20/20 Vision – A Practical Guide For The New Financial Year
Just like that, a week has already flown by in the new financial year. On most fronts, your business has already made a smooth transition into the new year; however, it is imperative to take stock of the previous year’s performance and update all records to efficiently close out on last year and focus on the new year. Here is a handy checklist to help you get by –
- Analyze your financials –
As you begin the financial new year, it’s important to take a detailed look at your previous year’s sales and profitability numbers to understand what brought in the most revenue and what impacted your profits. Did you achieve the goals you set out at the beginning of last year? If not, it’s essential to analyze the reasons for the shortfall and create an action plan to resolve the issues. On the other hand, if you did achieve your goals, fantastic! Take a closer look at what created the maximum impact and find ways to replicate that throughout this financial new year.
Remember Pareto’s Principle of 20% input yielding 80% output, which holds true in most cases. In other words, find the 20% of resources that generated 80% of the total value for your business in the previous financial year and double down on that 20% this financial new year. By focusing on the factors that led to your success, you can improve your profitability and achieve your goals more efficiently.
So, as you begin the financial new year, it’s crucial to look back at the previous year’s performance in detail to identify the strengths and weaknesses of your business. This can help you create a more robust and effective plan for the upcoming financial new year. By analyzing your sales and profitability numbers and understanding the factors that impacted your success, you can make better decisions and take actions that will help your business grow and thrive in the long run.
- Reconcile your accounts and wrap up your annual audit –
As the new financial year begins, it’s crucial to focus on getting your books reconciled as soon as possible after taking into account the various tax credits on TDS and GST. By doing so, your auditor can file your annual tax returns sooner. Ideally, you want to be one of the first to file your returns in the new financial year as that results in a quicker turnaround time from the Income Tax department to provide a tax refund if you’ve paid surplus advance tax/TDS throughout the last financial year.
Filing your returns early in the new financial year has many advantages. First, it ensures that your books are up-to-date, which is essential for making informed decisions about your business. Second, it can help you avoid last-minute rushes and potential penalties for late filing. Third, it can result in a quicker turnaround time from the Income Tax department to provide a tax refund if you’ve paid surplus advance tax/TDS throughout the last financial year.
Overall, it’s important to be proactive in getting your books reconciled and filing your tax returns early in the new financial year. By doing so, you can ensure that your business is in compliance with tax regulations and maximize your chances of receiving a tax refund quickly. So, take the time to reconcile your books and file your tax returns as early as possible in the new financial year.
- Contract and Licence Renewal – Most client as well as supplier contracts usually last a year or run until financial year ending. Do a quick check of all contracts in place and ensure renewals for all the necessary contracts.Remember to check on regulatory licenses such as your Ghumasta/Shops and Establishment Licence as well as your AMCs with vendors of electronic products such as laptops, computers, and ACs.
- New Year, New Goals – If you haven’t already laid out a plan for where you want to be in 365…err 361 days, now is the right time. 20/20 vision as they say right?
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What You Need To Get In Order Is Your
- Top Line Goals – Simply put, your sales targets. How much did you sell last year? How much do you intend to sell by 31st, March 2020 and work backward – break it down into quarterly targets and then monthly targets? Ensure you’re comparing your actuals against the targets each month to stay on track towards year-end goals.
- Investments – Sales doesn’t just happen – it needs to be planned strategically with all the necessary inputs from the rest of the company – starting with marketing and going on to Purchase, HR, and Operations. To commit to a certain sales target, you need to also commit to a certain investment across all departments thus ensuring that each process scales up in proportion and helps you achieve these targets. A common oversight is to have audacious sales targets without proportionate investments in various avenues. As Warren Buffet famously stated, “Someone is sitting in the shade today because someone planted a tree a long time ago”. You need to invest and plant those trees early on to bear fruit and achieve your sales goals and creating a clear budget for those investments is critical!
- Team – Hiring, training, retaining your team members across each department is an ongoing challenge for most business owners. Good people are hard to find; moreover, great people are impossible to find. It is usually the good people that are trained, molded and shaped within the organization to become great and invaluable to you and your business. To ensure your team remains loyal as well as motivated through the new year, plan out what is expected from and measured for your team at the very beginning. Also, share your key goals and initiatives with the team – transparency builds trust, resulting in a more tightly knit workforce.
- Bottom line goals – We spoke about the top line, but it’s equally, if not more important to keep an eye on the bottom line. Given the above calculations made for sales and its respective investments, you must have ironclad profitability targets for each month and a quarter to ensure your business remains healthy, profitable and above all else, cash flow positive! Create a projected cash flow and projected P&L for the new financial year to ensure you’re always in the green.
- Reflect on last year – Well, it has been another year in business after all and that’s an achievement in itself, given the rising intensity of competition. Look back on the last financial year and pat yourself on the back for all the right decisions you made that brought you to this point today. Also, spend some time laughing about the challenges that gave you sleepless nights in previous months but now look trivial in retrospect. The new year is bound to be more successful, given the learnings from last year. Here’s wishing you all the best for FY2020!
If you enjoyed reading this blog and would like to exchange more ideas, notes about your last year in business, new ideas for this year or just generally catch up for a coffee, we’re all ears and open doors – drop by our Brego Business Office whenever you like!