How to grow your business: 3 New Financial Year tips
Hey guys it's Reuben here from New Wave Accounting, as we approach the end of financial year for 2021 I want to go through a few tips on how to make sure that you're growing your business in the next 12 months or in the new financial year, so tomorrow will be the first of July, and a lot of people will just go back into their usual method of running their business, and just just stay within that daily grind.
Now, I highly encourage you to look at three aspects within your business so that you're ready for the next 12 months, and you're not just flying blind. So, the first thing you want to make sure to do is to prepare your tax return super early and to stay on top of all of your compliance. Now, just because you prepare your tax returns early doesn't mean you actually have to pay for your tax returns, what we want to do is make sure of the outcome of their tax return, so that you can plan budget. And also be aware of, of how you went in the last financial year. Now if we get this done. Not only does it give you opportunity to forecast forward, but it also brings up other opportunities such as being ready for grants, ready for finance when you need it. A lot of people get stuck when suddenly they want to buy a house, they want to buy a commercial property, or they may look at government grids, and it's just far too late, they don't have enough time to actually process their tax returns they figure it out, They find out too late that they have an amount that they have to pay, and they're just not ready to plan and execute on opportunity so I highly encourage you to prepare your returns early and stay on top of your compliance.
The second tip is to look back and reflect on the prior financial year. Now, a lot of our clients regularly say us on a quarterly basis so that we can keep them updated but for those businesses who don't. It's always a great idea to sit down and spend maybe a day just having a look at the prior year's historical data so going through zero count locate your profit and loss looking at the actual outcome that's happened, and then assessing what went wrong, what, what you did well, and then using this as a guideline to make sure that when you play it forward, you're not doing, you're doing certain things and you're not doing others. So that's very very important. So that's how we're able to assess opportunities as well. The last and final aspect is looking forward in doing a bit of strategic planning. Now I want to dive a little bit deeper and take a little bit of time to go through how we do it here a new wave, and how you can do this for your business whether you're a restaurants, whether you have a hairdressing salon or whether you have an E commerce business, it's very very important to have a strategic cleared for the next 12 months and at least for the next 12 months you can do this for the next five years if you're, if you want to. The first thing I want to touch on is cash flow projections, 90% of the clients that we come across new clients do not have a cash flow projection. And to me this is this this shoots out alarm bells, it's a red flag because you're basically flying blind, you've put on your blindfold and you have no idea where you're going and you're basically running the business day to day, week by week even when in terms of cash flow. So, what I would like you to do is basically try to get a good understanding and if you can't do yourself, do this yourself, engage an accountant or engage someone that has the ability, whether it's, you know, business coach financial planner to assist you sit down with you and map out 12 months. Now, each month, you want to try and find out exactly where your business is going to be it was, as best as possible. We don't have a crystal ball we can't see into the future, but we can probably get it at 90% right most of the time. So, in essence what you want to do is figure out each month's revenues, taking into consideration fluctuations, as you've seen in the prior financial year. Now, if this is your first, first year, you'll just have to take a stab at this and just estimate each month, but if you've had prior prior historical figures look at your prior years, see which months go up and see which ones go down, and then add in, maybe an increase or a decrease even if you think it's going the other way. In the percentage of growth for revenue, that way you can use your you're aiming towards something, and not just trying to make revenue each month. After that you want to make sure that you understand your margins your cost of goods sold what effects, what costs are directly associated to each dollar of sale if you make if you make $1 How much is actually lift. And last but not least looking at overheads, these are the expenses that rarely change. month on month so they're going to be administration costs, you know, you may have some rent, stationery, all those sort of items that you're just buying month on month and even if you don't make $1 Extra you're still going to be paying those expenses. If you can get a clear indication of that each month for the next 12 months, then you're able to see where the, where you were going to be profitable where you may not. And then ultimately see if you can build that into cash flow in and cash flow out. So we have to remember that profit is different from cash flow, cash in your bank that's one of the questions we get all the time. How can why profit doesn't tie up to my, my bank account, it all comes down to. Well, various factors such as you know, loans, ie paying, you may have a to debt you may have debtors or creditors that have been accounted for and a lot of people are just looking at that profitability thinking we're going to do well in the next 12 months but some people may not have the cash to actually run the next month or next two months, so it's super important to have a cash flow projection, again if you need help with this, let us know we can sit down with you map out the next next 12 months, and we can even do a few different scenarios where you might say to us, Look, we want to buy a car. Next is smads we want to get a new warehouse. We're going to increase prices, and we can model this in two different scenarios. The cash flow projection is one side, after you've done your cash flow projection, we always like to set a budget, the budget is your targets. So, what is it that you want to achieve. month on month for each item on your profit and loss, so your revenue, your cost of goods, all of your expenses, what are we trying to target. Now if you don't have a target you basically. Who knows what you're aiming for and how, how, how can you set goals, how can you, I guess, motivate your staff or yourself, if you don't even know what you're aiming for, so it's super important to put a budget in place. With that budget, obviously we're monitoring this sort of month to month basis that budget doesn't change it shouldn't really change month to month worth of cash flow projection, it should be a rolling cash flow projection because if there is a big change, let's say next month, you find out that a big expenses come through, we need to adjust that cash flow, the month on month and you're monitoring this month on month so that you know exactly what the next, the following months are going to be in terms of your cash flow or other money within your bank.
Let's look at goals. So, here a new wave, every single year we do, we do planning, strategic planning on where we're at the moment where we want to be and how are we going to get there. So we do a simple one page plan in this one page plan. It's very concise, so that the whole team is on board, they understand it and we're all aiming aiming towards the same goals. the same plan, but it allows us to have a very powerful, I guess, forecast of where we're going to go. Now, in this strategic plan, we want to go through our purpose do the simple things your mission, your purpose, the core objectives within your business and why we're doing it. Why are you in this business in the first place and then I guess where do you want to be what is your big hairy audacious goal that's one thing that a lot of businesses don't look at they write data, day by day they focus too much on making money and not enough on the purpose of their business if you can combine those two together, you'll have a great business down the track. Part of the one page plan is structuring your team, making sure that you know exactly what team you need for the next 12 months to reach the revenue that you are trying to achieve. So there are certain parts in here and I always like to run a business in a way that, you know, it could be sold down the track, you don't have to sell it down the track, but if you if you plan this way then you're trying to remove yourself from certain areas of the business and, ultimately, someone should be able to basically take over your business without you being there and run it and that's how you're going to get the highest value out of your business as well. So, plan out a team structure. That doesn't have to be in place from day one, but something that you can build towards something that if you put it in place, you know that you'll be able to not only take yourself out of certain areas such as administration marketing, sales, whatever it may be, but it also allows the business to grow. And this is has to be in line, also with your cash flow projections and budgets. Now, with all of that information, you also have key targets, and your KPIs your key performance indicators. So there's going to be your revenue if you have your average order value calculations if you, if you want to have your number of clients or number of products, whatever it may be, this has to be specific to your business now for an e commerce Store for example, we're probably looking at targeting conversion rates average order values. Obviously, revenue but we want to be looking at things that move the needle in terms of profitability and growth in the business itself so these are the KPIs you said, they're the KPIs, you will be following month on month to try to achieve that we don't need a lot, you know, if you, if you have three to five KPIs, it's perfect. The more you have, the more administration you need to actually keep track of it, but start off small, but make sure that we're always progressing.
Now the last part is obviously, obviously actioning the plan that you've put together. Now, this can be broken down into quarterly projects and obviously annual sort of goals and timelines in these projects each quarter, you might have three action points that you want to. You want to tackle, but these need to be sort of low hanging fruit, they aligned with your, your, your strategy and your planning and cash flow projections, and you need to be able to assign this to a certain person in the team, so they have accountability to get it done. So if you have a large team you might assign a few projects out, if it's just yourself, you need a side of yourself, pick the top three that align with the goals, and then make sure that they're getting done each quarter.
And obviously, last but not least, to always keeping track of, you know your quarterly revenue goals and its profit, so that way, you're always moving towards something rather than nothing. But last but not least in terms of forward planning and strategic planning, probably more so now than ever is planning for emergencies. So COVID is the perfect example, who knows where we will be in the next 12 months two years, or even the next five years, but we always need to plan for the worst in case it does happen. Now this means lockdowns, this means you getting sick yourself. So how do we mitigate that risk, you need to put this into your strategic plan as well, because we now live in a different world where we can't just travel and live the lives that we're used to. So, be very aware that everything that you do you need to have some type of player to, to, to be on top of lockdown when it happens to be in front of your competition when things change. So have a think about those factors. So those are the three main areas so I'll go through it again so we want to make sure that you prepare your returns early and stay on top of your compliance, we want to look back and reflect on the prior financial year to get ideas or opportunities ideas of what you've done well what you haven't. And last but not least looking forward doing strategic planning so if you do these three things, I guarantee that It’ll put you in a better position for the next 12 months, I guarantee that you'll have more motivation, and it'll excite you to actually tackle these things as you hit those goals. As you reach your targets, you'll find that the growth of your business will be much faster, and your direction of your business will be much clearer as well. If you have any questions, please let us know you can book in an online meeting with myself or one of our team members it's new-wave.com.au or you can visit ecommerceaccountant.com.au. Thanks guys.