Small business accounting benchmarks
I’m sure as a small business operator/owner you would have read all about the value of using benchmarks to gauge the performance and viability of your small business, or perhaps even used benchmarks in assessing the value of a business you have been looking at purchasing. Most accounting software packages have the ability, to varying degrees, to provide you with relevant data about your small business. They can be a valuable tool but should not be used in isolation, the numbers only tell part of the story.
Now, whilst both you and I use benchmarks, it is important to point out that there is another body out there using benchmarks to assess your business, namely the Australian Taxation Office. That's right, every time you lodge your small business’ income tax return the ATO has the ability to compare your business figures with an industry wide average benchmark, specific to your location. The ATO has a list of benchmarks covering over 100 industries so chances are they have a benchmark that covers your area of trade or service industry. Without sounding like an alarmist, if your small business is not within the satisfactory range of the ATO benchmarks you need to take a serious look at why that is the case and either be prepared to explain why you do not fit inside the ATO benchmarks or take steps to ensure that your business does fall within the “safe” range. The ATO are now using these benchmarks to assess whether small businesses are declaring all of their income and also only claiming expenses which relate to the actual business. For further information on how the ATO is using small business benchmarks do not hesitate to contact your small business accounting specialist. It may just save you from an expensive and stressful phone call from the ATO.