Today is 1st October – the start to a new financial quarter. For most NZ businesses with a 31 March balance date this marks the half-way point of the financial year.
Last week we ran a “Know Your Numbers” webinar and if you missed it I recommend you watch it here.
The webinar outlined why knowing your numbers is critical to making informed business decisions and business success, and explained the key financial reports.
We also published a detailed guide covering what Financial Reports really mean and some tips to understanding them better. You can download Q2’s free guide here.
Recently I met the business owners of a local business. The annual financial reports to 31 March had just been drafted by their accountant (not Q2), and no interim or monthly financial reports had been prepared. They had effectively been driving their business “blind”.
But by reviewing their annual financial reports for the previous year (six months after balance date), they were now driving with their eyes on the rear vision mirror. Driving a vehicle, or business, and not being able to see ahead is dangerous.
So how can you see ahead in business?
Firstly, get your annual financial reports and tax returns drafted as soon as you can after balance date so you know how you performed and what your expected tax liabilities will be for the next 12 months.
Secondly, prepare profit and cashflow forecasts which reflect your business goals and aspirations for the next 12 months. Load the profit forecasts into your accounting system.
Thirdly, prepare monthly financial reports by 20th of the month following. These reports will show results for the previous month compared to forecast, as well as YTD actual results compared to forecast. If you prepared a “three-way financial forecast” (forecast profit and loss, balance sheet and cashflow) you can also compare actual financial position at month end against the forecast position. As explained in our “Know Your Numbers” webinar, your balance sheet is as important (if not more important) than your profit and loss report.
Q2 can prepare a “three-way financial forecast” for your business, and this may be subsidised by Regional Partner Network. Contact Q2 for more information.
Finally, review the financial reports, interpret the results, determine trends, and refine your business strategy as needed. This is the most important step and a financial business expert such as Q2 can help you make better decisions.
“The number one problem in today’s generation and economy is the lack of financial literacy.”