Five big business challenges for 2025

‘Uncertainty’ has been the defining phrase for the first half of the 2020s. The markets are unstable, supply chains have been wobbly and finding talent has been difficult.

But as we head into 2025, and the second half of the decade, what are the major threats, opportunities and challenges that your business should focus on?

We’ve highlighted five of the big business challenges and share how we can help you and your business.

Five big business challenges for 2025 (and beyond)

However well-organised you are, there are elements in the external environment that you just can’t control. These external factors can have a serious impact on your ability to trade, grow and turn a profit. So, are you on the ball and ready to tackle them in 2025?

Let’s look at five of the external factors you should be focused on:

Climate change and sustainability

It’s an unpleasant truth, but the environment is in real trouble. As a business, there’s a growing need to demonstrate your environmental responsibility. This means developing a sustainability strategy, investing in green technologies and demonstrating your environmental commitments.

If you’re working on building a sustainability strategy, First Class Accounts Ovens & Murray can assist with identifying how your financial management processes can align with environmental goals. We can help track spending on green initiatives, create accurate reporting for sustainability investments, and ensure your accounts reflect your environmental commitments.

AI and technological disruption

Artificial intelligence (AI) and automation have changed the game in a fantastically short timeframe. Finding the value in this tech is crucial, as well as understanding its limitations. Getting your digital transformation underway will be vitally important in 2025, as will exploring how AI and automation can kickstart your productivity, boost your customer service processes and create a real competitive advantage for the company as a whole.

First Class Accounts Ovens & Murray can support your business by streamlining your financial processes with automation. From automating payroll and accounts payable to integrating cloud-based accounting software, like Xero, we ensure your financial systems are ready to scale with your technological advancements.

Skills shortage and transforming your workforce

The ongoing skills shortage, combined with the reality of an aging workforce and changing employment expectations, is a major issue. To overcome the talent challenge, you’re going to need to rethink your recruitment policy, your training and what you do to retain your key people.Things like flexible working arrangements, continuous professional development (CPD) and a great company culture are all ways to attract and maintain your top talent.

Managing workforce costs effectively is critical when addressing these challenges. First Class Accounts Ovens & Murray can provide accurate payroll management and cost reporting to help you allocate resources efficiently, allowing you to focus on creating a workplace that attracts and retains talent.

Inflation and an unstable economy

The global and local economies are not out of the woods yet. Forecasts may be looking more positive but there’s still the ever-present threat of recession, rising inflation and high interest rates. Getting granular with your financial forecasting will help, as will exploring your options for additional revenue streams, better cashflow management and ready access to business finance.

At First Class Accounts Ovens & Murray, we offer cashflow forecasting and management services. By providing timely, accurate financial reports, we help you stay ahead of economic uncertainties and make informed decisions.

Regulatory compliance and reporting

Regulatory environments are getting increasingly complex, as governments wrestle with the need for tighter structures. Regulations around your environmental reporting, workplace relations and digital privacy are all likely to get tighter over the coming years. This means allocating time and resources to understanding and implementing the relevant compliance requirements.

First Class Accounts Ovens & Murray offers expertise in financial compliance and reporting. We ensure your books meet the latest regulatory standards and provide accurate reports. By staying on top of your obligations, you can focus more on running your business and less on the stress of regulatory changes.

Talk to us about overcoming the big challenges

There’s no magic wand that can change these macro environmental and economic factors. But awareness, detailed planning and good use of forecasting can be a major boost.

Talk to our team at First Class Accounts Ovens & Murray about your concerns for the year ahead. We’ll help you understand the major external factors and what you can do to make your business more resilient.

Dealing with uncertainty – tips for business owners

Whether you’re facing changing market conditions, supply chain disruptions, or other challenges, there’s still real uncertainty for business owners. We’re trading in challenging times at present. 

And knowing what step to take next is a key worry. We know that you invest more than simply time and money into your business. It is more than a job but part of your identity.

So, how do you get more clarity around your future plans? And how do you work on the short-term future of the business, when sales, income and cash are in short supply?

Focusing your efforts in the right places

Planning the next business move is difficult at the best of times, but it’s doubly problematic when we have so little clear idea of what a post-COVID19 business world will look like.

It's difficult to plan when we don't know what will be possible. What regulations will be in place once you can begin trading? Will the market have changed dramatically? Will you be able to trade over borders and continue to be an international operation? Will you have enough cash to actually operate?

As a business owner, you’ll be continually thinking of new business-critical issues to add to this list – but the reality is that you CAN’T control all these elements. This sense of mounting uncertainty is likely to raise your stress levels and make you more anxious.

So, how do you overcome these worries and find a practical solution?

Try to focus on the things you can control:

• Identify the things that matter to the short and long-term success of the business

• Find the things you can control and over which you have some influence.

It's too overwhelming to try and work on everything at the same time. Instead, try to focus on the one thing you can achieve each day.

At First Class Accounts Ovens & Murray, we can help you identify and prioritize these elements through detailed management accounting and cashflow forecasting. These tools empower you to make informed, confident decisions, even when navigating uncertain times.

Review your overheads and costs

One way to reduce your cashflow worries is to reduce your spending. Look at your controllable overheads and see if there are ways to negotiate better terms with suppliers, cut down on expenses or pause any subscriptions.

Our team can assist by reviewing your financial data and providing insights into where savings can be made without sacrificing operational efficiency. With First Class Accounts Ovens & Murray managing your accounts, you’ll save time and gain clarity.

Talk to debtors and creditors

If you can bring down your aged debt, that will help your overall financial health. Set up automatic reminders for any overdue payments. Also, talk to any late-paying customers and agree when these debts will be paid. And talk to suppliers about extending payment terms, if possible.

First Class Accounts Ovens & Murray can streamline your debtor management process by setting up automated payment reminders using integrated apps like Xero. These tools ensure your customers receive consistent, professional reminders about outstanding invoices, helping you reduce late payments and improve cashflow.

Our expertise extends to configuring these apps to suit your business, saving you time and ensuring payments are followed up efficiently. We can also assist with tracking your accounts payable, giving you better visibility and helping you negotiate extended payment terms with suppliers when needed.

Consider alternative revenue streams 

If your current business model doesn’t work well in lockdown, are there other online services that you could diversify into? Any new revenue streams will help to bolster your income and cash position.

Update your website and marketing

Having a great online presence is vital during this crisis, when most goods and services will be purchased online. Give your website a refresh and make it easy for potential customers to find and buy your services.

Catch up with your team

Maintaining contact with your employees is vital if you’re going to nurture team spirit. The more engaged your team is, the easier it will be to embrace change together.

Reach out for tailored support

First Class Accounts Ovens & Murray offers flexible, 100% contract-based bookkeeping services. This means no interruptions due to staffing gaps—your accounts will always be managed on time, accurately, and with efficiency. By partnering with us, you can focus on growing your business while we handle the financial details.

Take control of what you can today by seeking expert advice and support. With First Class Accounts Ovens & Murray, you’ll gain access to expert bookkeeping, process improvement, and cashflow solutions to help you stay ahead, no matter the challenges.

How to keep your small construction company on track.

Times are tough in the Aussie construction industry. 

With rising costs, a lack of labour and a challenging economic climate. This is leading to a rising number of business failures.

About 1,400 construction firms filed for bankruptcy in the second half of 2023, according to a recent article from Inside Business. 

And it’s not just financial challenges that sole traders and contractors are facing. There’s also the stress of the physical and mental pressure of running your own construction business.

So, what can you do to keep your small construction company on track?

As a contractor, it’s hard work balancing your on-site time against the administrative and business-focused time that’s needed to keep your company fit and healthy.

But without a razor-sharp focus on cash, business development, profit margins and your own wellbeing, the business is liable to flounder – making business failure a possibility. 

Seven ways to keep your construction business healthy

1. Avoid working with just one customer.

Putting all your eggs in one basket is a risky move, so look into working with a varied mix of big and small clients to spread that risk. Even if you lose a few clients, you’re still left with a viable income stream. 

First Class Accounts Ovens & Murray can help you identify which clients and projects are most profitable by providing management accounting services. This ensures you have a clear view of your revenue streams and their long-term viability.

2. Diversify your revenue streams.

If all your income comes from one service, it’s time to diversify! Consider moving into new services or project areas, giving you multiple revenue streams and reducing your reliance on one source of income.

3. Optimise your cost management.

The major upfront costs and slow payment times in construction can make it difficult to keep cash in a positive position. Rising costs for raw materials are also a major headache. So, now’s a good time to explore strategies to reduce your overheads and negotiate better deals with your suppliers. 

We provide cashflow forecasting and budgeting tailored to the construction industry. By working with First Class Accounts Ovens & Murray, you’ll gain insights into your spending, enabling you to negotiate better supplier deals and plan for periods of tight cashflow.

4. Build strong relationships.

Stable, long-term customer relationships are crucial to your success. So put some real effort into nurturing partnerships with customers and suppliers, so you have a secure pipeline of projects and reliable supply chains.

5. Make good use of technology.

If you can automate an administrative process, automate it! Use the latest AI business tools to automate the answering of your business phone, the booking of customer appointments and the chasing of outstanding payments etc. Using digital tools helps improve your efficiency and can also cut your costs too.

First Class Accounts Ovens & Murray can assist you in identifying and integrating accounting software, like Xero, to streamline processes such as invoicing, payroll, and debt collection. This allows you to spend more time on-site and less on admin.

6. Utilise the available government support.

The Government wants construction to flourish, so it’s important to be aware of the available government grants, subsidies or tax incentives that can ease your financial pressures and help you to grow and prosper.

7. Take good care of yourself.

It’s crucial to not take on more work than you can handle. As with any industry, you need time away from work. Overworking and spending every waking hour on the business can be counterproductive. 

How We Can Help You Stay on Track

The construction industry is facing hard times: that’s the reality in the current market. But with careful planning, management and strategic thinking, you can overcome the challenges.

Talk to First Class Accounts Ovens & Murray about:

• Managing your cashflow: With tools like forecasting and budgeting tailored for construction.

• Streamlining your admin: Through efficient accounting software and automated processes.

• Developing a long-term strategy: Focused on reducing costs, diversifying income, and improving profitability.

We’re here to help you keep your small construction company on track. Let us take care of the numbers so you can focus on building your future.

Cashflow and cost control

More than ever, cashflow is a vital part of staying afloat, whether your business is in recovery or growth mode.

Revenue, profit, and your bottom line are always important, and in 2024, maintaining steady cashflow remains the foundation for keeping your business running smoothly and adapting to challenges as they arise.

Regular cashflow forecasts will help you keep that in focus. Here’s why:

Cost control  

If you can't reach your targets for income, reining in your costs may give you a little extra head room to manage cashflow while you plan your next move.

At First Class Accounts Ovens & Murray, our team provides detailed cashflow analysis and forecasting services, ensuring you have a clear picture of your financial position. With actionable insights, we help you identify areas where costs can be reduced without compromising business quality.

Visibility on outgoings 

Cost control can be a challenge when it’s hard to pinpoint hidden costs or where established ways of doing things cost more money than they should. You may also have been coping with unexpected expenses, as you’ve adapted your business for unplanned circumstances.

We can your financial systems and processes to identify inefficiencies. Our expertise in management accounting ensures your data is not only accurate but also timely, so you’re never left guessing where your money is going.

Improving business practice

It's more than just keeping an eye on outgoings (though that's important). It's about looking at each aspect of your business and business systems (or the gaps where there should be business systems) to see if poor practice is driving costs up unnecessarily.

Streamlining your processes can drastically improve your cost control. We work with you to implement appropriate apps to improve efficiencies, save time and money, and reduce costly errors.

It can be useful to break it down  

You can look at cost centres such as office supplies or freight. Or you can look at what those costs do for your business.

It can help to analyse costs in terms of cost of sale and overheads.

Cost of sale and overheads

Cost of sale (also known as Cost of Goods Sold or CoGS) is how much it costs you to make a sale. In a business which sells products, CoGS is based on the price paid for the product, plus any costs necessary to put the merchandise into inventory and make it ready for sale, including shipping and handling. You can even break it down to calculate the cost of sale of individual units.

Overheads are general business expenses. They can’t be tracked directly to sales. Overheads are what it costs you to open your doors (whether online or actual) every morning.

What’s your plan?

1. Reduce unnecessary expenses
   Now might be the time to trim every expense that’s not related to your core product or service.
2. Suppliers
   Are you able to work with your providers to ask for discounts or more favourable payment terms on either cost of sale or overhead expenses?
3. Talk to the team
   Analyse your costs and involve your team, including frontline sales staff.
4. Advertising
   It might be a false economy to cut back on advertising, as customers are online looking for bargains and price-checking alternatives. Targeted campaigns might work better.
5. Prioritise
   Can you pinpoint the products most likely to bring the fastest or best return and hold back on products that are a slower sell?
6. Promote or discount
   If you have old or slow-moving stock, can you discount it and convert old stock to cash? If you can attract customers now, you may be able to use it to spotlight your other products.

Making managing cashflow easier

Every dollar you can pull back from your costs can go straight into cashflow. Whether your sales are booming or slow, keeping your costs under control is key to sustaining growth and stability.

At First Class Accounts Ovens & Murray, we understand the importance of managing your cashflow effectively. From cashflow forecasts to systems that streamline your operations, we partner with you to ensure your business has the financial stability it needs.

Want to get a handle on cash flow in your business?

Whether your sales are boom or bust, you want to make sure that your costs aren't holding you back. We can help.

Talk to us if you'd like to review your costs and your systems to keep costs under control. .

Planning for seasonal dips in income

Seasonal dips in income can be highly challenging when you’re a small business. But there are proactive ways to predict, plan for and overcome these dips in revenue.

The key to dealing with seasonal dips is to know when they’re most likely to occur, and to have measures in place to spread your income and revenue pipeline over the course of the year.

Understanding seasonality in your sector

If your business is seasonal such as pool supplies, or a ski gear specialist, you’ll be used to the peaks and troughs, but many 'non-seasonal' businesses experience times during the financial year where sales and revenue peak – and, on the flipside, where sales and revenue experience a pronounced dip.

When income is low at certain times of the year, it makes for challenging times. First Class Accounts Ovens & Murray can assist by analysing your business's financial history to pinpoint these peaks and troughs. Our expertise in management accounting provides insights that help you understand your sector’s unique seasonality and prepare for it.

So, what are the key ways to plan for this kind of seasonality?

Forecast your seasonality

It’s vital to know WHEN you’re most likely to experience any seasonal dips. Looking at bench-marking reports for your industry is one way to predict the seasonality in your niche or sector. But you can also use your own accounting data to great effect. Look back through your profit & loss reports and spot where the peaks and troughs have occurred over preceding years.

First Class Accounts Ovens & Murray offers forecasting services to help you assess this historical data. With our support, you can anticipate and prepare for quieter periods, ensuring that your financial planning is well-informed and tailored to your business.

Charge a premium in peak time 

One straightforward approach is to apply premium pricing for your products/services during the busy season. By increasing your pricing, you boost your overall revenue, giving you more working capital to see you through the leaner months when sales and income are at their lowest.

Our team can work with you to develop a pricing strategy that aligns with your cash flow needs, helping you make the most of high-demand periods while securing funds to navigate slower months.

Offer additional peak-time services

Offering added extras and other additional service lines during peak time is another way to maximise the season. In the months where customers are most engaged, look to upsell these premium services and offer more value. Satisfied clients will be more inclined to pay for added extras, giving you an increased revenue stream from the same number of customers.

We can help identify and structure these peak-time offerings, ensuring you’re positioned to maximise revenue during high-demand times.

Target other markets

Exploring other related markets is another useful tactic. When you’re experiencing downtime, look for other ways to monetise your existing assets, products or services. For example, if you’re a hotel where sales peak in summertime, offer discounted conference space in the winter months to boost revenue.

Diversify your products/services

If one product/service has a known seasonal dip, look at adding an additional product or service to offset this downtime. For example, a a ski resort could promote bike-riding or hiking breaks during the warmer summer months to keep revenue constant. Likewise a pool maintenance firm could establish an outdoor fireplace business for the colder months.

Have a regional e-commerce strategy

If you’re dependent on a small local market, broadening your marketing and e-commerce strategies can help to attract a wider customer base – and bolster sales. Paid advertising through Facebook, LinkedIn or Twitter can easily target new geographical markets, bringing in new customers and giving your revenue a much-needed uplift during seasonal troughs.

Talk to us about planning for seasonality

If your business is struggling with seasonal dips, and the resulting impact on cashflow, come and talk to us. We’ll help you identify the timing of your seasonal downtime, and come up with a clear strategy for stabilising your income across the year.

Get in touch to start planning for seasonal dips in income.

Understanding your revenue drivers

For your business to make money, you need to generate revenue.

You produce revenue through your usual business activity by making sales, getting your invoices paid, or taking cash from paying customers. So, the better you are at selling your products/services and bringing money into the business, the higher your revenue levels will be.

But what actually drives these revenue levels? And how do you get in control of these drivers?

Knowing Where Your Cash Is Coming From Is More Crucial Than Ever

As a business, you face multiple challenges, such as navigating an economic downturn, adapting to decreased consumer buying, and adjusting to evolving trading and market demands.

Understanding your revenue drivers is the first step to managing cash flow effectively. When you have a clear picture of where your revenue is generated, you’re better equipped to pivot or reinforce certain areas of your business as required. This insight allows for informed decision-making and confidence that your strategy aligns with high-impact areas of the business.

First Class Accounts Ovens & Murray can support this strategic thinking, helping you analyse revenue sources and overall business performance to identify where your revenue is strongest and how to enhance it further.

Important Areas to Consider

Revenue Channels

Where does your revenue actually come from? Do you create income from online sales and ecommerce, through retail sales in bricks and mortar stores, or through wholesales to other businesses? You may focus on just one of these channels, or it could be that you use a mixture of two, three or more.

With First Class Accounts Ovens & Murray’s support, you can measure the performance of each channel, making it easier to refine and improve your approach as your business and the market evolve.

Revenue Streams

Your total revenue will be made up of a number of different streams. Knowing which ones are most productive and the return they’re delivering helps with prioritisation.

For example, if 80% of your income comes from 20% of your products, perhaps you need to tighten up your product range and ditch some of the poor sellers.

If you’re selling more services to one particular industry, perhaps you should focus more marketing in this specific niche, or downscale your sales activity in less profitable niches.

First Class Accounts Ovens & Murray can assist by tracking these metrics, providing data-backed insights to support decisions on product lines and markets.

Product/Service Split

Do you know which products/services are the most profitable in the business?

Which products/services have been resilient to market changes (giving you some revenue stability) and which have adapted well to change?

The more you can dive into your metrics and find the most productive and adaptable products and services, the greater your ability is to provide constant and evolving revenue for the business.

With First Class Accounts Ovens & Murray’s expertise you can ensure you have access to real-time financial data to gauge what’s working well. 

Value vs Volume

Is your revenue based on selling high volumes at low margin or low volumes at a high margin?

Based on this, can you move your margin down to create a more attractive price point (and more value for customers)? Or are their ways to push volume up, shifting more units and boosting total revenue?

By diversifying into new channels, new streams or new products/services you can aim to balance value and volume to create brand new sales – and higher revenue levels.

With First Class Accounts Ovens & Murray, you can dive deeper into understanding this balance. By analysing value versus volume, you may find ways to adjust your margin to make products more appealing or identify opportunities to increase volume without sacrificing profitability.

Get Support with Revenue Generation and Growth

If you’re looking to better understand your revenue drivers and make informed financial decisions, First Class Accounts Ovens & Murray is here to help.

We specialise in management accounting, providing insights that empower your business to grow. Let us handle the details so you can focus on what you do best, knowing that your numbers are in expert hands.

Talk to us about exploring and understanding your revenue drivers

We’ll review the numbers in your business, help you to understand your revenue drivers and will give you proactive advice on enhancing your total revenue as a company.

Get in touch to kickstart your revenue generation.

7 ways to reduce your expenses and boost revenue

A recent survey showed that 32 per cent of Australian businesses list increased operating costs among their top three concerns. And rising costs can have a significant impact on your cashflow and bottom line.

So, what can you do to minimise the impact of sky-rocketing costs in your business?

7 ways to reduce your expenses and boost revenue

When costs are rising and profit margins are falling, that’s bad news for the financial health of your business. But there are ways to combat this scenario.

In short, you have two main tactics to kick into gear. You can either look at cost-cutting across all your operating expenses, or you can find ways to sympathetically boost your revenue.

Strategies for cost reduction

Streamline your operations

Look for any inefficiencies and find ways to streamline your processes and reduce the underlying costs. You can also use technology to automate key functions to add efficiency and reduce your underlying costs.

First Class Accounts Ovens & Murray specialises in helping businesses optimise their financial operations. We provide software integration services to ensure your financial data is accessible and accurate. By automating invoicing, payroll, and expense management, we’ll help you free up time to focus on the core aspects of your business.

Negotiate with suppliers

Revisit your existing contracts with suppliers and negotiate better terms, while also being mindful of the suppliers own cashflow pressures. Looking for alternative suppliers or finding cost efficiencies by purchasing in bulk.

First Class Accounts Ovens & Murray can help you integrate supplier management and purchasing apps that allow you to track and evaluate supplier performance, ensuring you get the best deals. Tools such as Unleashed can help you keep on top of orders and manage supplier relationships more effectively.

Reduce your energy consumption

Putting energy-saving measures in place, like LED lighting and energy-efficient equipment, is a move towards good sustainability, but can also help you save money. Considering renewable energy options can also help.

Manage inventory effectively

Keeping your inventory lean is a good way to optimise inventory levels and minimise your holding costs. Implementing a just-in-time inventory management cuts costs while keeping you ready to service customer needs.

First Class Accounts Ovens & Murray can assist you in integrating inventory management apps that suit your business needs. We specialise in setting up and maintaining systems like Xero, and other cloud-based apps that provide real-time insights into stock levels, automate reordering, and help you avoid overstocking or stockouts. This ensures your inventory is managed efficiently, reducing unnecessary costs and freeing up capital.

Strategies for increasing revenue

Expand your customer base

A broader customer base helps to bring in more sales and revenue. Explore the potential for entering new markets or customer segments, and boost ecommerce and digital marketing to sell more online.

Raise your prices strategically

Think about the demand for your products/services in the market and revise your pricing to keep it competitive. Be sure to communicate any price increases sympathetically to customers, so you don’t damage customer loyalty.

With the help of First Class Accounts Ovens & Murray, you can integrate pricing tools that give you a clearer view of market trends and customer buying behaviour. Apps such as Vend or Lightspeed can assist in tracking sales and help you adjust prices in response to market demand, ensuring you maintain competitive pricing without losing customer loyalty.

Introduce new products or services

If your current products/services are not selling, it could be time to diversify your offering to meet changing customer needs. Make the most of your existing resources and expertise to bring new products to market.

First Class Accounts Ovens & Murray can help you budget and forecast for these new product lines by integrating cloud-based financial apps like Xero, allowing you to track performance metrics and evaluate whether new products will positively impact your revenue.

Be proactive and protect your business

There’s no magic wand that can make the current economic pressures disappear. But by being proactive about your cost-reduction and revenue-generation, you can do your best to protect your business from the worst elements of increasing costs and an uncertain market.

First Class Accounts Ovens & Murray can help you review your current financial and business strategies to look for the best possible opportunities, whether it’s better cashflow management, cost-cutting, or revenue generation. We specialise in implementing cloud-based apps such as Xero and other integrated tools to give you real-time financial insights, automate processes, and streamline operations. Our bookkeeping services ensure your financial data is accurate and up-to-date, giving you the clarity to make decisions that reduce your expenses and boost your revenue.

By adopting the right financial and operational apps, you'll be well-equipped to stay on top of your cashflow, control costs, and unlock new revenue opportunities.

Get in touch with First Class Accounts Ovens & Murray today to discuss how we can help you reduce expenses, boost revenue, and streamline your business.

Key numbers to focus on in your business now

As a business owner, it’s always been helpful to have an understanding of accounting – but in the world today, it’s never been more important to have a good grasp on your finances and understand the key numbers to focus on in your business.

For many businesses, priorities have changed, customer behaviours have mutated and revenue streams have had to evolve and pivot in order to maintain a profitable business model.

To track, monitor and drive your financial performance in this new business world, it’s increasingly important to have a handle on your key financial reports and metrics.

Getting to grips with your financial reports

In the past, extra cash in the business may have been seen as a surplus that needed to be spent on something. Recent years have shown us that having these reserves is vitally important for the survival and long-term health of your businesses.

To truly be in control of this cash, it’s vital that you can understand your accounts, financial reports and dashboards and ‘see the genuine story’ behind your financial position.

So, what are the key reports to focus on? Let’s take a look:

Budget 

Your budget is the financial plan that's tied in with your strategic plan. In essence, the budget is your approximation of the money it will take to attain your key strategic goals, and the revenue (income) and profits you hope to make during this period. It’s a benchmark you can use to measure your actuals (historic numbers) against, allowing you to see the variances, gaps and missed targets over a given period.

Cashflow Statement 

A cashflow statement shows the flow of money into and out of your business.

Understanding these cash inflows and outflows in detail allows you to manage this ongoing process, allowing you to aim for a ‘positive cashflow position’ – where inflows outweigh outflows.

In your ideal positive scenario, you have enough liquid cash in the business to cover your costs, fund your operations and generate a profit.

Cashflow Forecast

Forecasting allows you to take your historic cash numbers and project them forward in time.

As such, you can see where the cashflow holes may appear weeks, or even months, in advance. This gives you time to take action, whether it’s increasing your income stream, reducing your underlying costs, chasing up unpaid invoices (aged debt) or going to lenders for additional funding.

Balance Sheet 

Your balance sheet shows you your company’s assets, liabilities and equity at a given point in time.

In a nutshell, it’s a snapshot of what your business owns (your assets), what you owe to other people (your liabilities) and what money and profits you currently have invested in the company (your equity).

Your balance sheet is useful for seeing what stock and equipment your business owns, how much debt (liabilities) you’ve worked up and what your company is actually worth. This is all incredibly useful information to have at your fingertips when making big business decisions.

Profit & Loss

Your profit and loss report - often referred to as your P&L. Your P&L gives you an overview of the company’s revenues, costs and expenses over a given historic period of time.

While the balance sheet is a snapshot, your P&L is more like a moving video. It shows you how your finances are progressing by demonstrating how revenue is coming in and costs/expenses are going out (rather than cash coming in and going out, as you see in your cashflow statement and cashflow forecasts).

There is a range of software and apps that you can use to generate the above reports so you can understand and focus on the key numbers in your business. For example Xero. 

Talk to us about software and apps to help you with the financial reporting and forecasting for your business

Should you buy or lease your business assets?

There are certain items of equipment, machinery and hardware that are essential to the operation of your business – whether it’s the delivery van you use to run your home-delivery food service, or the high-end digital printer you use to run your print business.

But when a critical business asset is required, should you buy this item outright, or should you lease the item and pay for it in handy monthly instalments?

To buy or to lease? That is the question

Buying new pieces of business equipment, plant, machinery or vehicles can be an expensive investment. So, depending on your financial situation, it’s important to weigh up the pros and cons of buying, or opting for a leasing option.

First of all, let's look at why you might to decide to buy the item.

Buying: the pros and cons

Pro: It’s a tangible asset

When you buy an item, you own the item outright and it will appear on your balance sheet as one your business assets. As such, by owning these assets outright you increase the perceived capital and value of your business. You can also claim the cost of the asset against your capital allowance for tax purposes.

Pro: It’s yours for the life of the asset 

Once you own the item, you have full use of the equipment for the duration of the life of the asset. Your use of the asset isn’t reliant on you being able to keep up regular lease payments, and if your financial circumstances change then you can sell the asset to free up the capital.

Con: It’s an expensive outlay

Paying for the item up-front is a large outlay for the business and will require you having the cash to cover this cost. Spending a large lump sum in this way may take cash away from other areas of the business, so you need to be 100% sure that this purchase is the right decision and a sound investment.

Con: You may require extra funding

If you don’t have the liquid cash available to buy the item outright, you may need to take out a loan. Asset finance is available from funding providers, but does tie you into a loan agreement that will add to your liabilities as a business – reducing your worth on the balance sheet.

How First Class Accounts Ovens & Murray can help

Our cashflow forecasting services can assist in determining whether you have the financial capacity to make an outright purchase. We can also implement appropriate apps to help you assess the impact on your working capital, ensuring you maintain enough liquidity to cover other business expenses.

Leasing: the pros and cons

Pro: Leasing has a cheaper entry point

If the item you need to purchase has a large price tag, leasing allows you to make use of the asset without the cost of buying it in full. For startups and smaller businesses with minimal capital behind them, this can make leasing a very attractive option. You may not own the asset, but you can make use of it – and this may be the difference between the success or failure of your business.

Pro: You can spread the cost

There is still an associated cost of leasing, but you can spread the cost over a longer period, making it easier to find the necessary liquid cash to meet your lease payments. With this money saved, you can then invest in other areas of the business, helping you to expand, grow and bring in more customers and revenue.

Con: You don’t own the asset

There are different types of leasing agreement. Under a capital lease, you do own the asset (once you’ve paid if off). But if you opt for an operating lease, this is a more short-term lease and you won’t own the asset at the end of the contract. Ownership does have its advantages (including being able to sell off the asset if required) so it’s important to consider what kind of leasing agreement you’re entering into and what the advantages/disadvantages may be.

Con: You may pay more in the long run

Most leasing agreements will attract additional costs and interest on your agreement, so you may well end up paying more than the market price for your asset in the long term. If you can cope with the higher cost, this is fine, but bear in mind that buying outright may have offered greater value.

Con: You may lose the use of the asset

If you can’t keep up your lease payments (due to poor cashflow for example) then the owner of the lease agreement may recall the asset. If this item is crucial to your business model, losing this key asset can have a profound impact on your ability to operate. In this respect, leasing is a more risky prospect, but also an easier option for businesses with less cash to splash.

How First Class Accounts Ovens & Murray can help

Our management accounting services ensure you have timely and accurate financial reports to make informed decisions about leasing versus buying. We can also help you understand your financials, so you can understand if you can meet your financial obligations

How to make the best choice for your business

Deciding whether to buy or lease your equipment isn’t always straightforward. It depends on factors like your financial situation, cash flow, and long-term business goals.

We offer a comprehensive cashflow forecasting and management accounting services to provide you with an accurate picture of your financial future. By implementing the appropriate apps, and with our support, you can review your current financial position, assess your cash flow, and look at your regular costs to help you decide whether buying or leasing is the right thing for the business.

Talk to us about whether buying or leasing is the best way forward.