6 ways to start the new financial year strong

With a new financial year upon us, it’s worth taking a moment to reflect on recent events and your goals for the new financial year. The extraordinary events of FY20 (drought, bushfires, a pandemic and economic mayhem) will be hard to forget and many businesses are still in “survival mode” with an uncertain future ahead. 

Working closely with a wide range of businesses, we deeply understand the difficulties many are facing along with the opportunities some see ahead. We wanted to come up with a list of tips that are just as important to both “survival” and “growth” mindset business leaders.

We also took this opportunity to link to some of our blog posts and videos from this past financial year, providing you with further reading on some of the key points. You can always contact us for much more information on those or any other points too.

1. Continue to investigate cloud technology

Migrating to Xero is just the beginning. Even if you are getting the most out of Xero’s core features (and many of us are not), there’s the App Marketplace of some 800+ Xero approved add-ons for you to explore. These apps can save you even more time, offer greater insight into the current state of your business and even help you make evidence-based decisions for the future.

We’ve recently started to share regular write-ups on different Xero apps for you to consider, including: Receipt Bank, CloudPayroll and Vend. Feel free to contact us if you ever have any questions about taking your use of Xero to the next level. Some tools, e.g. Spotlight Reporting, will be more useful than others in nailing the next point during FY21 and are worth looking at ASAP.

2. Small business? Think bigger, become bigger

Being one and working with many, we understand and love small business. However, as accountants, we also know that a “big business mentality” is not actually that difficult to cultivate – setting budgets, making forecasts, comparing budgets vs. actuals, tracking key business metrics, making adjustments to the business in response to what you see in the numbers… all important disciplines that can fall by the wayside in the busy-ness of small business.

We’ve written and spoken about the importance of being a “DiY CFO.” If you think FY21 is the year to really start working “on” rather than “in” your business, we would be very happy to assist. Here’s a prior blog post containing some useful tips as well as a full seminar video to get you thinking. 

3. Look at your personal finances 

Following on from the point above, we regularly see startup founders and small business owners neglecting their personal finances and other investments while fixated on growing their companies. This is understandable but so risky when you consider that a new or growing business will generally take years to get right (that’s assuming they succeed)! While continuing to focus on your business, at least consider whether you are able to 1) better protect yourself and any dependents you may have, and 2) diversify your investments just in case things don’t work out as planned.

A range of activities fall into this point, including personal budgeting, finance, insurance (i.e. income protection, trauma, disability, and life), estate planning, investment strategy and management. If you are concerned that your personal finances are not in order, this uneasy feeling can be more of a distraction and hindrance than you may realise. Advising on these issues is so unique to each individual or family that we would always recommend a complementary first meeting with the team at Allworths Wealth Management as your next step. Mark wrote a short post for AWM summarising some of these tips earlier this year.

4. Continue to leverage COVID-19 incentives

By now you’ve probably secured any additional funds you’re entitled to, including the ATO’s temporary cash flow boosts, JobKeeper payments and even the NSW government’s small business support grant. We wrote about these and any other measures in our Small Business Survival Guide, which was continuously updated through the local lockdowns.

However, other incentives remain in place that you can benefit from as needed. For example, the increased instant asset write-off scheme was recently extended to any assets purchased between 12 March and 31 December 2020. For our clients, one of the most common asset purchases (up to $150,000) would be work or passenger vehicles. If you’re looking at upgrading between now and the end of the calendar year, we would be very happy to assist you.

5. Get clever with finance options

There’s nothing fundamentally wrong with a business carrying a healthy and sustainable amount of debt. Being strategic about your finance options can help accelerate your plans for growth by freeing up cash that would otherwise be tied up. The prerequisite to this though is having effective management accounting in place (see Point 2) so you have superior visibility over your current and expected cash position over the coming months, which is especially important in a COVID-19 context. Otherwise you can’t really call any amount of debt “healthy and sustainable,” as you have no way of knowing that.

Generally, any major purchases can be financed to avoid parting with too much cash upfront. If your car or premises are financed, you can look at refinancing now at lower rates to save on your repayments. If you need to invest in a new piece of equipment, you can look at doing that in a variety of ways to spread out your repayments. You can also look at using any unencumbered assets you may have (e.g. vehicles, plant or equipment) to open up more funding options. If you’re looking at any of these ideas for your business in FY21, you can save so much time (if not money) by talking to a professional.

6. Invest in your skills and team

If you love learning and see the benefit to your career progression or business prospects, why not plan ahead and see if there is any work-related training you’d like to do in FY21? The cost, if related to your employment, is tax deductible. 

There are so many places you can turn to, depending on what you’re looking for. LinkedIn Learning has a huge range of business courses, as does Udemy and Coursera. Not to mention the countless training companies, RTOs and universities offering short courses and qualifications of all kinds.

This is also a great way of investing in your team and giving back to them in what has been a very stressful and unusual time. Especially for teams that continue to work from home, group training is a great way to stay connected as a team and up to date with the latest skills and practices.

Final note

This was not an exhaustive list but hopefully you found it thought-provoking and useful to your own situation. At Allworths, we always make time to chat through business and even life decisions with our clients so please don’t hesitate to reach out if there’s anything above that struck a chord. Contact us whenever you’re ready for a no-obligation chat.

Happy new FY and here’s to brighter times ahead!