Why just reviewing top-line financial half-yearly performance is no longer enough
In our new business world, annual reporting is becoming redundant because, by the time annual results are consolidated and produced, the data is already obsolete and the market has moved on.
In the changing commercial landscape, delaying indepth business reviews until the end of the financial year at 30 June results in missed opportunities.
Instead, complete a half-yearly business review before Christmas and, ideally, quarterly.
To keep pace with rapid market changes and shifts in customer demand, a half-yearly business review is recommended. It provides an extra opportunity to reflect on business performance, identify opportunities and mitigate risks in the lead up to 30 June.
This approach can help prevent any unpleasant surprises cropping up at the financial year-end.
If you opt for half-yearly reporting, it has the additional benefit of minimising clerical errors caused by rushing to compile data and documents in the lead up to the end of financial year. Ultimately, it makes the EOFY process much smoother and less of a burden for business owners.
As more and more business owners are no longer solely relying on annual reporting as an indicator of business and financial performance, it is important that an holistic approach is taken to maximise the returns on the effort associated with undertaking a half-yearly review.
As such, we recommend five areas (in addition to financial performance) to address now as part of a half-yearly review.
Five key areas to cover in a half-yearly business review
1. Review overall business performance
The calendar year-end provides a timely prompt to reset your strategies and plans to maintain alignment with the broader economic environment.
Business leaders should review goals achieved in the past six months and decide if they still apply in the New Year. This can help put the business in a solid position at the start of the new calendar year.
2. Identify new opportunities for better efficiency
Achieving optimal cost and operational efficiencies is key to business agility — essentially, consider current business processes and where opportunities lie to do things faster, smarter and more efficiently through automation.
Many businesses have adopted digital tools that streamline manual processes, allowing employees to focus on profit-generating activity. For example, automated invoicing, travel and expense management tools significantly reduce the cost and time of completing these processes manually. Automated tools also deliver real-time business insights that inform better decision-making and provide much higher levels of data security than their manual counterparts.
3. Assess and strengthen business cyber security
Cybercrime is on the rise. Is your business at risk?
Did you know that 90% of successful cyber-attacks attacks are due to human error*? With cybercrime on the rise, it is now more important than ever to ensure your business is protected by building a human firewall.
Small and medium-sized businesses are increasingly attractive targets for cybercriminals. Often, smaller businesses don’t have the financial or technical resources in-house to deal with existing and emerging threats. One of the biggest threats we face is ransomware, a malicious attack where data is encrypted and held hostage until the criminals are paid to release it.
Adopting the right security practices can seem overwhelming, so start by reviewing the tools you already have at your disposal, any training needed and developing policies that help protect the exposed areas of your business.
The Australian Government provides a Cyber Security Assessment Tool which could serve as a useful starting point. Visit the website to find out more.
4. Recordkeeping review
Half-yearly reviews should take into account ongoing changes in Tax Office requirements and include a review of government support packages, particularly COVID-19 business support changes.
Also remember to include a summary of income and expenses (such as the payment of supplier invoices and employee expenses) and to review current business assets, plans for new investments or capital purchases, and how any government support is being applied within the business.
5. Review changes that impact tax
Many business models have been completely realigned to endure extended restrictions and lockdowns. Therefore, it’s important to review business changes that have occurred (or are likely to) that impact tax planning. For example, changes in operations, employee numbers or business spending may have tax implications at the end of the financial year.
Equally, work with your accountant to identify any impending tax ruling changes likely to impact your business in the coming year. Businesses that have automated recordkeeping systems should have the latest ATO requirements inbuilt, making it much easier to keep abreast of forthcoming changes.
For businesses that still rely on manual accounting processes, this is the time to consider if investing in an automated system might offer easier and cost-effective compliance with ATO requirements. The outlay for using an automated system could also be claimed as a tax offset at the end of the financial year.
SIMPLICITY. TRANSPARENCY. CERTAINTY.
Businesses that conduct frequent strategic, operational and financial reviews put themselves in a stronger position to anticipate and align proactively to market shifts. These are more likely to survive and thrive over the longer term, no matter what happens in the broader economy.
What’s your definition of success? At Salisburys Accountants, we offer solutions that make sense of your business journey, from start-up to retirement. See how we help you Protect, Plan, Grow, Track and Exit at https://www.salisburys.net.au/pathways/ or call our team in Albury on 02 6041 3014.
* Source: IBM Cyber Security Intelligence Index @2020 Business Australia.