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Financial Planning for Small Business Owners: Tips and Tools for Success.



small business restructuring

The success of a small company depends on more than the quality of its products and services. To ensure the success and longevity of your firm, you must also have sound financial planning and  management.

Inadequate capital can make it difficult for a small firm, especially one just starting, to avoid financial troubles like a cash shortage or problems making payments.

To ensure your small business lasts the test of time and does not become part of another statistic of the high rates of failure of small businesses in Australia, it is essential to take charge of financial planning and make informed decisions. Here are some tips and tools for success for small businesses in Australia:

Establish clear goals

Setting achievable goals is the first step towards creating a successful financial strategy. Remember the acronym SMART:

These goals must be Specific, Measurable, Attainable, Relevant and Time-Bound. An example of a SMART goal for a small business would be  to “Increase website traffic by 10% by the end of the quarter”.

This goal is specific and measurable, i.e.  to increase the number of visitors to your website by 10%, and achievable, i.e. A small business could work on their social media presence, SEO and content creation strategies to achieve the goal.

It is also relevant since increased website traffic could lead to increased sales. And by giving yourself a quarter to achieve this goal, you also make it time-bound, increasing accountability.

Budgeting and expense management

A realistic budget is a crucial tool for small businesses. It is essential to know how much you have available to spend at any time, what needs to be spent on marketing and product creation, how much you can pay your employees and if you’re still making a profit after all expenses have been paid.

Staying within budget and regularly reviewing and adjusting this budget to reflect changing circumstances can help small businesses survive the initial five years of trade.

Monitor cash flow

If more money is leaving your business than is coming in, you are on the quick path to insolvency. Any business needs to have a positive cash flow to be sustainable.

Separate personal and business finance

Very often, small business owners make the mistake of mixing personal and business finances. Doing so could put your personal assets at risk if your business becomes insolvent in the future. Establish separate bank accounts, credit cards and financial records for your business.

Regular financial statements and reports

Stay on top of your  finances by generating regular financial statements, including profit and loss, balance sheets and cash flow statements. These can help you to keep your finger on the pulse of revenue, expenses, assets, liabilities and so on. This will help you make informed decisions.

Tax planning and compliance

Businesses in Australia are required to meet their tax obligations. Failure to do so could lead to penalties, fines and back charges. As a business owner, it is important to understand the different types of taxes that apply to your business and have a proper plan in place to make sure you do all that is required to stay compliant.

Investment and expansion strategies

Failure to plan for expansion may  lead to stagnation. Your annual financial planning should include strategies for growth and expansion.

What happens if my company becomes insolvent?

If you are seeing negative cash flow and increasing debts year after year, your company might be heading towards insolvency. A business becomes insolvent if it cannot pay its debts as  they become due.

Businesses with total liabilities under $1 million dollars may be eligible for the Australian government’s Small Business Restructuring (SBR) scheme, which allows  businesses to restructure their debts under the guidance of a Restructuring Practitioner (RP).

If creditors reject your Small Business Restructuring Plan (SBRP), your only option may be declaring insolvency, liquidating the company, or putting it into voluntary administration.

Rodgers Reidy offers business evaluation services.  We can examine the current financial position of a business, root causes of problems and make recommendations that can help.

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