Episode 73 - FS360 Podcast - Assisting Small Business

Evolve Online Bookkeeping’s Natalie Grohn says that in the current “fragile” Australian economy, a well-defined set of business analytics could assist small businesses in a tough period.

Speaking with Gavin Nash on the FS360 Podcast, Grohn outlined what Evolve could do to assist small businesses to ensure they ride out the storm.

Current predictions see small business failure rate increasing from 4.4% to 6% this year, with little respite from the operating challenges on the horizon.

According to the Australian Securities & Investments Commission, small businesses dominate the annual insolvency statistics and the risk of failure has increased 20% compared to last year thanks to high interest rates, rising costs and poor consumer spending.

“Costs are high and consumers are really thinking twice about whether or not they need to make any discretionary spends,” Grohn said.

“Small businesses in Australia are lucky to survive beyond their first five years in business. It’s also just concerning about finding the level of skills that they need to continue and support their business in the labor market as well.”

Evolve offers services such as monthly bookkeeping, bank reconciliations, business reports, preparation for activity statements, payroll, superannuation processing and Xero set up and conversion.

They also assist in cashflow management, one of the most important aspects of a small business during this period.

“There’s various software integrations that can turn your cash flow concerns into cash flow confidence. Utilising Xero to the best of its ability (helps) keep you on top of your cashflow,” Grohn said.

Strategies that could be implemented once slow payers have been identified include tracking of invoices, payment history monitoring, credit checks, looking at any customer red flags … and tracking software.

“Xero has some great features set up so that you can automatically remind the customer about the invoice,” Grohn said.

While these services help with the short-term, such as being paid on time, they could also assist in long-term thinking when it comes to decision making.

Xero assists in tracking profitability, where gross profit and net profit should be the focus of any small business. It’s here that they can compare performance with past periods, customise profit and loss reports to see the business’s performance compared to the past and monitor assets and liabilities.

“Two main areas of reporting would be looking at your aged receivables, which is obviously your debtors, then looking at your aged payables which is your creditors,” Grohn said.

“Keep an eye on those figures all the time and you might be able to identify a slowdown in customers paying yourself and keep an eye on aging balances. Also just to ensure you can plan when your own bills are going to be due.”

An extension of this is setting up tracking categories in Xero, which assists in the ability to track different areas of the business and seeing which areas need future investment or current investment.

“You can compare different locations in terms of sales … you just need to make sure that on the data entry side of things, that the tracking categories are included in all your transactions, whether that’s the accounts payable invoice or a journal that is being processed,” Grohn said.

“Then that can filter through to looking at the reporting side of it, like your profit and loss and reviewing that in terms of the categories.”