Written by Kodie Axelson
I can’t believe it that is another financial year down! I hope everyone had a great year! We are post COVID now and businesses are getting back on their feet and finding their new ‘normal’ whatever that may look like. As a business owner we are used to peaks and troughs and challenges coming our way. COVID however was quite a hit to many businesses and definitely not called for. Were you prepared for such challenging times? I’m not sure what amount of preparation we can have for a global pandemic, but it begs the question are you prepared for change?
How prepared are you for a major change or shift in your business? How prepared can you be? The first issue off the bat will generally be cashflow. Can you sustain a downturn and do you have enough funds in the bank to float your business for at least a few months. To mitigate the risk of cashflow issues I find it a great money management tool to have a GST account and a profit account. This can be broken down further into additional accounts, but I find at a minimum these accounts are a must. Transfer your desired profit margin from your account every week or at most every month along with your BAS commitment. This will leave you with the remining funds to operate the business for the coming month. It is a great red flag if your funds left do not float you through the entire month. This is an indicator that your profit margin is down for the month, and it is also a great driver to motivate you to increase your sales. Another little tool is to have your profit account with a different bank, so those funds do not feel available to you.
Another trick I find helpful is to process your BAS monthly. This makes you aware of any downturn or red flags straight away rather than 3 months later. Reconciling monthly will give you an accurate profit & loss statement on a monthly basis. This is great for reporting and managing cashflow. You’re then reflecting on your business position monthly rather than quarterly giving yourself time to adjust where you need to, if you need to.
These tips are the smallest yet most beneficial moves I believe make a big difference to small business management. Small business is the backbone of the country and with the hits you have all received in the last few years I hope these couple of pointers will help you through the years to come. There are many unknowns in business ownership but if it were easy everyone would be doing it.
I wish you all an awesome and prosperous 2024!