Time For a Business Audit?

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The first quarter of a new financial year is the perfect time to conduct an ‘audit’ on your business to assess what is working in the business and what needs working on.  Although the word ‘audit’ conjures up some pretty negative thoughts for most business owners, this is not a witch hunt. We simply suggest you take a step back to review the direction of your business and your financial goals for the year ahead.

Ask yourself these three questions:

  • · Where do see your business at June 30, 2014 in terms of revenue, profit and staff numbers?
  • · If you are planning a growth spurt, what marketing activities will drive the growth?
  • · What do you plan to change from last year to achieve better financial outcomes?

As a starting point,  below are five areas in your business that you could put under the microscope.

1.  Business Planning & Goal Setting
As mentioned above, what are your financial goals for the year in terms of sales and profit? If you plan to significantly grow your sales in the 2013/14 financial year what marketing strategies do you plan to use?  What tools, equipment, software and systems do you need to help you achieve those targets?  Remember, if you keep doing things the same way you can’t expect significantly better results.

It’s time to identify the activities that will have a big impact on your results.  Create a list of action steps then delegate    responsibility for implementation. Set realistic time lines for implementation and by documenting the action steps you can measure and monitor your progress.

2.  Marketing Moves
What are you doing to attract more customers? How do you plan to get your customers to come back more often and spend more each time? Marketing is the key ingredient in your growth plans and you need to map out your marketing moves for the year ahead.  If your website is just a billboard that lists the ‘who what and where’ of your business maybe it’s time for a ‘facelift’ or possibly a new website.  Is it time to ramp up the search engine optimisation on your website, write new  content and incorporate an opt-in box where you give away a valuable, informative e-booklet in exchange for an email address? Your branding could be old and tired and in need of a makeover particularly if you want to appeal to Gen X and Y customers.
Do you have a customer database and how often do you market to these customers? Is it time to produce a regular   newsletter, write a blog and embrace social media in your business because your target market is in tune with those     channels? Should you start producing videos and increase your online spending at the expense of off-line strategies?

3.  Budget and Cashflow Projections
Now that you have mapped out the goals for your business in 2014 what does that mean from a financial perspective? Basically, you should create a cash flow budget to track the financial impact of these changes. How much will each of these strategies cost to implement and what is the timing of the expenditure?  You need to identify what extra resources you might need including stock and staffing. Will you need to get funding and when? Is it time to extend the overdraft or     finance a van or equipment by lease or chattel mortgage? In this environment you need to plan your funding needs in  advance because banks don’t take too kindly to last minute funding requests.

We can help you do some financial modelling based on different prices and assumptions but it is important to quantify the financial outcomes and then measure these against actual performance. We have a simple budgeting tool to help you and most accounting software programs also have a budget and variance feature built in.

4.  Increase Prices
If suppliers have pushed up their prices then you need to think about passing on those costs to maintain your profit margins. Inflationary pressures are a fact of life and what would a 3% increase in prices do to your bottom line? Your rent and payroll costs probably both went up by 3% last year but have you adjusted your prices accordingly? What have your competitors done with their       pricing in the last 12 months? Maybe it’s time to get a mystery shopper to do some ‘research’ for you. If you decide to increase prices, how do you plan to notify your customers and will you announce the price rise a month from now so they have some advance warning?

5.  Review of Costs
While most accountants will tell you to slash costs to improve your bottom line, we always look to increase revenue by applying some smart marketing methods. Having said that, you should also look to identify any costs you might be able to cut. Start with the big four expense categories on your profit and loss statement bearing in mind your rent is probably fixed until the end of the lease.  Some costs might be superfluous to your needs and maybe you could drop some           subscriptions or negotiate a better price from your major suppliers. In business, if you don’t ask, you don’t receive.

Again, you need to measure and monitor what is working with your marketing and if you need any help with your business planning or marketing contact us today on 03 9435 4444.

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