How often do you look at your profit and loss? Do you know what the ‘bottom line’ is and are you tracking it at this time of year to forecast your tax liabilities and at the same time, implementing legal strategies to minimise your exposure?
At this time of year, it is imperative that you forecast your 30th June 2017 financial result and discover what this means from a tax perspective.
If you are using XERO, to keep up to date, this should be a relatively easy exercise.
Which brings me to my next question: are you making enough money?
If you’re not making the money you would’ve hoped, you need to take corrective action quickly. This will involve looking at strategies that drive key actions which ultimately result in better financial performance.
If you’re not looking at your numbers weekly, by the time your accountant or bookkeeper has delivered the news it may be too late.
So it’s important to have a weekly financial management pack that keeps you on track. Think about it: every major business has a finance team which delivers the financial result weekly and at worst, monthly.
Your accountant can help set it up, but ultimately it’s about discipline and you, as a business owner, taking the time to review the business numbers: and I am not just talking about the bank balance.
That’s the first thing you can get from a Profit and Loss Statement, but it’s by no means the only thing.
Here are some other insights you can gain by regular financial review:
- Are your sales levels acceptable?
- Is your gross profit percentage in line with industry averages or the ATO benchmarks?
- Are your wages as a percentage of sales in line with industry averages or the ATO benchmarks?
- Are any other large expenses as a percentage of sales too high?
- Are you spending too much?
- Does something seem odd?
- Are you getting enough from your marketing spend?
- Are your finance costs too high? Do they need a review?
- Are there any assets that can be written off?
- Do you need to make investments in technology and process?
- Is it time for a rent review?
- Is your business helping you achieve your financial goals?
- Is your pricing right?
- Are you missing out on cross-selling opportunities?
- Do you all your staff “do the business” the same way?
- Is it possible that fraud exists in your business?
- Are you carrying too much stock?
XERO can provide much of this data in a couple of clicks
Again, it might be helpful to have a chat with your accountant and tell them what information you would love to be able to extract from your XERO software. So here’s my advice: ask your accountant “How should I be using my Profit and Loss before the end of the financial year to save on tax?” If you’re not proactive, there’s a fair chance you’ll be paying too much tax.