Preparing for the New Year: Financial Considerations for Your Business

The new year is here and it’s time for business owners to reflect on the past year’s performance and plan for a successful calendar year ahead. From tax planning to budgeting, here are some essential financial considerations to help you set your business up for growth and stability in the new year.

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Review Your Financial Performance

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Before moving forward, take time to review your business’s financial health over the past year. Analysing your balance sheet, income statement, and cash flow will help identify areas for improvement and opportunities for growth. Consider:

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• Revenue trends. Are your sales growing? Have there been any dips that need addressing? Do you have seasonal factors that will require additional resources, advertising or cash flow support?

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• Cost management. Are there areas where expenses have increased unnecessarily? Where can you streamline your spending? Do you need to negotiate with suppliers or source new suppliers to reduce costs?

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• Cash flow management. Ensure your business has enough cash flow to cover operational expenses and invest in opportunities. Remember, a profitable business can experience cash flow problems — especially if you receive payments on credit terms and have to wait weeks for your clients to pay their invoices. Smart cash flow management ensures you can access funds to move onto the next project without relying on timely payments from your clients. 

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Budgeting for the Year Ahead

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Setting a comprehensive budget is one of the most effective ways to stay on track. It helps you forecast income and expenses, ensuring that you allocate funds wisely. Consider:

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• Growth objectives. What are your goals for the new year, and how will you allocate resources to achieve them?

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• Contingency planning. Unexpected events can happen at any time. Make sure you’ve got a plan for unforeseen expenses and events.

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• Capital investments. If you’re planning any significant purchases (like new equipment, software, or infrastructure), factor these into your budget early.

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Tax Planning and Strategy

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With six months remaining of the current financial year, the new calendar year presents the perfect opportunity to start planning your tax strategy for the upcoming financial year. A well-structured strategy can reduce your tax bill, protect assets, ensure compliance and position your business for success in the year ahead. Areas to focus on include:

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• Maximising tax deductions and credits. With strategic planning, incorporating your business goals and needs, you can take full advantage of available tax deductions, such as business expenses, research and development (R&D), and depreciation on assets. These deductions can significantly reduce your taxable income, meaning more of your profit ends up in your pocket!

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• Applying new tax legislation and Budget measures. Keep up-to-date with new tax legislation and budget measures, such as the small business energy incentive, small business skills and training boost or the instant asset write-off. These measures can provide significant tax relief and support your business growth. Timing is crucial, with strategies like prepaying expenses, stock valuations, deferring revenue, and making superannuation payments for employees before 30 June often considered for maximising tax benefits.

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• Exploring tax-effective investment opportunities. Tax-effective investment strategies, such as the immediate write-off for equipment and negatively-geared investments allow businesses to claim deductions and boost cash flow, improving both short-term and long-term financial outcomes.

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• Reviewing business structure. Your business structure (sole trader, partnership, company, etc.) plays a significant role in your tax strategy. Tax planning involves reviewing whether your current structure is still the most tax-efficient. Restructuring to accommodate growth, new owners, or changes in operations can result in substantial tax savings and asset protection.

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• Exploring complex structuring options. For businesses with more complex needs, there may be opportunities to maximise tax benefits through advanced strategies.

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These could include:

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• ‘Bucket companies’ for tax-efficient income splitting.

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• Self-managed superannuation funds (SMSFs) for retirement planning and investment flexibility.

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• Utilising the loss carry-back scheme for tax loss companies to offset future tax liabilities.

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Each of these strategies should be tailored to your specific business structure and objectives. Working closely with your accountant ensures you make the most of every opportunity to minimise tax and set your business up for success in the new financial year and new calendar year.

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Plan for Growth

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Whether you’re aiming to expand your business, increase your profits, or introduce new products and services, growth requires careful planning and funding. As you plan for growth in the new year, consider:

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• Financing options. Explore financing options such as loans, grants, or investment opportunities to fund your growth plans.

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• Cash flow management. Ensure your cash flow is flexible enough to support your expansion without overextending your resources.

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• Staffing and payroll. As you grow, you may need to hire additional staff. Ensure that your payroll systems are set up to handle these changes.

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The new year is a great time to ensure your business is on track for success. By reviewing your financial performance, planning your tax strategy, and setting clear goals for growth, you can position your business for a successful year ahead. 

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If you’d like help with business strategy, tax planning, budgeting or cash flow, please get in touch with us to discuss. We’re always happy to help you make the most informed decisions for your financial future.

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