bearing the margin squeeze due to increased costs without raising prices?
  • What is your overhead this year versus the past two years?

If you are facing strong competition, fight back by reducing your costs or by justifying to the market why they should buy your better product/service for a higher price. You have to promote your product or service by providing details on what makes it better than others in the market, longer lasting or whatever makes it stand out.

Overheads/net profit

Ask yourself these questions after looking closely at all your overheads:

  • What are the reasons we are spending this money?
  • What are the contributions of these expenses to the business and its profitability?
  • Is it right to halt the spending on this item?
  • Is there a better alternative to achieve this?
  • Should we look for a new supplier – if only to prompt the existing supplier to sharpen their pencil on this expense?

It is indeed beneficial in some cases to set up an atmosphere of rivalry among suppliers. You shouldn’t take your value as a customer to them lightly.

Customer payments

How do you compare the average number of days it takes you to be paid by customers to the terms you offer? Very few business owners are aware of the big difference between these two items and the problem it can cause on cash flow if the gap is huge. Reduce this number by working it out and setting a goal.

Supplier payments

Work out the number of days it takes you to pay suppliers versus the terms they offer you. If you are not leveraging every day of the terms offered, you could be making a needless cash flow problems. It would do your business good to negotiate for better terms from suppliers – especially if you are a major customer and they have strong competition for your business.

Stock management

What’s the amount of inventory you require on hand at any particular time? Consider the inventory in dollar terms sitting in your stockroom that could be spent on other things, such as marketing to sell more and empty your stockroom faster. It’s tempting to purchase items in bulk to get discounts. However, if the inventory will sit unmoved taking valuable cash, you may be better off purchasing in smaller amounts. Think of ways you can reduce the quantity of your inventory.

Job management

If you discover that you have money tied up at any given time for on-going jobs, discover ways to hurry up the time it required to obtain payment on jobs, such as progressive invoicing, deposits, etc.

This year, create a plan to pay attention to these important elements of your financial management and you will definitely see profits and cash flow increase in the next financial year.

Prepare not just for the end of financial year but also for the beginning of financial year to improve your profits and avoid cash flow problems. Hire professionals to help you make these preparations. PJS Accountants provides a full range of services including accounting, taxation, business improvement, superannuation, business valuations, asset protection, succession planning and bookkeeping. We have spent more than 30 years dealing with local businesses in Capalaba, Cleveland and the Redlands. Our team is always available to take your call and assist you in whatever business needs. For enquiries, contact PJS Accountants.