Content Lead, Xero
According to our latest research, if you’re a small business owner in Australia, it’s likely you’re thinking fairly short term. More than 70% of business owners say they plan no more than six months ahead, and that includes almost one in three (31%) who take things one day at a time.
In fact, only 6% of Aussie small business owners plan for the next five years.
While working in the here and now may suit some, it can make small businesses more susceptible to long-term trip ups. When the Australian Small Business and Family Ombudsman tracked the survival of businesses over a four-year period, it found only 1.3 million (or 62%) of the 2.1 million firms in business in 2011 were still in business in 2015.
To stretch your short term thinking and prepare for the next five years – not the next five months – consider these three focus points this new financial year.
Concentrate on cash flow
Creating the space to plan ahead can be especially hard when cash flow concerns root you to immediate issues. That’s not unusual. According to data from Xero Small Business Insights, only 45-55% of small businesses in Australia are typically cash flow positive at any time. There are steps you can take to counter this trend – such as invoicing immediately, requesting deposits on jobs, and using automated reminders to chase overdue payments.
A tip to try today: If you send online invoices through Xero, try including an online payment option, such as those provided by Stripe or Paypal. This can give customers and clients a quick and secure way of paying you, and help you keep cash flow positive.
Become more digitally connected
Digital solutions have been available to small business owners for some time now, but in recent months they’ve started to become compulsory too. The launch of the ATO’s new initiative, Single Touch Payroll (STP) is a good example of this. STP requires employers with 20 or more workers to report certain information to the ATO each time they pay their employees, which means business owners won’t be able to keep financial records in spreadsheets and shoeboxes much longer.
A tip to try today: As business becomes more digital, spend some time getting to know your own system setup and fine tune any parts of the process that can still be automated. Our app marketplace has hundreds of solutions that can help your business work smarter as you identify your key points of focus for the future.
Probe your financial year performance
No small business owner can effectively plan for the future without having a good grasp of their numbers to date. The end of a financial year is a good opportunity to review your business performance over the past 12 months, identify trends and concerns, and use these insights to create a consolidated plan going forward.
A tip to try today: You can create custom reports in Xero to compare different years, jobs, staff, clients, job types and much more. If you’d like professional help with analysis and forecasting, try inviting an advisor into your Xero account. To find a bookkeeper or accountant near you, head to the Xero Advisor Directory.