The start of the year is an exciting time to reflect on the past twelve months and prepare for the next. And while many of us will be thinking of 2022 resolutions – no doubt relating to exercise, diet, and personal fulfilment, if you are a business owner it’s also a suitable time to review your business and take steps to improve performance in and get your business ready for 2022.
With this in mind we’ve put together a list of 8 key areas that can be reviewed (in between eating more salads and going for a run!). Let’s get started.
Review growth, revenue & sales goals
Take some time to reflect on the past year and ask yourself some important questions:
- Did your business grow?
- How did your revenues and profits compare with the previous year?
- Are your sales up?
- Does your expenditure over the past 12 months give any cause for concern?
- If you made a list of goals last year, did you achieve them?
In short, try to understand how your business has changed since the end of the previous year. If it’s grown, great. If business hasn’t improved, ask yourself why, and dig into the figures to find out more. Now might be a suitable time to get professional advice from an accountant. They can help with the coming years financial planning and get you on track.
Get the broom out and do a Jan 2022 tidy-up
Run an accounts receivable ageing report
And determine what actions you may need to take to encourage slow paying customers or clients to clear their debts with you and pay quicker moving forward.
Run an accounts payable report
To determine whether your business is paying its obligations on time. Late repayments can hurt your business credit.
Review contracts with vendors and suppliers
Consider negotiating increased payment terms to improve cash flow.
Review the business credit cards you’ve used
Is it time to shop around for a better deal?
Evaluate your business bank account
Including fees and benefits, to determine if it’s still the right fit. If you’re using a personal account for business, set up a business bank account.
Review business expenses
To identify costs, you can eliminate. Remember to ask yourself what kind of ROI you are getting on those expenditures.
Line up a line of credit
Whether a crisis (think Covid-19) or opportunity comes along, you’ll be glad you have access to this essential type of short-term financing when you need it.
Review your outstanding business loans
To determine whether you can save money by refinancing business debt or through business debt consolidation.
Shop for new financing
Shopping for a loan before you need the funds will allow you to make better decisions.
Check your business and personal credit reports
Credit scores will play a factor in many financing decisions and good credit may help your business save money.
Plan to work on your business, not just in your business
Business owners tend to spend a lot of time working in their business, earning money. However, it’s important to remember why you went into business on your own or with others – and while it can be difficult taking a step back, the beginning of a new year is a perfect time to set new goals for your business.
Make a shortlist of your core business goals for the year. These might include sales targets, revenue figures, opening new stores, taking on more staff, or improving business relationships with existing clients. Your goals will help guide your planning down the right path for getting your business ready for 2022.
Once your goals are set, you need to do some business planning and establish timeframes around each goal to keep you and/or your business partners accountable in working towards achieving the goals you have set. You may also wish to work with your accountant or adviser on the strategies and actions required to achieve your goals.
Ensure you are using appropriate accounting software
Learn from the past year and figure out how you can track your finances more efficiently in the coming year as its almost impossible to correctly review your numbers unless your numbers are up to date. Make this as easy as possible for you and your business by choosing cloud-based accounting software that meets your needs.
Take a real interest in the numbers
While we love numbers, it’s fair to say that for most, when their accountant starts talking debits and credits, it’s time to take a power-sleep! However, to make informed decisions about your business you really need to be on top of the numbers that power your business. The frequency that you review the numbers is also important.
Reviewing your year-end financials, which may be prepared by your accountant up to 11 months after the end of the financial year, is ok. However, if you are wanting to make monthly decisions on buying equipment or employing more staff or longer-term strategic decisions, the year-end financials are not enough. Why not consider a monthly review with your key management team and accountant in 2022?
Stay on top of Payroll (and potential issues)
Being unaware of payroll issues that your business may face can lead to loss of income or ATO penalties – all of which can be avoided by making sure that in 2022 you always:
Ensure you pay Super on time
At the end of each quarter, you have 28 days to ensure you have paid your employee’s superannuation to their super fund.
This is important as if the payment is made on the 29th or 30th, unfortunately, you are unable to claim a tax deduction for the superannuation payments. Further, you must pay the superannuation guarantee charge (which is non-deductible) and lodge an SGC statement with the ATO.
Keep track of bonus payments to staff
Your business is entitled to claim a tax deduction for the bonus expense in the year, so long as your business has committed to the liability.
Make sure you classify people correctly for payroll purposes
The outcome of whether your people are classified as employees, independent contractors or consultants in your accounting software is important. By misclassifying someone, you may be losing money or incorrectly calculating their entitlements, which may lead to incurring further penalties.
Review your insurance
Pandemics, natural disasters, increased reports of cyber ransom attacks, we’ve had them all in 2021 so we definitely recommend you take a moment to:
- Review your insurance coverage to make sure it still meets your business needs.
- Consider shopping around for insurance cost savings.
- Discuss coverage with your insurance agent to eliminate coverage gaps.
Plan for tax in 2022
We definitely recommend doing this with your accountant as it will enable you to discuss your figures, plan for the balance of the tax year and review any opportunities you could potentially take advantage of before the end of the financial year. Also, it’s a terrific way to learn more about your potential tax liability and helps to avoid unpleasant surprises at tax time. Get in touch with us if you’d like to book a tax planning session and get your business ready for 2022 tax time.
Tax Planning
You’ve worked hard to build your business and you should reap the rewards. Book a Tax Planning session with POP Business to optimise your business ahead of tax time or call 1300 180 630.
And finally...
Don’t forget to take time to recognise your accomplishments and those of your team. The fact that your business has survived 2021 is reason enough to celebrate. And while 2022 will have challenges the team at POP Business are ready to lend an experienced and qualified hand in helping your business grow, whatever stage it is at. Call us to find out more today!
