The prolonged impacts of COVID-19 and the digitalisation of the business environment mean Australian and New Zealand small and medium-sized businesses (SMBs) can no longer rely on annual reporting as a true indicator of business and financial performance.
In the changed business landscape, leaving in-depth financial reviews until the end of the financial year will result in lost opportunities for SMBs, according to SAP Concur.
Fabian Calle, the Managing Director for Small and Medium Businesses at SAP Concur in Australia and New Zealand expanded on this worrying development with comments.
“SMBs have historically looked at top-line financial performance half-yearly but its now highly advisable for them to complete a full half-year financial review before Christmas.”
“The current business environment has been constantly changing at a pace that is becoming increasingly difficult for businesses regardless of their sizes, to keep up with.”
“Therefore, SMBs should closely review the full financial statements of their businesses in half-yearly periods to get a clearer picture of their performance and respond accordingly.”
“This can be more effective and efficient than waiting and rushing to complete reporting at the end of the financial year when mistakes are more likely to occur.”
“In addition to improving efficiencies with financial reporting, the half-yearly review gives SMBs the opportunity to truly reflect on business performance in the first half of the financial year and identify opportunities, as well as mitigate risks, for the remainder of the year.”
“This approach reduces unpleasant business surprises at the end of the financial year and also makes the end-of-financial-year process much smoother and less time consuming for SMBs.”
Half yearly financial review
SAP Concur advises SMBs to ensure their half-yearly financial review covers five key areas.
An in-depth review of record keeping tasks
Half-yearly financial reviews should take into account ongoing changes in Australian Taxation Office (ATO) requirements and include a review of government support packages.
The financial review must attempt to include, at a minimum, a summary of business income and expenses such as the payment of supplier invoices and employee expenses.
It is advisable to also review current business assets, plans for new investments or capital purchases, and how any government support is being applied within the business.
Tax and business changes that impact tax burden
SMBs should confirm if there are any impending tax changes that could impact the business.
Changes experienced in the business’ operations for example, employee numbers and business spending may also attract tax implications at the end of the financial year.
SMBs that automated record keeping should have the latest ATO requirements built into the system to make it easier for the business to keep abreast of any forthcoming changes.
Businesses relying on manual accounting processes should consider investing in automation to ensure that the business easily and cost-effectively complies with ATO requirements.
The cost of deploying an automated digital system instead of manual processes can also be claimed as a tax offset in the ATO requirements at the end of the financial year.
Review overall business performance
The end of the calendar year provides a good reminder for SMBs to reset business and marketing strategies and plans to maintain alignment with the broader economic environment.
Business leaders should explicitly consider reviewing their business goals that were achieved during the past six months and decide if any may no longer apply in the new year.
This puts the business in a solid position for the start of the next calendar year in 2022.
Opportunities for cost and operational efficiencies
Achieving optimal cost and operational efficiencies is key to business agility.
It’s therefore very important to consider current business processes and where there may be opportunities to do things faster, smarter, and more efficiently through automation.
Many SMBs in Australia have now adopted and deployed advanced digital tools that streamline manual processes, thus letting employees focus more on profit-generating activities.
For example, automated invoicing, travel, and expense management tools are proven to significantly reduce the cost and time of completing these processes manually.
Automated tools also facilitate delivery of real-time business insights to inform better decision-making and provide much higher levels of data security than manual processes.
Remind employees about scams that target SMBs
A half-yearly business review provides a good opportunity for the organisation’s executives to remind employees about potential phishing scams that pose a risk to the business.
So far this year scammers have stolen more than $7.2 million in Australia by gaining access to home computers, which is an increase of 184% compared to the same period last year.
This creates risks for SMBs that rely on employees accessing company systems from home.
Cyber threats and scams that target Australian SMBs often attach great focus around areas such as investments, myGov, tax file numbers, and government business support.
“SMBs that use automated expense, invoice, and travel management tools and increase the frequency of their business and financial reviews will put their organisations in a much stronger position to proactively anticipate and align to the next market shift.”
“These are the businesses that are more likely to survive and thrive over the longer term, no matter what happens in the broader economy,” concluded Fabian Calle.