Search form

  • Existing customers: 131 436 | General Enquiries: 1300 092 969 – 9am to 5pm, M-F

How well is your business performing?

How well is your business performing?

Understanding whether or not your business is on track can be tricky, but comparing your progress with others in the industry is a good first step. We outline how to read performance benchmarks issued by the ATO and how to measure your business’ success against them.
 

Performance benchmarks

The benchmarks by the Australian Taxation Office (ATO) are ratios that it developed using data from businesses’ tax returns and activity statements.

The ATO uses several different metrics for the performance benchmark, such as:

  • Cost of sales to turnover.
  • Total expenses to turnover.
  • Rent to turnover.
  • Labour to turnover.
  • Motor vehicle expenses to turnover.

You can use performance benchmarks to compare your business to others by comparing your business’s sales, expenses, labour costs and non-capital purchases with the benchmarks set by the ATO. If you fall under or over these averages, there may be cause for you to examine why and if you need to change your business strategy.

Each industry has specific performance benchmarks, and within each industry, different types of businesses have different benchmarks.

Food

For some businesses in the food industry, the ATO uses the benchmark of cost of sales to turnover. For example, if you run a coffee shop and your annual turnover range is $65,000 to $250,000, expenses should be making up most of your income tax return. This means an average of 83 per cent for expenses and an average of 39 per cent for sales.

Trades

In the trades industry, predicted income is typically based on labour and materials. For example, if you run a carpentry business with an annual turnover of $50,000 to $110,000, your average total expenses should be 42 per cent, while non-capital purchases to total sales should be 25 per cent to 43 per cent.

Manufacturing

In the manufacturing industry, the ATO typically uses the cost of sales to turnover for performance benchmarks and factors in the large number of expenses this industry incurs. This means cabinet makers with an annual turnover of $100,000 to $300,000 are expected to have an average cost of sales of 40 per cent and average expenses of 71 per cent. Non-capital purchases to total sales are expected to be 50 per cent to 60 per cent.

Retail

The ATO uses different benchmarks depending on your business. For example, the cost of sales to turnover is used to calculate the performance benchmark for a clothing retailer. This means businesses with an annual turnover of $65,000 to $250,000 is expected to have average cost of sales of 51 per cent and an average total expenses of 84 per cent. Non-capital purchases to total sales are expected to be 63 per cent to 78 per cent.

Transport

The ATO uses different metrics for this industry, depending on your business. For example, labour to turnover is the performance benchmark for furniture removals businesses, while it is total expenses to turnover for delivery services businesses.

This means for a furniture-removals business with an annual turnover of $50,000 to $125,000, average labour should be 25 per cent, an average of total expenses of 65 per cent, and non-capital purchases to total sales of 36 per cent to 53 per cent.

While the ATO uses benchmarking to help catch businesses that aren’t reporting income, you can also use them to compare your business to competitors. Just remember they are benchmarks only and not always an indication of success or failure.

Comparing your performance to others in your industry is a good first step to understanding whether or not your business is on track. Learn how regularly reviewing your goals will also help you check your progress and stay focused on the big picture.

Why Speak to an Adviser?

  • Tailored expert advice with your best interests at heart
  • Get the right Resilium Insurance suited to your needs
  • Personalised service from quotes to claims

 Find Your Local Adviser

Sorry, invalid location.[?]