You may have heard the term ‘small business benchmarks’ thrown around a lot, but what exactly does it mean and how can your SME benefit?
Today, we’re going to tell you everything you need to know about small business benchmarks, including how you can check your industry’s benchmarks to see how you’re tracking.
What are Small Business Benchmarks?
The Australian Taxation Office explains small business benchmarks as “a guide to help you compare your business’s performance against similar businesses in the same industry.”
These benchmarks are calculated using tax returns and activity statements from over 1.4 million small businesses. This information is then updated on a yearly basis as new financial data becomes available.
If you’re a numbers person, you can find out all of the facts and figures regarding the income tax return benchmark ratios here.
What Small Business Benchmarks Can You View?
The ATO lets you view benchmarks across multiple areas of running a business. Just some of these include:
- Gross business income
- Salary and wages
- Cost of sales
Click here for the complete list of benchmarks and information you require to view them.
How Can Your SME Benefit from the ATO’s Small Business Benchmarks?
We mentioned that these benchmarks allow you to compare your business’s performance against those within your industry, but in what other ways can this help your SME?
Another aim of these benchmarks is to understand whether the amount you are spending on a certain aspect of your company is similar to that of other businesses in your industry.
The ATO uses our small business benchmarks to protect honest businesses from unfair competition. It does this by comparing what a business is reporting with others in their industry. If a business is outside of its industry benchmarks, the ATO might ask them to explain why.
Keep in mind that being outside the benchmark ratio doesn’t mean something is wrong. Double-check your financial records first, then determine in what ways you can improve your costs.
Is Your Industry Included in the ATO’s Small Business Benchmarks?
Currently, the ATO provides benchmarks for the following industries:
- Accommodation and food
- Building and construction trade services
- Education, training, recreation and support services
- Health care and personal services
- Professional, scientific and technical services
- Retail trade
- Transport, postal and warehousing
For the full list of small business benchmarks available, visit the ATO website.
How to Check Your Small Business Benchmarks
The ATO provides small business owners with a free business performance check tool, which can be accessed easily and for free.
Begin by downloading the ATO app from Google Play, the Windows Phone Store or the Apple App Store. Within the app, you can select Business Performance Check, before entering the required information. You can then view your small business benchmark and compare the results to your own company’s records.
There you have it – our in-depth guide to small business benchmarks! If you have any questions relating to your small business, we’d love to hear from you in the comments section below.