For business owners going through the process of registering a new RTO, the area that seems to cause the most frustration is ASQA’s Financial Viability Risk Assessment. I frequently hear clients express their concern about the level of detail required by ASQA, particularly in relation to Section 4 – Ratios. For example, business owners have told me they struggle with the ratio calculations, or worry that they will not be able to accurately forecast their business’ profit. Some even find it stressful just preparing their business plan.
ASQA uses the Financial Viability Risk Assessment to determine whether an organisation has the financial resources necessary to deliver the appropriate level of service to students and remain in business so that students can complete their qualifications. Interestingly, while the process of forecasting a start-up business’ revenue and expenditure is required to become an RTO, it is not required for most other businesses. But it probably should be.
Many entrepreneurs enter into business and start operating with minimal or no plan. They have little idea of what to charge for goods and services, what to pay for goods and services (like business assets), their obligations as a director of a business in regards to the tax office or even the compliance requirements of the authorities who regulate the relevant sector. As the famous saying goes, fail to plan and you plan to fail.
Which is why I encourage all my clients to embrace the Financial Viability Risk Assessment process; it provides an invaluable opportunity to prepare an accurate plan and set the business up for success! Take the time to thoroughly research how your business is going to operate and the financial implications of your processes and procedures. By forecasting your income streams and expenditure, identifying your future assets and liabilities and even setting out your assumptions in relation to student enrolments you not only secure the future sustainability of your business but that of your employees, students and suppliers. Even your fellow taxpayers will benefit from a clearly articulated plan come tax time.
There is, of course, another reason why you should welcome the thorough approach ASQA takes in questioning you about your business’ continuity: you want to get your RTO registration application right the first time! According to ASQA’s 2016-17 Annual Report*, just 65% of initial registration applications were processed within their specified six-month timeframe. Imagine waiting more than half a year for your business to receive the green light, only to find your application to trade has been rejected! This was the case for nearly 20% of new registrants last Financial Year – don’t let this be you. We are experts in preparing Financial Viability Risk Assessment requirements for new RTOs and can help you get a real picture of the future of your business.
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*Australian Skills Quality Authority Annual Report 2016-17