Growing and Consolidating Businesses

Growth and Consolidation

The challenges of growth can be as challenging as the start up phase. Managing cash flow in the business ensuring that you are not overtrading, that you are maintaining your profit margins and controlling your tax liabilities are often crucial issues in this phase. Some of the issues you need to consider are discussed below.

Business Plan

There are many different formats for a business plan. Whatever the format a business plan should include a situation analysis. A business plan would ideally consist of a mission statement, objectives in hard numbers, analysis of the product or service, marketing plan, critical success factors, management and human resources summary, production or operations strategy, innovation strategy, financial projections, sensitivity analysis, and contingency planning.

Strategic Plan

A strategic plan is an adjunct to the business plan with a more intensive analysis of the external environment and the internal environment created by the business. This analysis will often reveal the critical handful of key operations that the business must get right every time for it to continue to be successful.

Information Technology and accounting systems advice

Using accounting software or a combination of manual and computerised accounting systems will often save time and enable you to produce statutory information for GST returns, income tax returns and Australian Securities and Investment Commission Statements if required. Additionally most accounting systems are capable of producing a wide variety of reports that enable you to have up to date and accurate information on business performance. We can assist you in the selection and implementation of an accounting system that is suitable for your circumstances.

Taxation Compliance

Completion of statutory and compliance income tax returns becomes a more onerous and a standard requirement during the growth and consolidation stage.

Income Tax minimisation advice

Advice on how to minimise the impact of taxation on trading profits through the year and particularly before the end of the financial year in the April to June period is essential to have some control over the incidence of year end tax liabilities.

Capital Gains Taxation minimisation advice

The impact of decision to sell or purchase capital assets that might incur a capital gain tax liability is of special importance. It is essential that you seek advice on these transactions. Also income tax can give rise to unexpected consequences. Having timely and competent advice on such issues can make a significant difference to your income tax liability at the end of the financial year.

Goods and Services Tax advice

Assistance with the preparation of GST returns and advice on GST problems to ensure that you comply with the law and do it under or over pay your liabilities.

Business Mentoring

It is not unusual in business that a quick five minute telephone call may save you from the consequences of making a poor decision. Being able to speak with someone with over thirty years business experience may save time, stress and money.

Management Meetings

Meetings with the owners on a quarterly or monthly basis to review the performance of the business as indicated by the actual profit and loss statements to budgeted profit and loss statements, review of cash flow information, review of financial analysis information with proposed management actions resulting from these reviews.

Cash Flow Statements

Cash flow management becomes critical in the growth phase. Matching receipts from payments for goods, services or commodities to payments for inputs such as wages and materials may lead to liquidity problems or in the worst cases, insolvency. A well prepared cash flow statement will allow you to be aware of approaching liquidity shortfalls and allow you make arrangements with your debtors, creditors and financiers to ensure that your business does not get into financial difficulties.

Budgeted Profit and Loss Statements and Projected Balance Sheets

In industries that carry high levels of debtors and stock and if net profit margins are tight, it is usually advisable to prepare budgeted profit and loss statements that account for these items on a quarterly or monthly basis so that declines in profit can be immediately identified and action taken to correct any change.

Financial Analysis

Undertake a financial analysis and trend analysis of the business or sections of the business and use of benchmarking to determine whether performance needs to be improved. This will highlight what aspects of the business performance might need to be addressed.

Asset Purchase

An analysis may be required to determine if a new business asset that will consume significant financial resources will be a viable purchase for a business. Various methods can be used to determine if the asset purchase is a good use of the businesses scarce resources. Such methods include accounting rate of return, discounted cashflow, net present valuations, internal rate of return, payback period and terminal value.

Asset Accumulation

Commence building assets outside the business to accumulate wealth for the owners of the business. This asset accumulation program may involve business property purchase, other property purchase, and establishment of a self managed superannuation fund or investment in other assets.

Asset Protection

During the growth and consolidation phase when assets are starting to be accumulated some thought may be given to asset protection. Use of techniques such as the optimum ownership structure, assignment of credit loans, options over the family home and other assets, financial agreements pre-nuptial agreements, change trustees of trusts, ensure joint powers of appointment, binding nominations for superannuation beneficiary’s, review ownership of life insurance policies, floating charges secured by deed of guarantee and testamentary trusts. Management strategies with a regular review approach needs to be implemented to manage liability exposure.

Financial Statement Preparation

Financial statement preparation is a basic compliance issue for any business of substance. It is the document financial institutions require for lending purposes and purchasers requires when assessing the purchase of a business. Reliable, credible and accurate financial statements supported by well documented source records are an essential requirement for a business.

Growing and Consolidating Business Checklists

The following is a collection of PDF files for download.
Asset Protection ChecklistStrategic Plan OutlineYour Investment Property Checklist