An SME accounting firm has outlined five concerning factors which present a threat to growing businesses, requiring direct intervention from leaders to avert financial ruin.
According to John Corias, senior partner of m.a.s accountants, several threats are a never-ending challenge for anyone in business, but two have become much more worrisome in recent months.
5. Addressing problems too late in the game
“Often when small businesses are looking for accountants or lawyers to solve a big problem, it’s too late,” Mr Corias said.
“The cost of fixing the problems in your … business rather than preventing them is significantly higher. It’s similar to buying a house and not being able to afford insurance – it’s too risky and a potential disaster.”
4. Fearing a big tax bill
“As accountants, we do our best to minimise the amount of taxes you have to pay. However, I advise my clients to try to change their mindset when it comes to paying tax,” he said.
“Ultimately, the bigger your tax bill, the better your business is doing.
“Businesses should be accepting of this, as it means your business is doing well. It’s encouraging to see that Australians believe they are paying the right amount of tax (51 per cent of the population) and this figure is rising every year.”
3. Cash flow headaches
“If you need to pay your expenses before you recoup money owing to you, then you have a cash flow problem,” said Mr Corias.
“There are benchmarks for business and wage costs. A way to keep an eye out for these things is to invest in a good piece of accounting software … that integrates with your business.
“If your business structure allows it, a great way to alleviate cash flow headaches is to take payment via credit card or direct debit. This puts you in control of getting paid on time and allows for more cash into your account more often.”
2. 457 visas
“The 457 visa was a way for Australian or overseas employers to sponsor skilled overseas workers to work temporarily in Australia. Reforms … meant the visa was abolished and replaced with a new Temporary Skills Shortage visa. These changes affect all industries,” Mr Corias said.
“Businesses need to work within the landscape – that means working with who we have in this country. Invest in your staff and train them to be who you need. There is no quick fix. You need to actively check the productivity of each staff member.
“A way to do this is with timesheets and monthly reports to improve efficiency. By keeping track of these, you will notice if there are inefficiencies occurring and can work with your team to rectify it.”
1. Soaring energy costs
“Rising energy and power bills is an alarming issue for everyone in Australia, but it is especially crippling for small businesses,” he said.
“Energy costs can be a significant percentage of a … business’s turnover, but there are ways to mitigate this issue.”
Mr Corias suggested seeking the expertise of an energy broker to compare the value afforded by different energy suppliers, or look at investing in renewable systems for the longer term.
“Energy brokers can perform an audit and inform you of the best supplier depending on your business’s needs. There are only two power grids in NSW yet there are numerous suppliers so it’s important to look at the contracts and compare them,” he said.
“Another way is to look at different forms of energy, such as a solar installation system, where you can sell power back to the grid. The upfront cost is larger but these installations can save you money if you have a long lease.
“Lastly, look at long-term energy over a long period of time as the rates will drop significantly.”