Normally, the financial year-end and the start of the new period offers a handy opportunity for business owners to reflect on and evaluate their operations and market position.
But in turbulent times such as these, financial-year-end planning becomes a matter of survival, says Veroshen Naidoo, KwaZulu-Natal based area manager at Business Partners Ltd. Now is the time to have a look at all the parts of your business that had shaken loose or ground to a halt in the ups and downs of the pandemic, July civil unrest, load shedding and other disruptions. The very business landscape has changed, and you cannot plan for the new financial year without thinking carefully on what the changes mean for the future of your business, says Veroshen.
He offers the following checklist for business owners in planning for the new financial year:
- Scrutinise your books
A year-end review obviously starts with assessing, analysing and interpreting your financial statements for the past twelve months with the view to updating your business plan, adjusting your budgets and shifting your strategy for the financial year ahead. If your books lack sufficient depth or quality to draw detailed performance ratios from them, then one of your most urgent tasks of the new financial year is to work on a system to capture such information regularly and reliably. And if you get into the habit of using your financials to improve your operations and management, your business is probably going to improve irrespective of what the new year throws at it.
- Get out the pruning shears
Even if you feel you have already squeezed all you can out of your costs and overheads in response to the pandemic, go through them once more. Scrutinise it line-item by line-item to see if anything can be cut. But also think holistically – that’s what a year-end review is for. Perhaps there is an entire function in your business, such as deliveries, that you can outsource to make it more affordable. Or the opposite – perhaps there is something that you can bring in-house in order to save costs.
- It’s a team exercise
Most of the thinking around the strategic direction of your business and usually also a good deal of the granular detail of your business’ performance probably falls on the shoulders of the business owner. The year-end planning process is an excellent opportunity to draw on the support and ideas of key staff members. It is also a great chance to pull in a fresh pair of eyes from outside – a business adviser, coach or mentor, a knowledgeable accountant or industry expert. They tend to be busy this time of the year, but even if you cannot negotiate a discount, paying for their expertise may turn out to be your best investment for the year.
- Budget conservatively and realistically
Even if you don’t have to make any major strategic shift for your business, at the very least you have to come away from your year-end planning process with a set of conservative and realistic budgets for the year ahead. With this invaluable tool, everyone on your team will know what the sales levels and expenses should be, what targets they should be working towards, and when to sound the alarm when circumstances chance.
- Audit your stock and assets
The year-end is a good time to audit your stock with the view to identify obsolete and slow-moving items which you must dispose of to free up cash entrapped in your business. Assets must be scrutinised for a maintenance and repair plan for the new financial year.
- Plan your taxes
For many business owners this is akin to having to eat a bowl of spinach, but a brief session with your accountant or tax practitioner to have a look at the year’s taxes can help you avoid nasty tax surprises and penalties, especially now that SARS is working with renewed vigour.
- Adjust your business to the landscape
Many of the trends in the fast-changing business world present opportunities for businesses that adjust accordingly. For example, subsidies and grants are available for businesses that transition to green energy and recycling. Similarly, with increased load-shedding, businesses that invest in generators, UPSs and, ideally, solar solutions gain a distinct advantage over those that don’t. (Look out for new developments at Business Partners Ltd on this next month.)
- Adjust for inflation
Normally, this goes without saying, but it seems that inflation is set to be a more prominent feature in 2022 than usual. Prepare for higher interest rates as the Reserve Bank continues working to counter inflation, and do everything you can to save fuel, which probably won’t be getting any cheaper any time soon because of the instability in the international fuel market.