It is not unusual for business owners to have financial blind spots. These can be caused by a lack of confidence in either their own financial knowledge or in the systems they use for gathering financial data. Sometimes it’s a general disinterest in accounts and back of house matters brought about by a lack of time.
In this article we consider common financial matters that hold businesses back from achieving their profit potential and offer quick solutions for overcoming common financial blind spots.
The past year has stopped many a business owner in their tracks, and prompted many to reconsider how they do business. As we move forward, it’s important to understand how having a clear picture of your financials and a genuine understanding of their implications can help you minimise losses and negative financial impacts and make the most of new opportunities.
Put your software to work
Most businesses now make use of cloud-based accounting systems. However, what many business owners don’t realise, is that these programs can be customised to generate financial reporting that’s more meaningful for your type of business. This information can then be used to drive your business decision making.
Having access to the right type of information and understanding how best to apply it can be a powerful combination. This doesn’t have to mean an expensive new software roll-out, but it might involve tweaking your existing systems and committing to more accurate and timely data entry.
For many businesses, basic reporting in the form of quarterly BAS, profit and loss statements and balance sheets will provide most of what you need to know about your business performance. While numbers are not always a business owner’s greatest strength, for non-financial business owners, it’s imperative to have close contact with someone who does. Understanding them is essential to your business success and in turn your personal prosperity. If you need help, our accountants and bookkeeping staff can provide advice and software guidance that’s appropriate to your overall accounting, tax and business development requirements and goals.
Develop realistic growth strategies
It’s important to develop a strategy for the type of growth you’d like to see in your business. A well-informed interpretation of your balance sheet will give you confidence about the financial state of your business now, while well-prepared financial projections will give you confidence for future decision making.
Understanding your numbers will provide clarity around the most profitable areas of your business, as well as those that may not be performing as you’d expect. Perhaps there are services you provide or products you produce that are no longer profitable. It’s important to regularly weigh up cost verses profit needed to sustain or grow various areas of your business.
As you apply the new lens of COVID-normal, remember to consider the simple things that can create a big impact on profitability. These commonly include chasing up overdue accounts, investing to upgrade equipment by taking advantage of Government measures that may be available to you such as the instant asset write off or small business pool provision or phasing out older, expensive product lines in favour of emerging new product trends.
Access sound advice
It’s common for time poor business owners to become too close to their business, blinding them to problems or opportunities. Calling on advisors, including ourselves at Rosenfeld Kant, for support that includes interpreting your financial reporting and our all-important “arm’s length” insights, can provide clarity and confidence for taking your next steps.
The fact is, “you don’t know what you don’t know”. Leaning on us, and your other advisors, to make the most of the combined experience and knowledge available, simply makes good business sense.
For assistance with financial reporting and management or to discuss any of the matters raised in this article, please contact Rosenfeld Kant on (02) 9375 1200 or email gary@roskant.com.au, raul@roskant.com.au or elias@roskant.com.au
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The information (including taxation) contained within this article is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Rosenfeld Kant strongly suggest that no person should act specifically on the basis of the information in this document but should obtain appropriate professional advice based on their own personal circumstances.