A practical guide for Australian small business owners
For many business owners, the end of the financial year brings a sense of relief once the accounts are finalised and the tax return is lodged. But a tax return only tells you what has already happened. It does not necessarily show whether your business is financially healthy, whether your structure still suits your needs or whether you are well placed to achieve your goals in the year ahead.
At FMS Group, we believe good accounting should do more than keep a business compliant. It should provide clarity, support better decisions and help business owners plan with confidence. An annual financial health check brings together the key areas that influence business performance, including cash flow, profitability, tax planning, debt, business structure and future growth.
Think of it as a regular check-up for your business. It can confirm what is working well, identify issues before they become more serious and uncover opportunities that may otherwise be missed.
A Tax Return Is Only One Part of the Picture
Your tax return is important, but it is historical. It reports on income, expenses and tax obligations for a period that has already ended. A financial health check is forward-looking. It considers how the business is performing now and what changes may help improve the future.
A useful review should answer practical questions such as:
- Is the business generating enough profit for the level of work and risk involved?
- Is cash flow strong enough to cover tax, superannuation, wages and operating costs?
- Are prices and profit margins still appropriate?
- Is the current business structure still suitable?
- Are there financial risks that need to be addressed?
- Can the business afford to employ more people, invest in equipment or expand?
Seven Areas Every Business Should Review Each Year
1. Cash Flow
A business can be profitable on paper and still experience cash flow pressure. This can happen when customers pay slowly, too much money is tied up in stock, expenses rise faster than revenue or tax obligations are not set aside. A health check looks at when money comes in, when it goes out and whether there is enough working capital to operate comfortably. It can also help establish better systems for invoicing, debtor follow-up and tax provisioning.
2. Profitability and Margins
Strong sales do not always translate into strong profit. Reviewing gross profit, net profit and margins can reveal whether pricing is keeping pace with wages, supplier costs, rent, insurance and other overheads. It may also highlight services or products that are performing well and those that are consuming time without delivering an adequate return.
3. Tax Planning
Tax planning is most effective when it happens before the end of the financial year. A proactive review can help business owners understand their likely tax position and consider legitimate strategies while there is still time to act. This may include reviewing the timing of expenses, superannuation contributions, asset purchases and other business decisions. The right approach will depend on individual circumstances, so tailored professional advice is essential.
4. Business Structure
Many businesses begin as sole traders or partnerships because these structures are simple to establish. As a business grows, the original structure may no longer be the most appropriate. A review can consider tax, asset protection, administration, succession planning and future ownership. Changing structures can have significant implications, so it should always be carefully assessed rather than treated as a quick fix.
5. GST, BAS and Other Compliance Obligations
Falling behind with BAS, payroll, superannuation or record-keeping can create stress and expose a business to penalties and cash flow problems. A financial health check can identify gaps in systems and help ensure obligations are understood, recorded and planned for. It can also confirm whether bookkeeping processes are producing reliable information for decision-making.
6. Debt and Lending
Business loans, equipment finance, credit cards and overdrafts should be reviewed regularly. Interest rates, repayment terms and lending facilities can materially affect cash flow. A health check can help determine whether existing finance remains suitable and whether the business is financially prepared for future borrowing. Because FMS Group also provides lending support, accounting and lending considerations can be reviewed together rather than in isolation.
7. Future Growth and Succession
Growth often requires investment. Before hiring staff, opening a new location, purchasing equipment or expanding services, business owners need reliable forecasts and a clear understanding of the financial impact. The same applies to succession. Even if a sale or transition is years away, early planning can strengthen the business, reduce risk and support a more orderly handover when the time comes.
Warning Signs Your Business Needs a Financial Review
You do not need to wait for a crisis before reviewing your finances. Some common warning signs include:
- Cash always feels tight, even when sales are strong.
- Tax bills regularly come as a surprise.
- You are unsure which parts of the business are most profitable.
- Your prices have not been reviewed for some time.
- The business has grown, but your structure and systems have not changed.
- You are relying heavily on an overdraft, credit card or personal funds.
- You are planning to employ staff, invest in equipment or expand.
- You only hear from your accountant at tax time.
How Often Should a Financial Health Check Be Completed?
For most established small businesses, a detailed annual review is a sensible minimum. However, businesses experiencing rapid growth, changing costs, funding pressure or major investment decisions may benefit from quarterly or more frequent reviews.
The aim is not to create more administration. It is to ensure that business owners have current, reliable information when important decisions need to be made. Regular reviews also reduce the risk of discovering problems only after the financial year has ended.
Why Choose FMS Group?
FMS Group is an award-winning, family-owned practice with offices in Long Jetty and Gordon. With three generations of the family working together and more than 100 years of combined industry experience across the broader team, FMS Group has built its reputation on long-term relationships, personal service and practical advice.
What makes FMS Group different is its integrated approach. Accounting does not sit in a separate silo. The team can also assist with financial planning, retirement planning, SMSFs, lending, estate planning and aged care advice. This makes it easier to consider how a business decision may affect a client’s personal finances, superannuation, borrowing capacity, retirement plans and family goals.
FMS Group takes the time to understand each client’s circumstances and explain complex matters in plain English. Advice is tailored rather than generic, and clients have the benefit of a responsive team that can work collaboratively across different areas of their financial life.
Our family looking after your family.
Frequently Asked Questions
What is a business financial health check?
It is a structured review of the key financial areas of a business, including cash flow, profitability, tax planning, debt, compliance, business structure and future goals.
Is a financial health check the same as preparing a tax return?
No. A tax return reports on the past. A financial health check uses current financial information to assess performance and help guide future decisions.
When is the best time to review my business finances?
A review can be completed at any time, but early in the financial year is particularly useful because it gives business owners time to implement improvements before the next year-end.
Can a financial health check help improve cash flow?
It can identify the causes of cash flow pressure and highlight practical areas to address, such as invoicing, debtor management, expenses, pricing, tax provisioning and finance arrangements.
Should I review my business structure every year?
A formal restructure may not be required each year, but it is sensible to confirm regularly that the structure continues to suit the size, risk profile and future plans of the business.
Can FMS Group help with more than accounting?
Yes. FMS Group provides an integrated range of services, including accounting, financial planning, retirement planning, SMSFs, mortgages and loans, estate planning and aged care advice.
Take a More Proactive Approach to Your Business Finances
A financial health check is not about searching for problems. It is about creating a clearer picture of where your business stands and where it can improve. Small changes to pricing, cash flow management, tax planning or financial systems can make a meaningful difference over time.
Whether your business is growing, facing new challenges or simply ready for a more strategic approach, the experienced FMS Group team can help you review your position and plan the next steps.
| Is it time to give your business a financial health check?
Book a consultation with FMS Group to review your business finances, identify opportunities and plan with greater confidence. Visit www.fmsgroup.com.au or contact the Long Jetty or Gordon office to arrange an appointment. |
General information only: This article is general in nature and does not take into account your objectives, financial situation or needs. Seek professional advice before making financial or business decisions.