Tax Time – A Time To Look Ahead
If you are a small business owner then of course it is your intention to dot the I’s and cross the T’s in order to complete everything that needs to be done at tax time. While this is important, what you really should be doing in addition to this, is planning ahead for the new financial year so that things run even better than ever.
Did you know that most small businesses fail in the first five years of start-up and generally this is due to cash flow issues, high expenses and low profits? For this reason you need to review the previous financial year so you can better position yourself to meet and exceed your financial and business goals for the year ahead. Were there unexpected periods (whether high or low) that shout “anomaly”? Try to understand why these occurred so you better plan for these events should they happen in the current financial year.
Not writing it down can be an exercise in disaster. If you keep relevant information in your head then miscalculations and assumptions can occur. Write it all down even if it is not part of the specific budget – you can always include a list of variables to represent possibilities which may occur. And don’t forget those seasonal adjustments which can increase or decrease your expenses and profit.
You must ensure you follow up on any overdue accounts or claim them as a tax deduction if necessary. If late payment is a common occurrence you will need to strengthen your terms of trade so the number of late or no payers is reduced dramatically. A strong cash flow is always at the heart of any successful business.
There is no need to micromanage your budget – try to fight the need to include every little detail. Focus on the big ticket items and leave the staplers and business cards as a general item rather than itemised as such.
While you may think there will be a high growth and profit potential, err on the side of modesty. We all expect growth over a 12 month period but it is rare business which will see dramatic growth in a short period of time. Assumptions like this can cause serious issues when it comes to outgoing expenses if the money is not coming in as quickly as you predicted. Your cash flow forecast is very important but keep it grounded in reality if possible.
A new financial year; a new financial beginning. So many opportunities and so much potential for growth and success.