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There’s a good chance your customers (or you) are a bit exhausted right now, having been frantically getting all their tax and financial ducks in a row to lurch up to the EOFY finish line. Some of them may have done it all smoothly. But many may be weary of the annual June flurry of catch-up administration, last-minute spending, and activity to get their business’ tax in order.
It doesn’t have to be this way. Instead, with your help, they can embrace the concept of BOFY – beginning of financial year. BOFY isn’t just about managing tax, or avoiding tax debt – it’s about reviewing habits, business processes and systems to build in efficiencies for the coming financial year; and planning funding requirements.
With a few well-chosen questions you can start a conversation aimed at helping your SME customers make some adjustments, manage their business better and be on top of their data throughout the year. Here are some quick BOFY conversation starters:
- How often do they review their numbers? - BOFY is the ideal time for SMEs to instill the good habit of reviewing their business’ finances - their P & L (profit and loss) and balance sheet - preferably monthly, but at least quarterly. According to Nick Rogers, Head of Sales at Banjo, what distinguishes the well-run, profitable SMEs is that they’re fully aware of their numbers and are managing them. “Regardless of the fluctuations in your business, if you’re well informed, you’re well armed. Regularly reviewing your numbers means you can spot problems early on, make adjustments, or supplement with working capital to bridge gaps.”
- What’s their growth plan for the year? - if they don’t know, encourage them to have a realistic growth planning and budgeting session with their broker (you), accountant, or senior staff to review and understand past and forward data. Most of the popular accounting software has apps that that will enable faster, more accurate analysis.
- Do they know where the bottlenecks and duplications in the business are? - According to an MYOB report, 48% of Australian mid-sized businesses said they’re wasting time inputting data into multiple systems. Explore integrated solutions that can be used to automate processes, and even potentially reduce head count.
- How are they managing their cash flow? - discuss whether they’ve made a plan for peaks and troughs in revenue to manage momentum and potential working capital needs over the coming year. For instance, has the seasonality in their business changed? Or have their sales smoothed out across the year, instead of a peak at Christmas?
- If they’re considering expansion, have they looked beyond revenue? – the opportunity to expand must be accompanied by a detailed analysis, says Nick Rogers, who cautions against being dazzled by high revenue projections. “The potential to increase revenue from expansion can look very appealing. But giving away margin to expand may not be worth it. Look at forecasts and ensure that the revenue can deliver the right level of profitability.” Also, if the business is poised for expansion or significant growth, have proportionate increases in inventory, storage and/or staff been factored in?
- Are they on top of debtors? – one of the undeniable ways to improve your cash flow is to get your debtors to pay you. Perhaps understandably, many SMEs defer this task as it can be time-consuming. BOFY is a good time to bite the bullet, start making the phone calls, and negotiating with debtors. It could take a few weeks, but the rewards are obvious and it may instil better paying habits in those debtors. If the debt is literally unrecoverable, note that from a tax perspective debts will come off income in the year they’re written off, regardless of the year they were invoiced.
- Have they considered the finance options available to them? – they may be unaware of their borrowing potential, or may have been put off by daunting, lengthy loan processes from mainstream banks in the past, or the need to secure property against the loan. Non-bank lenders like Banjo can provide faster, unsecured funding that they may not have considered.
- Have they planned for the short and the long term? - While short-term tax planning – working out what can be done by 30 June to minimise tax for that financial year - is what most businesses focus on, long-term tax planning is just as critical. Encourage them to discuss with their accountant how to utilise long-term tax planning in their business structure to minimise tax, and what type of investments can help them do this over the long term.
With some discipline and sensible planning, BOFY can become a business hygiene habit that’s transformative for your SME customers.
Get to the heart of what is moving your SME customers forward and help them to get BOFY off on the right foot. Understanding their growth plans will help you to help them.
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