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Let’s Talk: How to plan for an uncertain financial year

The end of the financial year is a critical time for business owners, an opportunity to review and learn from the previous twelve months’ trading and to set a course for the year ahead. 

In the wake of COVID-19 and the reduction of government support for businesses affected by the pandemic, this year’s strategic planning will need to accommodate uncertain global and domestic conditions and unpredictable consumer confidence.

Let’s Talk…

Jason Bertalli, Member of Entrepreneurs’ Organization Melbourne and Director of BNR Business Accountants

Let’s Talk: How to plan for an uncertain financial year

“The secret is in the title – PLAN! Many, if not most business owners, have had a tumultuous period during the pandemic, be that positive or negative. 

“The temptation is to catch your breath, take the foot off the pedal and cruise after such a tough period, but that is exactly what not to do. 

“For those who had a tough time, start planning a bounce back, using what we do know and building risk management around what we don’t. For the lucky others who, like many of our clients, are still swimming in additional government-assisted cash flow, it is even more important to plan allocation of resources. 

“The gravy train of government handouts is coming to an end, and you need to ensure your business is ready for the next stage, whatever that is. As always, hope for the best, build plans for the worst, and lean on your knowledge networks.”

James Haslam, Chief Financial Officer at ELMO Software

Let’s Talk: How to plan for an uncertain financial year

“Among the lessons from 2020 is the challenge in predicting the unpredictable. However, when it comes to planning a budget for a business that is precisely what you’re trying to do. 

“There are ways to work with unpredictability with the key being able to remain agile. Businesses should set short, medium, and long-term financial and strategic goals and consider what resources will be needed to achieve each of them. It also helps to consider how the achievement of each individual short-term goal – like automating and simplifying time-consuming and costly processes – can help with the medium-and longer-term goals such as investing in a new product or market. 

“Having a view to the different timelines of goals and the expected return on these goals also helps with prioritising the alignment of resources with the most important strategic objectives garnering the most focus. If you understand what you are striving to achieve, you can respond with greater agility to opportunities and challenges as they arise.”

Jason Toshack, General Manager ANZ, Oracle NetSuite

Let’s Talk: How to plan for an uncertain financial year

“In an ever-evolving world, it is important for leaders to continuously review business and market data to make the right decisions. Responding to correct information is crucial when assessing which investments delivers the best returns while minimising risk and preserving cash flow. 

“While scenario planning has always been key, business leaders should now consider how additional scenarios might impact their business. Diligent preparation can help keep the lights on in adverse conditions, but also prepare you to capitalise on market shifts where appropriate. 

“Consumer-facing businesses might want to consider how they target alternative customer segments or find new revenue streams by exploring B2B opportunities.

“Whatever scenario you’re planning for, the key is to ensure you are making decisions based on accurate and reliable data. Planning might not guarantee an outcome, but the right approach backed by robust processes and tools can help leaders prepare their business for both short- and long-term challenges, build resilience and support business continuity.”

David Hancock, Managing Director, Montara Wealth

Let’s Talk: How to plan for an uncertain financial year

“While many business owners may still be a little cautious following the pandemic, the truth is that the next financial year is looking much more promising. Consumer confidence is at a 10-year high, unemployment is low, and the economy is recovering faster than any of us could have anticipated a year ago. For some businesses, now might be the time to stabilise and recover, whilst others are using the extra cash in the system to flourish. 

“Any good habits or innovations developed during the pandemic should be retained. Surplus cash generated can be used to pay down debt or take advantage of opportunities through reinvestment in areas such as hiring new staff or purchasing equipment, with the instant asset write off scheme extended for another year. While it pays to remain prudent, for many business owners now could be a unique opportunity to take their business to the next level.

Rolf Howard, Managing Partner, Owen Hodge Lawyers

Let’s Talk: How to plan for an uncertain financial year

“While many business owners spent the last year or so in survival mode, now that more certainty is entering the market, it’s a good time to cast a critical eye over your business to safeguard it against any further uncertainty. 

“Conduct an audit of your employment contracts to ensure that everything is in order and you’re compliant. Undertake a risk management plan to identify any areas of vulnerability and strategies to mitigate them. Make sure you have the correct insurances in place to protect you and your employees. Think about a possible exit strategy for your business and a succession plan. Get or update your Will and other estate planning documents. Review your superannuation and whether you have contributed enough, or whether establishing an SMSF may be right for you. 

“If the pandemic has taught us anything, it’s that having the right safety net in place is important.”

Helen Baker, Financial Advisor and Founder, On Your Own Two Feet

Let’s Talk: How to plan for an uncertain financial year

“The big issue for any SME is managing financial obligations through the rollercoaster of business cycles.  SMEs should crunch the numbers on their commitments to leases, staff, debt etc. and see how those can be managed in the event of volatility.  

“What is the plan if their clients are unable to pay their outstanding invoices?  What is the plan for servicing fixed and variable costs if revenue decreases? How much will expenses increase if revenue increases?  Can you get the staff you need?   How much debt is the business carrying and are you now getting the best rates given extremely low-interest rates?  SMEs should also revisit grants and support packages still available as the recovery support is extended.”

Jonathan Kenny, CFO, SiteMinder

Let’s Talk: How to plan for an uncertain financial year

“As some of the ongoing impacts of the pandemic will lead to outcomes that are yet to be known or understood, business leaders will need to focus on what they can foresee and be ready to demonstrate the same level of agility they displayed in 2020. For savvy business leaders leaning on learnings from the pandemic, they’ll recognise these periods of change as opportunities to double down on understanding their customers, and how their needs have changed. 

“Start by taking a step back to ensure you deeply understand your customers’ business operations and utilise data and other touchpoints to see how their performance and needs are shifting month on month. From there, try to anticipate their future requirements. Doing so will allow you to jump on areas of potential exposure, help you to better realise opportunities, and will ultimately ensure you’re deploying the solutions most relevant to your customers’ ‘new normal’.”

John Delaney, Managing Director, MessageXchange 

Let’s Talk: How to plan for an uncertain financial year

“As SMEs prepare for the future, automated technology, such as e-invoicing, will be essential to help them pay invoices on time, manage cashflow, and save significant amounts of money to bring more certainty. 

“E-invoicing puts control back in the hands of SMEs, with many organisations promoting discounts or faster payments for e-invoices. For example, the Australian federal government announced five-day payments to suppliers who send e-invoices for contracts less than AU$1 million. For SMEs with poor cash flow, this can make a huge difference. E-invoicing also makes it easier to get financial data for more accurate decision-making. E-invoicing captures data such as the number of invoices sent and received, value of invoices sent and received, and number of invoices rejected and accepted, which can be monitored in one platform and accessed from anywhere.”

Vijay Sundaram, Chief Strategy Officer, Zoho

Let’s Talk: How to plan for an uncertain financial year

“It’s likely that the new financial year will bring with it more clarity and less concern than last year. However, despite Australia’s remarkable economic recovery, sky high consumer confidence and little-to-no remaining restrictions, complacency is dangerous – planning is essential. 

“Plot out your guaranteed, likely and potential projects or income and your expenses, taxes, overheads, wages and subsidies that should be accounted for ahead of time. With that you can analyse your financial health, forecast business cashflow and determine whether you’re looking safe or might need a rainy-day fund. This will help avoid any last-minute scrambles or surprise fees come tax time. 

“Now should also be when businesses implement – or enhance – reliable financial software to ensure everything from expenses and invoices to taxes and analytics are meticulously organised. With the insight from your planning and the safety net from your software, your business operations will run much more smoothly, and you’ll be properly prepared come the next tax season.”

Simon Le Grand, Director of Marketing APAC, ‎Lightspeed

Let’s Talk: How to plan for an uncertain financial year

“Many industries faced unprecedented disruptions throughout 2020, however those experienced by hospitality businesses are difficult to top. From forced closures, takeaway only restrictions, square metre seating capacities and mandatory QR codes, hospo business owners became masters of the pivot. Now that the pandemic has stabilised in Australia (for now), it provides an opportunity to plan for how to get the most out of the coming year. 

“One thing that COVID-19 made apparent, is that technology holds the keys for the future of the hospitality industry. Implementing integrated tools such as Cloud-based POS systems have proven to be vital to unlock new ordering channels and expand businesses in times of uncertainty. With connected, cloud-based POS systems that provide powerful inventory management tools, access to data and reports such as revenue trends, and menu syncing with online ordering and delivery apps, business owners can make smart decisions on the go while gaining efficiencies from automation that enable them to run leaner. In an uncertain financial environment, future-proofing is key. “

Vu Tran, Co-founder, Go1.com

Let’s Talk: How to plan for an uncertain financial year

“Top business strategist Roger Martin has warned against overly “safe” strategies: ‘True strategy is about placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success.’ 

“Increasing the odds of success isn’t just about simply building a solid plan to achieve the most daring of goals. It’s about engineering and executing it in a way that provides a high degree of safety while still being incredibly bold.  

“This means setting goals that others may view as aggressive, overly optimistic or even visionary. But at the same time setting realistic safeguards that allow you to ensure that the right time, energy, and resources are invested in the right areas.

“We can’t predict anything about our future other than the fact that there will likely be more volatility to come. Those who are not only the most adaptable but indeed ambitious will thrive.” 

Drew Haupt, Co-founder, WLTH

Let’s Talk: How to plan for an uncertain financial year

“Planning for uncertainty is more important than ever as businesses continue to bounce back from the repercussions of the pandemic. In my opinion, the best way to approach this is via thorough planning, ensuring that you are prepared for any changes that arise, and being ready to face these challenges straight on.

“Talking through your business goals and sharing them with the wider team helps to make sure that everyone is accountable, and as a business you are on the right trajectory to success. As the end of the financial year nears, it’s also a prime opportunity to reflect and build a plan for the new year.

“Everyone in the organisation needs to work towards the overall business objectives and ensure that they are all chipping away at their personal and team goals, as it will allow the business to be best prepared for any uncertainty and changes that arise.”

Dean Hosking, General Manager, Konica Minolta Australia 

Let’s Talk: How to plan for an uncertain financial year

“As SMEs look towards an uncertain new financial year, the focus should be on becoming battle-ready to improve competitiveness. There are three key areas SMEs need to focus on to make their businesses battle-ready in 2021: cost management; supply chain relationships; and resources for growth. 

“One of the first instincts in challenging times is to cut costs yet experience has shown that this can be a shortcut to disaster. To manage costs strategically, it’s important to identify areas where costs can be controlled without impacting the business’s ability to compete. 

“Businesses should also review vendor and supplier relationships to ensure they remain profitable, contribute to the organisation’s overarching goals, and deliver a true partnership. 

“And SMEs looking to grow need to consider what resources they have to support that growth. This includes managing assets effectively for stronger return on investment, looking to invest in the right models for growth and building agility to let the business pivot as needed.” 

Meagan Wood, Head of Advisor Strategy at Intuit Quickbooks 

Let’s Talk: How to plan for an uncertain financial year

“Planning for an uncertain year requires mental preparation for big changes, planning for worst-case scenarios and most importantly, seeking professional financial help. As we’ve seen since the pandemic, businesses might need to pivot, focus on new channels or just do anything to survive. Our research shows small businesses with an accounting advisor relationship are now three times morelikely to feel positive about the upcoming end of financial year and tax preparation period than those without.

“Advisors help you access relevant government support to include in your business plans. They guide you with your accounting, business best practices and avoiding potential costly pitfalls. The value an advisor brings to your business extends far beyond meeting compliance obligations. Many become like friends. Half (50 per cent) of small business leaders told us they lent on their advisor for ‘emotional support’ during the pandemic. An advisor relationship is the gift that keeps on giving, all year round.” 

Jarrod Kinchington, Managing Director, Infor ANZ 

Let’s Talk: How to plan for an uncertain financial year

“The pandemic is a sound reminder that businesses can expect disruptions to hit in any shape or form at any time. Whether it’s related to inclement weather, physical or cybersecurity threats, or a sudden product recall, businesses need to have resilience built into their DNA.

“Business success will depend on how agile an organisation can be to adapt and thrive in fast-changing and unpredictable market circumstances in the face of adversity.

“Organisations need to consider how quickly they can access relevant data to make quick and informed decisions. Do they have a centralised asset register that offers visibility across the business to make critical decisions, especially during uncertain times?  Smart technologies like IoT and cloud-based systems will facilitate improved collaboration and data sharing, while intelligent automation can deliver long-term cost and operational efficiencies.

“Successful organisations will be quick to adopt or continue to build on a modern digital backbone to stay agile and resilient, to help navigate disruptions and turn them into opportunities.

Elan Pamensky, Founder, Cloud CFO, and EO Melbourne Accelerator

Let’s Talk: How to plan for an uncertain financial year

“The year 2020 has taught us many things, and if there’s one major takeaway, it is to expect the unexpected. 

“As we move into the “new normal”, we anticipate that the coming financial year will remain uncertain. Tips that could help companies plan for the new FY are:

Determine your financial position – Go to your numbers person and ask for their assistance to make an in-depth analysis of your company’s finances. From here, you can start building a budget and a solid plan for the coming FY.

Reassess your goals – Bring out your organisation’s short and long-term goals. Are there any gaps? What changes can you make?

Embrace technology – accounting software tools allow you to access up-to-the-minute information about your business’ finances, giving you more accurate data that you require during planning.

“In summary, businesses that are on top of their numbers and have adapted to changes in technology can better adapt to changing times.”

Ian Yip, CEO of Avertro

Let’s Talk: How to plan for an uncertain financial year

“We’re poised for a lot of growth in the new financial year. Our traction is good, as is our sales pipeline. Yet we still have the hangover of the pandemic that we’re still not truly over. Our financial planning for the year ahead focuses on weathering the worst-case scenario. In essence, we need to ensure we have the cash runway to survive a number of months without any revenue, thus ensuring our survival is not based purely on ‘that one big deal coming in’. 

“It does mean however, that we need to have a backup plan, and a backup plan to that backup plan. Effectively, our model accounts for where any cost savings will come from, should we need to go down that route. It does mean we have to keep an extremely close eye on our monthly spend and have the agility to dial this down quickly. 

“Granted, not every company will have the required runway. If that’s the case, its leaders need to figure out quickly how they can get themselves enough cash in the bank to get as close to that goal as possible, whether it be through doubling down on sales and marketing efforts or looking for external financing to provide a bit of breathing room.”

Greg Dudley, National Head of Restructuring and Recovery, RSM Australia 

Let’s Talk: How to plan for an uncertain financial year

“As businesses continue to face uncertainty in the new financial year, there are two key things they can do now to build better resilience. 

“The first is taking control of cashflow to ensure the business can meets its debts and obligations no matter what happens in the economy. Some ways to improve cashflow include debtor management, creditor management, cost reduction, and the development of conservative budgets and forecasts. 

“The second is to limit risk and avoid making major decisions such as large investments, unnecessary debt, or closing the business, without a thorough consideration of other options. 

“During uncertain times, business owners and managers can benefit from knowledgeable, calm advice from an expert third party, who can help the business set realistic plans that can support stability and potential growth. 

“Consider the new financial year as an opportunity to reset the business, improve efficiencies, and prepare for the future.”

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Clare Loewenthal

Clare Loewenthal

Clare is an author, business commentator and passionate contributor to Dynamic Business. She was the Founder and Publisher of Dynamic Small Business magazine, which became Australia’s largest small business publication.

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