More than 60% of small businesses fail within the first three years of starting up. So, what are the four key red flags you need to be aware of to keep you on track and steering your business towards success?
Not planning for taxes
Plan ahead and don’t damage your credit rating and reputation. Small businesses make up 65.2% ($13 billion) of all outstanding ATO tax debt. From 1 July 2017, all outstanding ATO debt greater than ten thousand dollars and at least ninety days overdue will be reported by the ATO to credit reporting agencies. This has the potential to damage your credit rating and reputation. If you are unable to meet your tax obligations then it is wise to engage an experienced adviser who will negotiate with the ATO on your behalf.
Limited access to funding
The power of leverage to grow your business. A number of business owners are spreading their business across several banks to leverage more opportunities to borrow. To be able to access these funding opportunities it is a necessity to have up to date records. Cloud-based accounting systems are now making it easier for businesses to have reliable and up to date data available on the go. This allows for business owners to secure funding for growth and to be able to capitalise on low interest rates faster. Furthermore, this assists with negotiating better interest rates on existing funding.
Owner dependence and failure to delegate
Small business owners who dedicate every minute and penny to their business may be limiting business growth and setting their own expiry date. The large majority of small business owners continually fail to delegate responsibilities and decision making, making it very difficult for their business to continue to grow and operate without their constant presence. To improve the value of your business you need to start delegating more control to your employees and partners. This can prove difficult for owners who have spent years tied to their business but in the long run you will unlock scope to grow and create more spare time.
There are a number of things to consider when managing cashflow effectively: do you have a large amount of capital tied up in stock and work-in progress?, do your customers pay on time?, do you pay your suppliers on time? A great way to analyse your cashflow is to start looking at your management reports on a weekly basis, including reviewing your debtors, creditors and stock turn over. Always remember that cashflow is the lifeblood of your business.
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This article was co-authored by Zoe Wright