As a business owner, it is important to control your finances and prevent money loss on sales by regularly evaluating your financial position, profit and loss, cash flow forecast and break-even point.
When you run a business, you must keep up with your bookkeeping and financial reporting.
Set up a bookkeeping system that can simply be a record keeping book from an accounting software such as MYOB or Quicken. Make sure you regularly update your entries to know the exact state of your finances. Implement financial and employment policies and procedures to know how long you should keep business records and find out whether you are required to register, report and pay GST.
Cash flow management
It is helpful to have a projected cash flow for the next 12 months to find out if the business is growing or losing money. You will be able to anticipate how much and when the money is going out and coming in, so you can maintain a positive cash flow. You should create a budget to help with your planned financial business operation and measure it against the forecast. Plan more strategically, grow your business and ultimately increase your income.
Another way to maintain your cash flow and grow your profits is to manage supplier payments and customer orders. You want to make sure you don’t owe businesses or the ATO money as this reflects whether you have a strong cash flow or not. Complete a cash flow forecast statement so you can pay suppliers on time and if customers are the ones who owe you money, you should know how much is owed and how overdue these are. You must collect right away if the money is already outside of your credit terms.
To make sure that your goods and services can cover your total costs, find out what your break-even point, gross profit and profit margin figures are. You should also regularly review product and service costs, so you can make allowance for sales dips or rising costs.
You can also pay yourself wages from your sales revenue and determine the amount by calculating your net margin and gross margin. You can do this by subtracting cost of goods and overhead expenses from net sales. You should also keep up with your employer obligations such as super and PAYG which are often part of a quarterly tax office return. Record this in your cash flow statement to keep yourself updated.
Benchmark your business
Create value-added points that you can advertise to differentiate your product or service from competitors. However, you should benchmark your business against competitors too, so you can plan and implement changes to improve your business. Understand your customers and conduct a market research to develop your sales techniques and market reach.
Always talk to your accountant and make sure he or she does a regular review of your finances to help detect any potential issues early and constantly find new ways to improve your business. You may also budget and refinance your business if your financial and cash flow reports show that you are constantly reliant on overdraft or other financial facilities.
To know more about managing your business finances effectively, click here to speak to experts who specialise in business tax consultancy and the hospitality industry. We are big believers in the use of professional tools to manage your business. The right tools can streamline your processes so that the business is best placed to trade profitably.
Sky Accountants goal is to help hospitality businesses to maximise their full potential by developing tailored strategies and systems that allow them to save time and money. Low costs, efficient systems and fast turn arounds are ingredients to success but keeping track of profits and expenses are also just as important for your business.
With our years of experience, you can also consult us about your business structure, operations, management, tax breaks and responsibilities and other concerns surrounding your hospitality.