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END  OF  FINANCIAL  YEAR  ANALYSIS 

   Most of us at June 30 with the help of our staff or our accountant will prepare a Business Activity Statement and an income statement. But June 30 is an excellent time to do much more than this. Of course, you may prefer to do your analysis at December 31 or March 31 or at some other time during the year.
Today, it is not sufficient to just look at your profit and compare this to last year. Much more detail is needed. The two most important things to measure are your marketing and the products or services you offer. All businesses have four types of sales. These are:

a) repeat sales from your marketing programs
b) new sales from your various marketing programs
c) unsolicited repeat sales
d) new sales from other sources

Depending on the type of business you have, you should, where possible, attempt to match your sales to your different types of marketing.
It is important to not only compare your sales with the cost of your marketing but also to take account of the cost of goods sold and order processing costs. You should also take account of your fixed costs by allocating them according to the sales from a particular marketing program as a proportion of your total sales. 
You can then break down your profit according to miscellaneous new and repeat sales as well as sales from your various marketing programs. This way you can tell which marketing programs achieved the best results. Comparison with previous years will then enable you to decide what marketing was successful and what was not. It is possible that your marketing to obtain new business will make a loss, especially after allowing for your fixed costs. However, if you have more products and services you can sell to your customers in the future then this should not be a concern unless the loss is quite large. You should check that your profit from your repeat business is high enough to cover any loss in obtaining new business.
You should also do a similar evaluation of your products at the end of the financial year so you can determine which of your products or services made the largest contribution to your profit. You need to calculate the sales generated from each particular product and from this figure deduct the cost of goods sold, advertising costs, order processing costs and an allocation of your fixed costs. It is easier if you exclude GST from both your sales and your costs.
After breaking down your profit, firstly according to your marketing, and secondly according to the products and services you offer, you can develop a marketing plan for the next financial year. You should be able to answer the following questions: Which marketing works best for acquiring new customers? What marketing was unsuccessful? Which products should be advertised more heavily in the future? Which products should be discontinued or phased out?
Once you have analysed your marketing and products, you can determine your sales budget, your expected costs and hence your cash flow for the next financial year. This is especially important since your advertising costs are likely to fall due before you obtain receipts from sales. 
There are many other ways to analyse your business at the end of the financial year. You can investigate your branches and if you export - which countries are most profitable.
The average number of days it takes to collect an account is an important calculation to do since this affects your cash flow projections. You could also count the number of customers and number of staff and measure the turnover of both. A SWOT analysis is another common task undertaken by a number of businesses. You can assess the strengths, weaknesses, opportunities and threats to your business and from this evaluate a short term and long term marketing plan for your business.
When evaluating your company over the last 12 months it is important to take account of external influences. The new tax system and the Sydney Olympic Games would certainly have had a significant effect on your business over the last year, particularly if you operate your business in Sydney. 
Whether your business is large or small it is important to study the figures and look at them in a number of ways. The crucial decisions you make now depend to a large extent on what has happened in the past.

This article is reprinted from Rentons' Business Tips No. 11
© Copyright May 2001 ACS