The completion of the first quarter of your financial year is an important time to assess your business's performance and make strategic adjustments. Evaluating this period and acting now can help you head off any challenges. As well as help you make improvements to ensure you meet your annual goals. Here are some key elements of your strategic business and financial plan to assess.
Key areas to assess in your Q1 financial Review
Start by assessing these 6 key areas in your financial review:
Business revenue – is your turnover for the quarter above, in line, or below the target you set?
Gross and net profit margins – have you achieved your margin goals in relation to what you set for your business and in relation to the industry you operate in?
Total operating costs – have you factored in price increases in costs like insurance, rent or utilities? Do you need to rework your budget and cash flow calculations?
Material and labour costs – has inflation impacted these costs or have they remained stable and predictable?
Cash flow – have you been on target with your projections, or have unplanned expenses negatively impacted your cash flow? What will that mean for the plans you have for the coming quarter?
Tax compliance – have you met your tax obligations and are you on track with any payment plans you have in place with the ATO? Staying compliant is crucial to avoid penalties and interest charges.
Which goals is your business struggling to meet?
When you review the above points is there a pattern developing? Is your business meeting some of the goals, while struggling to meet others? Identifying negative or positive trends is key to making informed decisions. Or has a specific event that has impacted your business? It may be quite easy to identify a blow-out in the cost of a specific material, versus several factors changing across the board.
Without detail and clarity, you may find it hard to make adjustments that will get you back on track for quarter 2. If you are struggling to identify areas for improvement in your financial review, this would be a good time to get your business accountant involved. They are experts at analysing complex financial data and pinpointing areas that impacting your business performance.
Leveraging accounting advice for business success
By the same token, you may be smashing it out of the park. Exceeding your profit and turnover expectations. This may be a good time to reevaluate your goals and see which additional opportunities you can exploit. Or how you could invest in materials and equipment that would increase productivity and output, to accelerate your plans. Again, your trusted business advisor will be a good sounding board for helping evaluate the timing and risks of your revised business plans.
Setting your business up for success in quarter 2
With the insights from your evaluation at hand, I suggest the following steps:
Revise your business goals as needed – document them so you have clarity for when you evaluate your progress at the end of quarter 2
Factor the latest market conditions into your Q2 plans
Review your budgeting and cash flow forecasting – this may mean you have fewer financial resources than you anticipated but tempering plans could maintain your profitability and reduce financial stress. Allowing you to be more effective within your business
Make and implement the tough decisions now – do you need to adjust your quotes and increase your prices to keep the business operating smoothly? Or do you need to revise your labour practices to manage project costs? Tough decisions only get harder as more time passes. Smaller changes sooner can be easier to manage, rather than dramatic changes when the business is struggling.
Commit to meeting your tax compliance obligations. The ATO continues to ramp up their activities to ensure compliance and are setting tougher repayment targets for their plans
Use additional funds and resources to invest in materials, equipment and other resources only if this supports your goals. Saving funds for unexpected events, or the Christmas shutdown may be a wiser option for your circumstances.
Additional resources for managing business finances
The team at ABA Advice Beyond Accounting is passionate about helping business owners understand their numbers and control their finances. We regularly publish useful tips on our news page to support your business development goals.
Here are a few must-read articles to set your business up for success in quarter 2. If you haven’t tackled setting a budget, then our budgeting and cash flow article is a good place to start. Whether you’re struggling on the cash flow front, or simply need a refresher, our 9 Proven tips to improve your business cash flow lays out simple steps to get ahead. While for our builders and tradies we cover What are the Key Financial Ratios and KPIs for Construction and Trade Businesses?
Having reviewed your quarter 1 business performance, you may want more meetings than your current service package offers to help you reach your goals. No problem! Get in touch and we can adjust your proposal to give you more time with our expert business advisors and accountants. Here’s to a positive and productive quarter 2!