The 5 numbers you should know at the start of the financial year
The start of a new financial year isn't just about resetting calendars and books - it's your prime opportunity to set a clear course for success. Understanding key financial figures helps you make informed, proactive decisions throughout the year. Here are the five critical numbers every business owner should review at the start of the financial year.
1. Your net profit (and why it’s not the same as cash)
Your net profit is your business’s earnings minus expenses, found on your Profit & Loss (P&L) report. This figure indicates profitability on paper but doesn't directly show your available cash, as it doesn't account for loan repayments, asset purchases, or tax obligations.
Action points:
Compare year-over-year profitability.
Check if your profit aligns with your pricing strategy.
Ensure your profits justify your efforts and risk.
Tip: Discuss with your bookkeeper how net profit aligns with your cash flow.
2. Your cash flow forecast
A cash flow forecast anticipates incoming and outgoing money, typically month-by-month or week-by-week. It's critical for maintaining smooth operations and planning for future expenses.
Action points:
Identify upcoming significant expenses.
Spot periods of lower revenue to proactively manage finances.
Confirm funds availability for regular obligations like payroll and super.
Tip: Regular cash flow reviews empower better decision-making and reduce financial stress.
3. Your payroll obligations (Super & STP)
Payroll obligations cover wages, superannuation contributions, Single Touch Payroll (STP) reporting, and tax withholding. Mismanagement can lead to audits, fines, or disputes.
Action points:
Ensure pay runs comply with relevant awards.
Check superannuation payments are accurate and timely.
Finalise STP and employee income statements.
Tip: Automate your payroll processes where possible to enhance accuracy and compliance.
4. Your BAS reporting cycles and dates
Your Business Activity Statement (BAS) reports GST, PAYG instalments, and withholding taxes. Staying aware of due dates helps avoid penalties and maintains financial clarity.
Action points:
Confirm your reporting frequency (monthly or quarterly).
Establish reminders and savings plans for upcoming tax obligations.
Tip: Add all key BAS deadlines to your calendar and set automatic transfers to manage your tax obligations easily.
5. Your break-even point
The break-even point indicates the revenue needed to cover expenses. Knowing this helps set realistic sales targets and pricing strategies.
Action points:
Calculate monthly overhead costs.
Determine necessary sales, jobs, or client volume to cover expenses.
Revisit pricing to ensure profitability.
Tip: Use your break-even analysis as a foundation for significant business decisions like hiring and expansion.
Need help mastering your numbers?
You don't have to tackle these numbers alone. At My Business Keeper, we specialise in giving business owners clarity around their financial systems and strategies, freeing you up to focus on what you love most.
Book a session and set your business up for a confident and successful financial year ahead.