Small businesses are a critical part of Australia’s economy, comprising nearly 98% of all businesses and employing over 4.7 million Australians. They contribute greatly to job creation and innovation in a wide range of industries. However, despite their essential role, small businesses in Australia often face significant financial challenges. According to ASIC, around 20% of small businesses fail within the first year, with cash flow problems being the most frequently cited cause of failure.
For your small business to succeed, it’s essential to have a solid wealth management strategy and to practice smart financial habits. Here are seven tips from Twenty Acres Accounting to keep your business on the right track.
1. Create a Budget and Stick to It
The foundation of any successful business starts with a well-planned budget. For small business owners, this means not only tracking daily expenses but also forecasting for future needs. A strong budget allows you to monitor your cash flow, predict future financial requirements, and ensure that you have funds available for growth opportunities.
Be mindful when taking out loans or lines of credit—ensure you have a solid repayment plan and clear intentions on how the funds will be used. This will help you avoid unnecessary debt and keep your business focused on long-term goals. There are also plenty of apps and tools available to help you create and stick to a budget effectively.
2. Prioritise Savings
Whether you’re saving for growth opportunities or for an unexpected downturn, establishing a savings plan is essential for your business. No amount is too small to save, as compounding can make a significant difference over time. Set specific savings goals for your business, such as creating a safety net of three to six months' worth of expenses. This will provide peace of mind and prepare you for any financial surprises down the road.
3. Invest in Your Business
When your business sees a period of increased profit, it can be tempting to celebrate with personal luxuries. While it's important to enjoy your success, remember to reinvest in the business for continued growth. Reinvesting capital into areas like marketing, staff development, or upgraded technology can help your business scale and stay competitive in the long term.
4. Pay Attention to Your Personal Finances
Many small business owners focus so much on their business finances that their personal finances can be left in the background. However, your financial future relies on careful personal planning. Take time to build personal savings, prepare for retirement, and avoid putting all your money back into the business. Experts recommend having an emergency fund with at least three to six months of living expenses in case personal circumstances change.
5. Don’t Hesitate to Ask for Help
It’s common for small business owners to be experts in their field but not necessarily experts in finance or accounting. Don’t hesitate to ask for professional advice when you need it. At Twenty Acres Accounting, we specialise in helping small businesses manage their finances effectively. By working with financial advisors who understand your business, you can ensure that you are making sound decisions for long-term success.
6. Plan for Tax Obligations
Tax time can be a stressful period for many small business owners, especially when it's not well-prepared for. A key strategy for avoiding tax-related financial headaches is to set aside money throughout the year specifically for tax obligations. Work closely with your accountant to ensure you’re maximising tax deductions and staying compliant with regulations. Being proactive with your tax planning will not only reduce your stress levels but also improve your cash flow.
7. Diversify Your Income Streams
Relying on a single product or service can leave your business vulnerable to changes in the market. Consider exploring new products, services, or markets to diversify your income streams. Whether it’s offering complementary services, expanding your reach to new customer segments, or even venturing into online sales, having multiple sources of revenue can help your business weather difficult times and thrive.
Is Your Small Business Ready for Financial Success?
Running a small business in Australia requires careful financial planning and strategic thinking. At Twenty Acres Accounting, we’re here to help you create a robust financial plan, manage your cash flow, and prepare for growth. If you’d like assistance with budgeting, tax planning, or any aspect of your financial strategy, reach out to us today to schedule a consultation.