Is your business performing as well as it should be? The ATO has provided and updated their small business benchmarks, which is a guide to help you compare your business performance against similar businesses within the same industry. The ATO benchmark methodology has been approved as statistically valid by an independent organisation and can help many small to medium-sized businesses understand whether they are performing as well as they should be.
Small business benchmarks by industry
Not every business is the same and therefore small business benchmarks vary depending on the industry you are working in. There are a number of different industries listed within the benchmarks to help you have a better understanding of where your business stands. Industries range from accommodation and food industries like pizza shops and pubs, right through to the transport and warehousing industry to include furniture removalists and towing services. You can see the full list of industry benchmarks by industry on the ATO website here.
How do I check my performance as a business?
The ATO has made it a lot easier to see how your business compares to your competitors by using the business performance check tool on the ATO app. The ATO app is available on the Google Play and the Apple App store and is as simple as entering your details into the tool to compare the data with the ATO benchmarks. You’ll be able to calculate and see how your business is comparing to your industry competitors.
You’ll need to enter some information such as average income, expenses and other figures like the cost of sales and interest on credit cards or on an overdraft. The information that you enter into the app isn’t recorded at all and is only used for the purpose of using the tool. After you’ve entered all of your details into the app, you’ll be able to see how your business is performing. It provides you with a basic percentage of how you are performing against the industry benchmark.
Check your results
Using the app, you will see if you are above or below the benchmarks for your industry. While it doesn’t mean that there is something drastically wrong with your business if you are outside of the benchmark ratio, it is an ideal time to assess any records, income or expenses that may be putting your business outside of the benchmark range for your industry.
If your business is above the benchmarks it may mean that your expenses are high in relation to your income in sales amounts. This might mean that you’re wastage is high, your volume of sales is too low or your markup is lower than your competitors. It could also mean that there are certain sales that haven’t been recorded properly, or your internal cash controls may need to be investigated.
If your result is below the industry benchmarks it could mean that your expenses are low compared to your sales. This might mean that your markup is higher than your competitors, you may be more efficient in your business than competitors or maybe you haven’t recorded all of your expenses. So long as you have all of your necessary records to support your business transactions, and you have checked that all of your figures are correct, there won’t be any further issues should you be audited.
If your result is within the benchmark range, it generally means that you don’t need to do anything else. But it is also ideal to take this as an opportunity to check on all of your record keeping and operations to see if there are any other further improvements to help increase profitability, if possible.
If your industry isn’t listed in the industry benchmarks list, you can also compare your business performance manually using the benchmark formula on the ATO website site.
If you would like to know more about small business benchmarks or your results aren’t as expected, you can contact the team at Diverse Business Consultants to help you assess your needs. We can ensure that all of your financial records are correct, accurate and that your business is running as efficiently as it could be.