4 Handy Tips To Prepare Small Business Owners For The New Financial Year
The new Australian financial year has just started. Small business owners need to follow these tips to make sure they’re prepared.
If you have a small business, you know that the start of a new financial year often presents challenges. For example, to start your business on the right foot, you may need to adapt to new regulations.
Here are four tips to help you do just that.
Tip #1 – Keep an Eye on Interest Rates
The Reserve Bank of Australia (RBA) held interest rates at 1.5% in July 2018.
If you’re a loan applicant, this is good news. It should mean that you’ll receive similar rates to those you received during the last financial year. Of course, that depends on your lender and their policies too. But most lenders standard variable rates won’t shoot up yet.
However, it’s still worth keeping an eye on the rates for the rest of 2018. Many analysts predict the RBA will continue holding for most of the year. But it’s possible that we may see a rate increase towards the end of 2018.
Assuming that happens, you’ll probably want to secure any new loans during the early part of the new financial year. If you can fix the interest rate, you’ll avoid any surprise rate hikes.
Tip #2 – Manage Your Working Capital
The start of a new financial year offers you the opportunity to get a handle on your working capital. You should have submitted your tax returns – or be in the process of doing so – for 2017/18.
Now, you need to prepare for the year ahead. There are a few things that you can do to help with this, including the following:
- Ensure your stock and inventory management systems are as efficient as possible. Make sure you have accurate numbers to build a forecast for the entire year. In particular, you need to be in control of the amount of inventory that you buy.
- Ensure you pay all vendors and creditors on time to avoid accumulating debt. On-time payments also mean that you don’t have to find money for unexpected penalties.
- Examine the contracts that you have with your debtors. To keep your cashflow consistent, ensure any money owed to you arrives on time. Re-examine the terms and conditions of any credit contracts you have created. Moreover, ensure you have procedures in place for dealing with late payments.
Effective management of your capital means you won’t run into cash flow issues.
Tip #3 – Nail down Your Loan Application
You may be in a position to expand your business in the new financial year. But it’s important to manage this growth effectively.
Diversifying your offering and adopting new technology can help you to expand. But it’s likely that you’ll need a small business loan to help with that.
If you’re a potential loan applicant, make sure that you do the following:
- Ensure that your credit score is high enough to satisfy any lenders that you lodge an application with. You can also take this time to fix any errors on the report before lodging your application.
- Figure out exactly how much you need to borrow. This means examining your growth strategy to ensure you don’t end up with too much or too little. Borrowing too much means dealing with higher repayments. Whereas borrowing too little means growth will stall.
- Prepare to prove your business’ ability to repay the debt. This may involve compiling documentation from the previous tax year(s).
- Take care when choosing a lender. You’ll often find that large banks and lenders ask for more documentation than niche lenders. Don’t assume you’ve run out of options if a large bank refuses your loan. If you do go with a niche lender, ensure they have an Australian credit license.
Following this advice helps ensure you choose the right lender and have everything to satisfy their requirements.
Tip #4 – Consider an Automated Solution
Approximately 80% of Australian businesses rely on employees to manually enter spend data. This raises the possibility of human error. A typo or incorrect reading gives you inaccurate financial data. And that can affect every aspect of the business.
Automation may be the solution, even for small business owners. An automated accounting software package provides a massive reduction in errors. Such software packages have in-built error checking functions.
This means you get more accurate financial reports, which helps with forecasting for the year. Consider implementing automation wherever it’s needed at the beginning of the financial year.
Tip #5 – Understand the New Minimum Wage Rules
The beginning of the 2018/19 financial year brings with it a 3.5% minimum wage increase.
It now stands at $18.93 per hour. Small businesses that have employees on minimum wage must comply with these changes.
You also have to account for them financially. Let’s assume that your employees work 38 hours per week. The new minimum wage means they receive $24.30 extra per week.
A small business with 10 employees thus has to pay staff an additional $240.30.
It may not seem like a huge amount. But businesses running on tight margins need to be sure they can absorb the extra outlay.
The Final Word
Small businesses have a lot to prepare for in the new financial year. You may have planned expansion activities, in which case you may need a loan. You’ll also have to track interest rates throughout the year to see if the predictions of an increase come true.
Taking control of your working capital and adopting an automated accounting solution will help you to manage cash flow. Plus, all small business owners have to understand the changes to minimum wage law.
You may need some financial help to prepare your business for the 2018/19 financial year. If so, you can count on Max Funding to provide the right solution for you. We offer small business loans that have a fast application and approval process. We also consider those with bad credit and can provide same-day approval of your loan.
Contact the Max Funding team today to find out more.