It's the end of the financial year, so July is a great month to make sure your business is ready for the year ahead.
Pay as you go (PAYG) instalments
Paying your income tax by instalments throughout the year helps you to manage your cash flow and avoid a large tax bill when you lodge your tax return.
If you already make payments towards your income tax during the year through the pay as you go (PAYG) instalments system, here’s a tip for tax time:
Prepare a budget plan for your business
Setting financial goals keeps everyone in your business focused on the important areas for success.
How to prepare a budget plan
- Review the operations and financial results from the last year and prepare an analysis of strengths, weaknesses, opportunities and threats (a SWOT analysis).
- Make a list of where you would like to see your business in one year's time.
- Prepare action plans for each item on your list and allocate responsibility and timing for completion of each action – use our one page action plan template below for guidance.
- Create your business budget.
When compiling your business budget plan:
- research your industry, looking for trends and opportunities to grow your business
- involve your staff as they may have suggestions for improvements – if they're involved in the development, they'll be more likely to support the new plans
- critically look at your financial results and identify areas where improvements in income and expenses can be made – use financial ratios to measure your financial performance.
Prepare a profit and loss budget
A profit and loss budget is the future financial plan of the business. By doing a budget you can see if your plans for your business operations will be financially viable.
How to prepare a profit and loss budget
- Review the approved business operating plan and note all required activities for the budget period.
- Review your previous year's profit and loss statements by regular periods – monthly, quarterly etc.
- Download our financial statements template we've provided below – or use your own – and prepare the profit and loss budget for the selected period using all the steps listed above.
When preparing your budget:
- identify and document all assumptions you've made for the budget period – when you compare actual to budget expectations, you'll know what assumptions you made to support the financial budget numbers you've used
- set your budget results to match your financial reporting – it's recommended to prepare financial statements monthly so your budget should detail monthly financial expectations
- regularly monitor your budget to actual results – you'll be able to see if there are problems and take quick action to ensure your yearly business plans will be achieved.
Prepare a cash flow forecast
A business can be profitable but still encounter cash flow issues.
It's important to focus on managing cash flow at all times. Preparing a cash flow forecast when preparing new business plans will make sure you have enough cash to support the new plans.
How to prepare a cash flow forecast
- Using your business plan and profit and loss plan, prepare a sales forecast – include information about when receipts from customers will actually be received.
- Prepare detail on any other estimated cash inflows, such as sales of assets, GST rebates, loan funds.
- Prepare estimated cash flow out flows, including the timing of when these will actually be paid for.
- Prepare a cash flow forecast using all this information.
When preparing and monitoring your cash flow forecast:
- be as accurate as possible on the timing of the cash flows
- regularly compare your cash flow forecast to actual results including bank balances – you'll be able to spot problems and quickly act to ensure your yearly business plans are achieved
- once the forecast is completed, run some 'what if' scenarios to measure how reactive your business cash flow will be to certain changes of events – such as decrease in sales, increase in fuel costs.
Complete staff reviews
Performance reviews and appraisals help employees know how they've been doing in relation to the goals and requirements of their roles.
Reviews also provide an insight into what further development or training staff might need.
How to complete staff reviews
- Set dates and times with each staff member to discuss the review.
- Use a standard template such as our performance and development agreement template below to make notes and discuss with each staff member.
- Make sure each staff member agrees to the goals set and provide them with a copy of the discussions.
When preparing for staff reviews:
- set Key Performance Indicators (KPIs) for each staff member that align with overall business objectives
- remove the prospect of a discussion about pay – the employee should be thinking about the work itself
- remember to recognise the good work that staff do – any weaknesses or problems should be discussed, and solutions should be identified together.