End Of Year – An Opportunity

It’s almost the end of another financial year – well at least it is in Australia. The end of the year is a good opportunity for reviewing your business performance over the last year as well as setting strategies, goals and plans for the coming year.

One of the opportunities which is often overlooked, is the opportunity to restructure your chart of accounts in your accounting package. Why would you want to do that?

Your management accounts are your ‘instrument panel’ for the business. They should be set up to provide you, the business owner, with the information you need to make informed decisions in your business. Correctly set up, your accounts will tell you; what are your most profitable products and services, who are your most profitable clients, the life time value of your clients, where your cash is going and where you can increase your profits – just to mention a few.

When it comes to selling the business, the profit and loss statements are crucial. Make sure you identify different income streams – not just “Sales” or “Income”. Break it down in to logical product or service lines. Track your cost of sales in the same way. Accounting packages these days allow you to assign product codes and associate costs to ‘project codes’. Make good use of the powerful features of the accounting package. Seek help from a good accountant and if you don’t know one, just give me a call.

When it comes to selling the business, it makes it much easier to put a value on the business if you separate out items which can become add-backs. That is, such things as owner’s wages and super, subscriptions and memberships and anything which is discretionary and not part of the day to day operations. It also makes it much more attractive to a buyer and improves the likelihood of getting through due diligence quickly and painlessly.

I often run half day workshops on preparing businesses ready for sale. You can get the details of upcoming workshops on this topic by CLICKING HERE

All the best

John Denton
“Helping business owners realise their dreams through buying and selling businesses!”.