SMBs are now adjusting to a permanently digital business environment that is much faster paced than ever before. In the new world of business, annual reporting is mainly redundant because, by the time annual results are consolidated, the data is already outdated, and the market will have moved on. This means that SMBs can no longer rely on annual reporting as a true indicator of business and financial performance. In the changed business landscape, leaving in-depth financial reviews until the end of the financial year will result in lost opportunities.
It’s also no longer enough to simply review top-line financial performance half-yearly. Instead, businesses now need to complete a full half-year financial review before Christmas. This is crucial to ensuring the business keeps pace with rapid market changes and shifts in customer demand. It also provides an excellent opportunity to truly reflect on business performance in the first half of the financial year and identify opportunities and mitigate risks for the remainder of the year. This approach can help reduce the chance of any unpleasant business surprises at the end of the financial year.
Half-yearly reporting has a key benefit of being more effective and efficient than waiting and rushing to complete reporting at the end of the financial year when mistakes are more likely to occur. Ultimately, it makes the end-of-financial-year process much smoother and less time consuming for SMBs.
Five key areas that should be covered in a half-yearly financial review:
An in-depth review of record keeping tasks
Half-yearly reviews should consider ongoing changes in Australian Taxation Office (ATO) requirements and include a review of government support packages, particularly considering recent announcements about COVID-19 business support changes by federal and state governments.
The review must include, at a minimum, a summary of business income and expenses, such as the payment of supplier invoices and employee expenses. It is advisable also to review current business assets, plans for new investments or capital purchases, and how any government support is being applied within the business.
Review ATO or business changes that will impact tax
Many SMBs have completely realigned their business models to survive during extended restrictions and lockdowns. Therefore, it’s important to review business changes that have occurred or are likely to occur that will impact tax payments and claims. For example, changes in business operations, employee numbers, or business spending may have tax implications at the end of the financial year.
Equally, SMBs should identify any impending ATO rule changes likely to impact the business in the coming year. SMBs that already have automated recordkeeping systems should have the latest ATO requirements built into the system, making it much easier for the business to keep abreast of any forthcoming changes.
For businesses that continue to rely on manual accounting processes or outdated tools, this is the time to consider investing in an automated system to ensure the business can more easily and cost-effectively comply with ATO requirements. The cost of using an automated system instead of manual processes could also be claimed as a tax offset at the end of the financial year.
Review overall business performance
The end of the calendar year provides a good reminder for SMBs to reset business and marketing strategies and plans to maintain alignment with the broader economic environment. Business leaders should review business goals achieved during the past six months and decide whether they will still apply in the new year. This can help put the business in a solid position for the start of the 2022 calendar year.
Identify new opportunities for cost and operational efficiencies
Achieving optimal cost and operational efficiencies is key to business agility. It’s important to consider current business processes and where there may be opportunities to do things faster, smarter, and more efficiently through automation. Many SMBs have now adopted digital tools that streamline manual processes, letting employees focus more on profit-generating activities. For example, automated invoicing, travel, and expense management tools significantly reduce the cost and time of completing these processes manually. Automated tools also deliver real-time business insights that inform better decision-making and provide much higher levels of data security than manual processes.
Remind employees about scams targeting SMBs
A half-yearly business review should include a cybersecurity review that involves reminding employees about current and emerging phishing scams that pose a risk to the business. For example, Scamwatch reports that so far this year, scammers have stolen more than $7.2 million in Australia by gaining access to home computers, which is an increase of 184 per cent compared to the same period last year. This creates a massive risk for SMBs that rely on employees accessing company systems from home. Scams that target SMBs often focus on investments, myGov, tax file numbers, and government business support.
Overall, SMBs that use automated expense, invoice, and travel management tools and increase the frequency of their business and financial reviews will put their organisations in a much stronger position anticipate and align to the next market shift to proactively. These are the more likely businesses to survive and thrive over the longer term, no matter what happens in the broader economy.
Read more: Let’s Talk: Tips for the new financial year
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