Six key accounting resolutions every business should make

Strategy planning

Cashflow | Hot Tips | Tax

By John Corias

Now’s the time for SMBs to reflect on the year gone and plan for the one ahead, and accounting expert John Corias suggests owners focus on five key areas when making plans for the next 12 months.

For small businesses that have the good fortune of taking a well earned rest over the Christmas/New Year period, the break is a great opportunity to reflect on the previous twelve months. For some it will be a time for recovery from a difficult year, whilst others will take the time to celebrate their successes.

No matter what camp you are in, the break from running your business should always see some time spent reflecting on lessons learnt and development of a plan for the year ahead. This need not be a complex process of self-analysis, simply a re-evaluation of where you had planned to be and where you ended up.

From a small business accounting viewpoint, the following areas should be foremost in your thoughts as you develop a plan for the year ahead.

1. Cashflow is King

Evaluate all of your outstanding debtors and do whatever is necessary to ensure that you are paid on time and in full. Make a new resolution to be wary of any new business you take on. Don’t just look at the potential income and profit from a particular customer. If you know that they are going to struggle to pay you for your product or services then any profits can be washed away in the opportunity cost of that revenue. Similarly, have an ongoing plan for debtor recovery, and assign time each week/month to minimising your outstanding debtors.

2. Assess Inventory Requirements

Following on from point one, it is better to only have in stock what you genuinely require in the short term. Any stock that is sitting around waiting for a potential sale is wasted in my opinion. The Japanese have a saying for this, Just In Time, or “Kanban”. By only ordering in what you know is about to be sold or produced you limit the amount of working capital that is tied up in stock. Also, review and eliminate slow selling product lines and offload any obsolete stock that you know is just wasting space.

3. Staffing Requirements

Often this is one of the hardest aspects of managing a small business, as emotional attachments and friendships with your employees can cloud your judgement. In difficult economic times, each employee must be evaluated for what they bring to your business. Each individual has their own strengths and weaknesses but must be productive in the workplace. Depending on your industry, it may be better to use sub-contractors rather than have idle staff members sitting around waiting for something to do and eating up your hard won cash flow.

Part of a fluid business plan must allow for an ongoing evaluation of all staff, why you employed them and what they bring to your business. If your business plan changes or work volumes vary, then your workforce must be flexible and adapt, otherwise opportunities will be lost. If you don’t have this flexibility in your work force, then now is the time to formulate a winning strategy.

Related Articles
Advice | Cashflow | Featured | Small Business
What you need to know about credit

It’s no secret that inadequate cash flow is one of the main reasons why businesses fail in Australia. Dynamic Business only recently talked about this issue last week, with new research commissioned by H&R Block found that the biggest struggles for small businesses across Australia are: ‘cashflow’ (35%) ‘marketing effectiveness’ (30%) ‘lack of support’ (19%) Read More…