Any new financial year comes with uncertainty. None of us have a crystal ball that can tell us what will happen over the next 12 months - but that doesn't stop businesses needing to prepare for the year ahead.
For the last few years, things have been even more uncertain than ever. While we hoped to return to some 'normalcy' post-pandemic, it hasn't eventuated. Continuous disruptions, inflation, and rising interest rates - SMBs all over the country (and the world) are being threatened by a whole range of economic and operational concerns.
There are also a million opinions from every direction on what will happen next - each one contradicting the one before. The truth is, we just don't know what to expect in the next 12 months. Are we strong enough to come through it? Will it get worse before it gets better? How will it impact business? No one can say for sure.
This isn't to say it's all doom and gloom. Every challenge brings opportunity. Based on the current and using some past lessons, here are a few things that small and mid-sized businesses should be considering as we move into the new financial year and start setting business goals and priorities.
Three key considerations for the new financial year
1. Uncertainty is everywhere
The new financial year opens with a whole lot of 'what ifs'. From the effects of European conflict to interest rates and global inflation, there are multiple factors impacting the operational and economic stability of many businesses across the country.
There is also a consensus that unemployment needs to rise considerably before any other factors start to come down - which also adds concerns around holding onto staff and navigating wages.
You'll see a different opinion on what will happen next everywhere you turn. The truth is, no one knows. Things change quickly, so businesses will need to be able to plan for agility and improve their ability to respond quickly - even if it's not yet clear what we'll be responding to.
2. AI and other rapidly expanding tech can't be ignored
AI is hard to ignore - and the small business sector can't afford to. While the risks and unknowns around AI remain high, there is no doubt it can greatly improve agility and cost savings in small businesses.
Competitiveness comes down to being able to do less with more, and that's precisely what AI delivers. How to best use it - and do so safely - will continue to develop as this next financial year progresses.
Many businesses are already using some early versions of AI as part of their operations. But things are moving quickly, and those who don't keep their finger on the pulse of new technology or capabilities could quickly find themselves behind competitors if they are slow to pick it up.
3. Successful businesses are the ones that transform
Traditionally, when people are uncertain, they put their hands in their pockets. Uncertainty encourages those who are risk-averse to keep the ship sailing on an even keel - but it also increases the reward for those who take risks.
If we look back at how businesses have dealt with economic uncertainty (The GFC in 2008 or the high interest rates of '91), we can see those who looked to strategically transform their business, rather than just cost-cutting to maintain BAU, are the ones who recovered better (or at all).
If you're forced to change, don't do the bare minimum. Change doesn't have to be drastic, but it should consider the future and not just the here and now.
How businesses can prepare for the unknown
While we can't predict what will happen over the next 6-12 months, that doesn't mean you can't prepare for it. There are certain elements that will put your business in a better position to manage uncertainty and change - and continue to maintain operations and profitability through uncertain times and beyond.
Visibility - you might not know what's coming, but you want to be able to see it before it hits. Clear visibility over your entire business and customers will allow you to look ahead and proactively manage any change rather than staring in the rearview mirror and reacting to what's already occurred.
Cost reduction - this doesn't mean cutting staff or upping prices; it's more about optimising operations to reduce wastage. With supply chains disrupted and inflation potentially impacting customer purchases, understanding what is turning in your warehouse regularly, investing in that stock and ensuring you're not holding too much dead stock will be vital.
Customer retention - in times like these, it is riskier to go looking for new business. That's not to say you shouldn't - but keeping your current customers 'sticky' and ensuring they keep buying from you is a safer game plan. This can come down to your customer service level and stock availability.
Reporting on performance - setting budgets and targets and having real-time view of how you're tracking against them will help ward off any unpleasant surprises. Remember, if your accounting software sits outside other business systems, it likely won't be able to carry out detailed, timely reporting.
Could this be a good opportunity for business transformation?
Some businesses will be in a better position than others to achieve the above and ride out the next year (or more) of ongoing uncertainty. Suppose you are already embracing things like AI or have implemented an ERP system. In that case, you will be able to use that to ensure visibility, reporting and stock and customer management.
Many have invested in technology over the last few years, accelerated by the pandemic and government initiatives that lowered costs. Some of these initiatives will continue to run, though at a smaller scale, into the 23/24 financial year.
Businesses turning over less than $10 million can deduct up to $20k of technology investments. That means if you implement a small business ERP, like SAP Business One, you may be able to claim the full cost of the investment back.
Is now the time to invest? That's an individual call for your business. But while we can hope for a calmer time in years to come, businesses will always be required to continuously transform. Now could be a good time to look forward and think about not only what will serve you this next financial year, but in the many to come.