The business environment is constantly changing at a pace that is increasingly difficult for businesses to keep up with. Therefore, SMEs 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.
In addition to improving efficiencies with financial reporting, the half-yearly financial review gives SMEs 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 can help reduce the chance of any unpleasant business surprises at the end of the financial year.
Similar to end-of-financial-year requirements, SMEs should ensure their half-yearly financial review covers five key areas:
1. An in-depth review of recordkeeping 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 review must 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.
2. Check any changes to tax requirements or business changes that will impact tax
SMEs should confirm if there are any impending tax changes that could impact the business in the coming year. Changes in business operations, employee numbers, or business spending may also have tax implications at the end of the financial year. SMEs that already have automated recordkeeping systems should have the latest ATO requirements built into the system. For businesses that continue to rely on manual accounting processes or outdated tools, this is the time to consider investing in an automated system to ensure the business can more easily and cost-effectively comply with ATO requirements.
3. Review overall business performance
The end of the calendar year provides a good reminder for SMEs to reset business and marketing strategies and plans to maintain alignment with the broader economic environment. Business leaders should review business goals that were achieved during the past six months and decide if any may no longer apply in the new year. This can help put the business in a solid position for the start of the next calendar year in 2022.
4. Identify new opportunities for cost and operational efficiencies
Achieving optimal cost and operational efficiencies is key to business agility. It’s important to consider current business processes and where there may be opportunities to do things faster, smarter, and more efficiently through automation. Many SMEs have now adopted digital tools that streamline manual processes, letting employees focus more on profit-generating activities. Automated tools also deliver real-time business insights to inform better decision-making and provide much higher levels of data security than manual processes.
5. Remind employees about scams that target SMEs
A half-yearly business review provides a good opportunity to remind employees about potential phishing scams that pose a risk to the business. Scams that target SMEs often focus on areas such as investments, myGov, tax file numbers, and government business support.
SMEs 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.