MYTH: Businesses only need an annual set of accounts and tax return

Various reports have indicated that SMEs require significantly more ‘financial data’ throughout the year, not just at the end of the financial year.

The information that is required relates not only to profit and loss account and balance sheet, but also to business metrics, budgets and cash flow forecast, monitoring of cash flow regularly.

Last week, MYOB CEO Paul Robson outlined the position very clearly in an article published in the Financial Review:

“The outlook is much gloomier for SMEs than for big corporates.”

“There are five or so areas that small business are calling out as creating a major pressure, which are all around the cost of doing business, like utilities, with significant increases in input costs, so electricity, water and fuel prices,” Robson says. “There’s the cost of capital obviously – so interest rates – but the final one is just managing general cash flow.”

Robson also referred to general metric information such as the number of invoices being generated and the average value of an invoice when compared to average values in a similar period last year.

What this is highlighting is that businesses need a lot more accounting input than just the preparation of annual accounts and a tax return.

If your accountant is too busy preparing annual accounts and tax returns for clients, then it would be to your advantage to seek a virtual CFO who can put in regular time for your firm each week, so that you can receive daily, weekly and monthly information that will assist you to operate your business.

Robson indicated, “A large number of small businesses go out of business in their first six months, not because their idea was a bad one, but because the fiscal management was poor.”

Our observation is that this threat to a business continues in the years ahead, unless steps are taken to ensure that an accounting professional is involved in the preparation of regular monthly financial data and reports.

To find out more, contact Towers Business Development on 1800 232 088 or email to arrange a complimentary initial consultation via Zoom.