SMEs in Australia: Why strong accounting practices are the backbone of growth

Small to mid-sized enterprises (SMEs) make up almost 97% of all Australian businesses, and are responsible for employing a large proportion of the workforce. Business growth for SMEs in Australia is not just about simply increasing the size of operations or market share. It also concerns establishing financial foundations that can be trusted. Accounting helps SMEs overcome their expansion challenges in the market. It establishes order, offers insights into the business, and aids in the detection of problems. Thus, SMEs should view accounting & auditing services not as a cost, but as a valued investment in the firm’s success.

Accounting as an essential pillar of growth

Accounting is not just about keeping track of records. It is the discipline that will help you make smarter financial decisions, keep an eye on how the company is performing, and recognise when something isn’t going as it should.

It starts with establishing a system for keeping track of and recording income, expenses, and liabilities. It involves knowing what and how much your business earns and spends regularly so that resources can be allocated appropriately. What operations are generating the most revenue? What could be done to decrease costs? How much working capital do you have?

Businesses that are confident in their development have a clear sense of where their money is coming from and where it is going. On the other hand, those that have weak accounting systems or make little effort to track and manage their cash flows are guessing. Guessing in a world of rising compliance regulations, changing customer preferences, and cash flow problems is a risky proposition.

Ensuring compliance and managing risk

SMEs in Australia must conform to several regulatory requirements, such as taxation, human resources legislation, and sector-specific requirements. They must not only understand the fundamentals of accounting, but also have a firm grasp of all of the regulatory standards that pertain to their area of operation.

Taxation and payroll legislation are among the nation’s most stringent. The examination and auditing of SMEs’ expenditure records and compliance with the regulations in Australia can help reduce the likelihood of legal problems or fines.

The presence of complete and exact bookkeeping, as well as a thorough understanding of the relevant statutes and rules, is required to guarantee compliance. You’ll be able to control legal risk with a strong accounting knowledge because it’ll keep your business on the right track by filing your BAS on time, as well as assisting you in tracking down GST and payroll records.

Moreover, a stringent auditing procedure will help you to identify and assess risks before they become major threats. For instance, internal auditing can help you recognise issues with cash management or inventory management. External auditing, on the other hand, can help confirm the legitimacy of your financial data to stakeholders and potential investors.

Therefore, SMEs in Australia that have a clear understanding of the fundamentals of accounting and collaborate with accounting & auditing firms will be able to manage legal risk.

Assisting SMEs with cash flow management

Australian SMEs, like SMEs all over the world, struggle with cash flow. Even profitable companies may find themselves up against a wall if their money-in, money-out visibility isn’t up to par. Organisations can use accounting principles to track cash flow in real-time, predict shortages before they occur, and plan for seasonal highs and lows.

A retail store owner, for example, may be aware of a seasonal revenue bump in December and use that information to prepare for February. Accounting and bookkeeping software supported by the help of a professional accountant may also assist a business in keeping up with supplier payments, payroll obligations and tax liabilities, without having to panic about surprise costs.

Driving informed decisions

Business expansion is a lot more than simply surviving from one month to the next. It is all about setting goals for the future. Businesses with a solid accounting and reporting infrastructure are well-positioned to set strategic directions. Whether it’s a desire to break into a new market, buy new equipment or hire new staff, data-driven decisions have a lower risk of failure than “gut instinct” based decisions.

Regular financial statements (profit and loss reports, balance sheets and cash flow estimates) can be used by owners and decision-makers to run various “what-if” scenarios and plan. For example, accounting information may reveal margin pressure due to rising supplier costs. Accounting and finance-related information can help identify the need to renegotiate prices or seek a new source for goods and services.

In sum, accounting and auditing services are an investment, not a cost. It can be paid back with an approach that will help chief decision-makers make smarter, strategic decisions with the best chances of success. Businesses can give themselves an even greater competitive edge, especially if they are a SME looking to scale business overseas, by complementing in-house accountancy expertise with offshore accounting services that are not only cost-effective but also easily scalable.