Planning for Increased Business Costs Starting July 1st

The end of the financial year (EOFY) marks a crucial period for business owners to assess their financial performance, address any issues, and prepare for cost increases. In addition to regular financial reporting, businesses should request analytical reports and leverage the expertise of their bookkeepers to gain insights into their operations. By utilising these tools, companies can forecast cash flows, budgets, and plan for potential scenarios, ultimately identifying areas for improvement. Furthermore, bookkeepers can assist in tax planning and ensure compliance with changing regulations. This article highlights the importance of proactive planning and collaboration with bookkeepers to successfully navigate the upcoming year’s challenges.

Small businesses face various factors contributing to increased costs, including superannuation rate hikes, potential minimum wage increases, and rising energy prices. Engaging with a bookkeeper can help budget and forecast the upcoming year. Businesses can develop accurate forecasts by setting realistic financial goals and utilising historical data. It is crucial to regularly review and update these forecasts to track progress and make necessary adjustments. Maintaining open lines of communication with bookkeepers throughout the year, rather than just during reporting periods, is essential for successful financial planning.

Legislative changes can significantly impact employment costs, such as minimum wage increases, award adjustments, and superannuation increments. It is vital to incorporate these upcoming increases into the business budget and consider them as part of future wage adjustments. Working closely with a bookkeeper, businesses should assess the total employment costs and add a percentage on top to cover superannuation increases, miscellaneous expenses, and unexpected costs. Providing reports indicating the cost of a potential pay increase can be an interim measure to facilitate budgeting. Reviewing employee leave entitlements and their impact on financials is also advisable.

Analytical reports leverage qualitative and quantitative company data to evaluate business strategies and processes. They empower management and staff to make data-driven decisions based on evidence and analytics. These reports can be presented in various formats, such as documents, spreadsheets, or visual presentations. Some essential analytical reports include comparing the current year’s performance to the previous year, identifying differences and analysing the reasons behind them. Additionally, comparing actual results to the business budget provides insights into expected versus actual outcomes, facilitating accurate future planning. Most accounting software programs incorporate basic analytics, aiding data analysis and performance assessment.

Examining finalised accounts helps business owners understand performance movements and identify areas of improvement. Businesses can determine where they made or lost money by comparing the current year to previous periods or years. Analysing the movement of balance sheet items and major changes can provide valuable insights. Summarising these findings in a report, including sales, costs, gross profit, expenses, net profit, and wages, provides a comprehensive understanding of financial performance.

Calculating the breakeven point is crucial for small businesses to determine the level of sales or revenue required to cover all costs and expenses without making a profit or incurring a loss. It represents the point at which total revenue equals total costs. Knowing the breakeven point informs decisions regarding pricing, production levels, and overall business viability. Analysing the breakeven point helps business owners set sales targets, evaluate cost changes, and assess profitability under different scenarios.

Collaborating with bookkeepers and utilising their expertise is vital for small businesses to develop comprehensive budgets, ensure financial stability, and foster growth in the upcoming year. Budget planning is a roadmap for success and gives businesses the confidence to navigate uncertainties. The ATO’s Cash Flow Coaching Kit offers valuable tools and resources bookkeepers can use to help businesses.