Why The Rear Vision Mirror Is The Hidden Cause Behind Most Business Failures In Australia
The statistics of business failures are frightening: 44 Aussie small businesses close their door each day and the Australian Chamber of Commerce and Industry’s latest small business review stating ‘profits and sales indicators remain below average and sales and labour cost pressures are growing’, some business owners who dreamt of their own business being their ticket to freedom, find themselves in deep financial pain.
With Christmas and the New Year fast approaching, many Aussie business owners will use this time to reflect on the year that was, and this ‘rear vision mirror’ approach to assessing the business is the number one mistake business owners make according to leading management accountant, Catherine McMurtrie.
But Catherine acknowledges that the business owners themselves are not entirely to blame for this historical mindset. They are often at the mercy of the figures and financial statements prepared by their accountants. “Many accountants are only providing half the service that is actually required of them but unfortunately many business owners simply don’t know what to expect from their accountant or the risks to their business by not looking forwards. Conducting a retrospective analysis of business accounts but failing to consider forecasting and forward planning, is an enormous risk for any business,” explains Catherine McMurtrie, Director of Advanced Accounts in Sydney
How Can Businesses Shield Themselves From Failure?
Catherine believes the end of the year is the time when accountants should be proactive for their clients by providing:
● A forward looking analysis to spot, plan and avoid surprise-hidden dangers such as tax bills or other ATO nasties which could cripple them or ultimately force closure
● An awareness of the business landscape to spot potential pitfalls
● An understanding of the ‘pinch points’ of the business and devising a strategy to smooth out any troughs
● Strong foundations to manage and minimize risk of ‘financial crash’
● Financial Fitness Reports
● Debt Minimization strategies for the coming year
“Accountants who fail to practice forward thinking strategies aren’t adequately supporting their clients and in the worst cases, this failing can result in the collapse of a small business,” says Catherine, who has witnessed and subsequently rescued many business owners who are stressed out, in debt and on the brink of closure due to retrospective accounting.
Catherine believes it falls within the duty of care of all accountants to not only have accurate historical records, but to also look ahead to plan and prepare in order to ward off financial disaster.
For more information about just how prevalent the rear vision mirror approach to Australian business really is, contact Catherine McMurtrie.