Hamish Baker is a chartered accountant and business advisor who lives and works in Ponsonby.
1. Modern businesses demand timely and accurate financial information. There are great cloud-based accounting systems available like Xero. It is important that these systems have been set up specifically for that business so the financial reporting is bespoke and meaningful to the user. Better information will enable business owners to make better business decisions.
2. Failing to plan is planning to fail. Small businesses need a business plan, even if it’s a one page document. Business is constantly changing, so think of it as a living, breathing document. Keep fine tuning it as things evolve. The business plan should contain financial goals including an annual budget. If there’s a target in place, it gives something tangible to work towards and drives performance.
3. Financial performance and position needs to be measured and monitored regularly. As a starting point, performance should be compared against budget and last year for the same period. Significant variances should be analysed and reviewed to check if there are any underlying issues or risks with action required.
4. Reviewing financial results is typically a lagging indicator. This is why non-financial information needs to be looked at too. Non-financial key performance indicators (KPIs) can be useful in explaining and providing context for financial results and linking to overall business plans or goals. For example, if a company has a strategy to provide excellent customer service, customer satisfaction or retention would be a better indicator of success than sales dollars. A few key non-financial KPI’s should be tracked on a regular basis.
5. Ask for advice before making a decision. It’s generally more expensive to fix up a mistake after a transaction takes place than asking for advice beforehand and getting it right! For example, if you are buying a rental property, it’s better to take advice on what entity you should purchase the property in before the transaction goes through, rather than after you’ve purchased it. There could be risks or disadvantages that hadn’t been considered because no expert advice was undertaken.
Baker Accounting; M: 021 050 9742, E: hamish@bakeraccounting.co.nz, www.bakeraccounting.co.nz
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