All Posts by Renae Pitargue

Using forecasting to help your decision-making

Producing regular management information is one way to help improve your business decision-making. But looking at historical numbers can only tell you so much.

In business, you want to know what the future holds. And to make truly informed decisions about your future strategy, it’s important to use forecasting tools to project your data forwards in time. By running projections, based on these historical numbers, and producing detailed forecasts, you can get the best possible view of the road ahead – that’s invaluable.

Run regular cashflow forecasts

Positive cashflow is vital to the short, medium and long-term success of your business. Without cash, you simply can’t operate the business efficiently. Running regular cashflow forecasts helps you overcome this challenge. With detailed projections of your future cashflow, you can spot the cash gaps that lie further down the road, and take action to fill these cashflow holes.

Income can often be unpredictable, especially in challenging economic times. If customers fail to pay an invoice, or suppliers increase their prices, this can all start to eat into your available cash. Using forecasting, you can extrapolate your numbers forward to which weeks, months or quarters are looking financially tight. And with enough prior warning, there’s plenty of time to look for short-term funding facilities, or to get proactive with reducing your spending.

Run sales and revenue forecasts

Keeping the business profitable is one of the key foundations of making a success of your enterprise. You want your sales to be stable and your revenues predictable if you’re going to generate enough capital to fund your growth plans. And you need to know how those revenues will pan out over the course of the coming financial period.

Revenue forecasts work much like a cashflow forecast. Instead of looking at your future cash position, a revenue forecast gives a projection of your sales and how much revenue is likely to be brought into the business in future weeks and months. With better revenue information, you’ll be more on top of your profit targets. You can manage your working capital in a more practical way. And you can improve your ability to invest in new projects, additional staff or funding of the long-term expansion of your business.

Run different scenario plans

What’s going to happen to your business in the future? None of us have a crystal ball to predict this future path exactly. But by looking at different possible scenarios, you can run projections to see what the potential outcomes and impacts may be.

These ‘What-if scenarios’ can be exceptionally useful tools when thinking about big business decisions. What if there’s an economic recession? What if our sales increased by 25%? What if we raised our prices by 10% next quarter? What if we lost a quarter of our customers? By plugging the relevant data into your forecasting engine, you can run these scenarios and see how each option pans out. That’s massively useful when the worst (or the best) does happen.

Update your strategy, based on your forecasts

By making the most of your forecasting tools, you give your board, your finance team and your advisers the most insightful data and projections to work with.

A good business plan is designed to flex and evolve to meet the needs of the changing market – and the changing needs of your own business strategy. By making use of your cashflow forecasts, revenue projections and what-if scenario planning, you give yourself the insights needed to update your strategy and your business plan. You can make solid, well-informed decisions and keep yourself one step ahead of your competitors. In the dog-eat-dog world of business, that’s a competitive edge that can make a huge difference.

If you want to delve deeper into the positive benefits of forecasting, please get in touch. We can showcase the latest forecasting software and apps, and show you the value that’s delivered through well-executed forecasting and longer-term projections.

Goals for your business

Have you achieved the goals you set out to achieve when you first started your business?

In this article we pose 5 important questions for you to ask yourself before you take the next step in your business journey.

Founding, managing and growing a business is a BIG commitment.

For most business owners, it will take years to build a customer following, turn a profit and create a truly scalable business. It's a journey that can sometimes be pressurised, stressful and risky.

But when your plan really does come together, there is the chance of real success, a lasting legacy and a business that delivers on your initial dream.

So, how do you know when you've truly achieved your goals for your business?

Here are five questions to help you understand if you've reached your original goals. 

1. Has your business met its growth targets and scaled up as intended?

You’ll have seen your business idea grow from being a fledgling start-up, to an established business and on to become a scaled-up, ambitious enterprise with a solid customer base.

If you’ve met your growth targets, then you know you’re on pretty solid ground as a business. Your idea clearly has legs and you’re delivering a product and/or service that your clients see as valuable. And which they’re willing to part with their hard-earned cash to purchase.

2. Are you running a profitable enterprise that's in good financial shape?

Running a tight financial ship is crucial. You need solid revenues, positive cashflow and good liquidity to keep your business ticking over.

In the early days of being a start-up, cash will have been tight. And your own personal income as a founder and director will probably have been scarce too.

But as your business has become more established, you should have found that your business revenue became more stable and predictable. And that your own personal wealth also followed this same reliable pattern. 

If your business has a solid balance sheet, great cashflow and meets your intended profit targets, you’re onto a good thing and can be sure that your financial position is in good shape.

3. Do you have a stable client base who say good things about you?

Without clients, you don’t have a viable business. 

Finding your first clients as a start-up was probably a significant turning point in your journey. A good client base brings with it the bonus of new sales, fresh revenues and a business that can actually turn a profit.

When clients engage with you and buy your goods and services, that confirms your original faith in your business idea.

You’re providing something they value and want to purchase. And you’re also building a community of like-minded people who all think your brand is great.

4. Do you have a team who can operate the business without you?

In the early days, you’ll probably have become a jack or jill of all trades. You’ll have run the sales and marketing campaigns, taken care of all the main operational tasks and dealt with the many invoicing, accounting and bookkeeping tasks. 

Turn the clock forward, and you probably have a team of people around you to take care of these jobs. But can they function without you?

This is really the acid test of whether you’ve scaled and succeeded.

If your business is still reliant on you, personally, you may have a problem.

To be a saleable proposition, a business needs to function effectively without the founder. If not, you're unlikely to be in a position to sell up. 

Usually, to make a business saleable, you need a team of engaged and talented people around you. People who share your vision and talents and who can keep the ship on an even course, even once the original captain has set sail on fresh, new adventures.

5. Do you feel you've achieved what you wanted to achieve?

In your formative years as a founder, you’ll have sat down to draw up a start-up plan. In that plan you’ll have outlined a clear vision for what your business was going to achieve.

This vision might have been:

• To scale up over five years, sell-up and retire
• To deliver a new kind of technical widget and make it the global standard
• To help your target audience improve their lives, helped by your product/service
• To provide the income needed for you to live your desired lifestyle
• To plough your profits back into the local community and be a force for good.

We all have different goals, and whether they are financial, personal or moral comes down to the individual. The important thing at this point is to assess whether you’ve actually met the vision that you set out to achieve. 

If your aim was to sell for a profit and then retire, are you ready to do this?

If the goal was to become a household name and move your sector forward, do your client engagement figures and market share stats reflect this?

Deep down, only you and your fellow founders know whether you’ve truly met your intended goal. But if the general consensus is that you aced it, then it’s time to think about the future.

What’s the next chapter in your business story?

If you can answer yes to all five of these questions, then congratulations! You've built a successful, stable and profitable business.

But what do you do now?

Do you continue to plough this fertile furrow and live off the profits?

Do you find a buyer for the existing business and start on your next business idea?

Or do you sell up and look at retirement and enjoying the benefits of your money and lifestyle?

It's a good idea to talk to your accountant or business advisor before you make what is, essentially, a life-changing decision. And your financials will play apart in their advice. If you’d like to talk through your options, do get in touch.

Offering online payment options

If you're a business owner, one of the best things about you can offer your customers and clients is online payment options.

With online options like these listed below, quick payments and receipt funds can be a thing from today!

•  ACH (Automated Clearing House) services like Stripe and Paypal
• credit and debit cards
• direct deposit

While there are a range of online payment options available, the important thing is to choose a provider, or providers, that can integrate with your accounting software.

By doing this, you can add a super-simple payment button to your invoices, which makes it easier for customers and clients to pay you and, therefore, helps you get paid quicker.

Costs

The average fee charged by a merchant service provider is 2-4% of the transaction amount. For Direct Debit it’s usually under $2 per transaction.

Something to consider is that for online payment for invoices over a certain amount, the credit and debit fees can be quite significant. Also, it can be expensive to process transactions when there are multiple customers and clients.

Because the cost of processing online transactions can be significant it’s important to take these charges into account when considering how much you charge for your products or services.

There are a number of apps available that can help you price your products or services. Some of these apps focus on cost-plus pricing, while others use value-based pricing. Ultimately, the right app for you will depend on your specific business needs and goals.

Benefits

Businesses who offer their customers and clients the option of paying online should see a big improvement when it comes to getting paid. 

While not all of your customers and clients will use the online option, many will, which means the time it takes to get paid will reduce – improving your cash flow.

Online payments can also help strengthen your customer/client relationship as anything that makes a process easier is usually appreciated.

We can help you implement the appropriate apps to set up online payments, so feel free to get in touch. 

Getting in control of your spending

Keeping your business in a positive cashflow position is vital. But you can only do this if your cash inflows (sales revenues and other income) outweigh your cash outflows (overheads, supplier costs and other liabilities like tax costs or loan repayments).

One way to re-balance your cashflow scales is to get in better control of your spending.

This process of ‘spend management’ is all about reviewing your expenses, negotiating better deals with suppliers and getting a razor-sharp focus on reducing your cash outflows.

Review your current suppliers

Once you have a reliable supply chain set up, it’s very easy to fall back on using the same suppliers time and time again. But the reality is that there’s real value in reviewing the suppliers you’re using, so you don’t miss out on any better deals.

Prices will go up and down in the marketplace and new suppliers will appear in the market. So it’s worth regularly checking for alternative providers that can offer cheaper rates, better value prices or longer payment terms etc.

Negotiate better prices with your trusted suppliers

You may be happy with the supplier relationships you have, but still want to cut down on your spending.

In this scenario, it’s well worth negotiating. Very few suppliers will want to lose a valued customer, especially if you’re a long-term client who’s bringing in reliable revenues. If the relationship is strong enough they’ll be open to negotiating a deal that works for both of you.

See if you can push the prices down, or get discounts for buying in bulk etc. And, if possible, see if you can get them to agree to a trade credit agreement, where you can pay for the goods and services over a longer period of time, to boost your cashflow.

Rein in your expenses

It may sound obvious, but one of the easiest ways to cut your overall expenditure is to be a bit more frugal with your overall spending.

Don’t overspend on stock, raw materials or services. Just buy what you need to stay operational, and keep a close eye on when new orders will be needed, rather than overspending and using up your available cash.

Where day-to-day spending has got out of hand, you can make a big difference to your expenditure by making small changes to your outgoings.

If you look at your spending with a fine-tooth comb, you’ll soon find costs and expenses that can be cut back or stopped entirely.

Other cash-saving options could include putting a limit on staff expense cards or cancelling unnecessary software and magazine subscriptions etc.

Use a purchase order number system

A purchase order number system makes it easier to keep track of your spending.

In essence, any purchase made by the business needs a purchase order (PO) number assigned to it, prior to a member of staff buying anything. This allows you to allocate a budget and track the spending against this particular purchase or project.

Having a PO number also makes it easier to track incoming invoices. Suppliers can quote the PO number on their invoice, so you can match the bill to the allocated job and budget.

Use tech to get in control of the numbers

In an ideal world, you want as much oversight over your spending as possible. And with today’s cloud accounting software, expenses apps and inventory tools, it’s easier than ever to manage your expenses and stay in control of the main numbers.

You can use an expense management system, like DiviPay, to get better oversight of spending and put yourself back in the expenses driving seat.

If you want to streamline your spending, come and talk to us. We’ll help you spot the areas where costs can be cut and help you integrate the latest apps to manage your numbers.

Tax Tips for small businesses 2022

Common Tax Deductions for Small Business

Are you claiming all the business tax deductions that you are entitled to?

There are many expenses common to most small business, and there are other expenses that are specific to the nature of the goods or services that your business provides.

• Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, insurance and vehicle expenses.
• Employment expenses include salary and wages, fringe benefits, superannuation and training costs.
• Other operating expenses may include things specific to your business, for example point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software.
• Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not written off immediately.
• Repairs and maintenance to assets and business premises.

Expenses must relate to the running of the business and providing the goods or services that your business offers.

Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and entertainment.

There may be some expenses you want to check such as private usage of business vehicles, prepaid expenses, bad debts, loss of stock and borrowing expenses. 

What’s on the ATO Radar for 2022?

This year the ATO will be taking a closer look at record keeping, work related expenses, rental property income and deductions and cryptocurrency transactions.

• Keep records for all business transactions (income and expenses), activity statements and financial reports for at least five years.
• Keep all records relating to employees, contractors and payroll for at least five years.
• If your business is a company, keep all records for at least five years, including director meeting minutes.

Other Common Tax Return Issues

Work-related travel expenses

Travel fares, accommodation, meals. The travel should be directly related to income producing activities and you need records to verify the travel claims.

Motor vehicle expenses

Keep records for fuel, repairs and servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel.

Fringe benefits

Have you captured all benefits provided to employees? Vehicle and entertainment benefits are usually scrutinised. This year you’ll need records of any extra benefits provided to employees because of COVID-19.

Superannuation

Have you paid the superannuation guarantee on time to employees’ super funds? The ATO will examine your Single Touch Payroll records including superannuation payments.

Current temporary tax depreciation incentives

There are currently three temporary tax depreciation incentives available to eligible businesses:

• Temporary full expensing - for assets you start to hold, and first use (or have installed ready for use) for a taxable purpose, from 7.30pm (AEDT) on 6 October 2020 to 30 June 2023.
• Increased instant asset write-off - if the asset was purchased by 31 December 2020, and first used or installed ready for use before 30 June 2021. The threshold remains at $150,000.
• Backing business investment.

Talk to your accountants about what applies for your business.

Get Your Business Records Ready for Your Tax Return 2022

Organising your documents now will mean you can get your tax return completed earlier and access any refunds due or start planning for tax payments.

Getting your business records up to date and accurate will allow us to work with you proactively to plan for the coming year, which will continue to be unusual (and possibly difficult) for many.

It will also be one less thing to do when your normal business activity resumes later in the year!

What Records do you Need to Have Ready for your Tax Agent?

• Have you bought or sold assets? If so, you need full details of acquisitions and disposals.
• Have you taken out a new loan or other finance? You must have details of the finance arrangements and statements of monies owing at 30 June.
• Check that any bonds or deposits paid or received have been allocated correctly.
• Have you prepaid for insurance or other large business expenses that need to be apportioned to the following financial year? Make note of the portion applicable to the current financial year.
• Do you carry stock? If so, you need to perform a full stocktake at 30 June (unless you qualify for the simplified trading stock rules).
• List any doubtful or bad debts to be written off.
• Review your debtors and creditors (accounts payable and receivable). Is the list current and correct?
• Do you have loans with related entities? Reconcile the loans to and from each entity to ensure the same value is reported in the accounts of both entities.
• Ensure that all payments to company directors have been correctly captured. Talk to us now if you want to make director payments before 30 June.
• Provide records of any government grants received for COVID-19 or natural disaster impacts on your business.
• Gather records of any COVID-19 related benefits that were provided to staff this financial year as there may be fringe benefits implications.
• If contact details of business owners and key personnel have changed let us know.

This year, there may also be new elements to discuss with your accountant if you have received grants, refunds, credits or deferrals of business expenses and liabilities.

Remember you need to keep all your business records for five years, so store everything securely and where possible electronically for safety and ease.

Check Supplier ABNs

Are you in the habit of checking your suppliers’ Australian Business Numbers?

When you make business purchases, you should receive a valid tax invoice from the supplier to prove that your purchase is a business expense. The ABN holds certain information, including contact details, business structure and GST registration.

Many business owners don’t routinely check the ABN of suppliers, resulting in incorrect GST claims – either claiming too much or not enough.

How to Check a Supplier ABN

• Go to the ABN Lookup website.
• Enter the supplier ABN provided on their bill.
• Review the current details, including the GST registration date. This will show whether a business is registered and, if so, from what date.
• The entry will also show if an ABN has been cancelled.
• Print or save the PDF extract and attach it to the supplier record in your accounting software.
• You can search multiple ABNs by uploading an Excel spreadsheet template.

When to Check Supplier ABNs

It’s good practice to check the ABNs of all new and major suppliers and any large or unusual payments. Always check the ABNs of suppliers you know to be new to business.

Check your accounting software – there may be add-ons that will automatically check the ABNs for you. Or, you may choose to audit ABNs once per quarter or even once per year for smaller businesses. If you do an annual check, make sure you do it in the March quarter so you can make any GST adjustments in the June BAS if needed.

Better yet – check the ABN of every new supplier and save the details in your software, so you always have the correct information and tax codes.

What if it’s Wrong?

It's not uncommon that suppliers (especially those new to business) charge GST on their invoices when they are not yet registered for GST. Some suppliers may also provide the ABN of another business. For example, one person may conduct business under both a sole trader ABN and a company ABN and provide you with an invoice from the wrong entity.

If you conduct a review of your suppliers’ ABNs and find that some have been charging GST in error, notify the supplier and ask for a refund of the GST or a credit to the value of GST incorrectly charged. Ask the supplier to reissue correct tax invoices.

Another common error is to claim GST on purchases made from small overseas businesses that are not registered for GST in Australia.

Need Help with BAS Adjustments?

Once you have corrected the entries in your software, you will need to make a GST adjustment on your next BAS.

If you have made significant changes over multiple BAS periods, it may be challenging to correct the GST.

Talk to us if you’d like to conduct an audit of supplier details and pick up the necessary adjustments to GST. Amending prior BASs might result in further GST payable, but it could just as easily result in a refund!

There is software that we use to support supplier bill payments, including Dext and Lightyear, that have this checking functionality built in. Talk to us about integrating these apps for your business.

Do You Know What Reimbursements Your Employees are Claiming For?

It's unfortunate, but employee expense claims are a common form of business fraud. Are you across all your employees' claims for reimbursement?

The best thing you can do to minimise expense claim fraud is to implement a process for reviewing and authorising expenses and reimbursements. Many business owners simply trust people to do the right thing and be honest.

While most employees are reliable, having good systems in place will mean that the dishonest actions of a minority do not jeopardise your business.

Examples of Expense Claim Fraud

• Fictitious expenses based on faked or altered documents or even booking confirmations that were never actually paid for.
• Asking for reimbursement for the made-up cost of goods or services provided for free.
• Collusion with someone in another business who can provide falsified documents to show purchase and payment.
• Personal expenses labelled as business expenses.
• Duplicated claims, for example, an employee might claim for legitimate travel expenses in one month and then claim the same expenses two months later.
• Purchasing an item using the business credit card and providing a personal card to receive the refund when goods are returned.
• Inflating legitimate expenses, such as meals or meeting costs, paid for in cash.

Steps to Proactive Expense Management

• Get a policy in place that includes limits on categories such as travel, office supplies or business meetings, and a clear authorisation process.
• Randomly check all expenses to ensure no staff members are collaborating.
• Get digital credit cards for employees who need to purchase items on behalf of the business regularly. Some solutions allow you to set monthly budgets and limits for specific categories.
• Make it easy for employees. Using a phone app means there is no excuse not to get a photo of the invoice or receipt, and the authorisation process is built into the app.

Mistakes in claims happen, and not all expense claim errors are fraudulent. But by having a procedure in place, you'll soon pick up an innocent mistake compared to deliberate fraud.

Talk to us if you’d like to know more about apps, such as Divipay and Expensify, that provide a systematic process for proactive expense management.

Making it easier to get paid

Making sure you get paid on time is crucial to your success.

The process of making sales and generating revenue lies at the heart of any business model. But you can't manage your cashflow effectively or raise any profits if customers don't actually pay their invoices.

The easier you can make it for customers to pay you, the faster you'll see cash coming into the business. That’s good news for your financial position, your ability to cover your operational costs and your capacity to fund the growth and expansion of your business.

So, how do you speed up those payments and make sure you get paid on time?

Set out clear payment terms

Your payment terms are the starting point for healthy payment times.

These terms set out when you expect to be paid and form a legally binding contract with the customer.

You may expect immediate payment on receipt of the invoice. Or you might set out a specific number of days that the customer has to pay the invoice (generally 30, 60, 90 or 120 days, depending on your industry). This is sometimes called ‘trade credit’ and allows your customers to pay for goods and services at a later, pre-agreed date – helping them to spread the cost.

Your payment terms should also include details of any late payment penalties.

If the customer doesn’t meet your agreed payment times, most businesses will add a 1% to 1.5% monthly late payment fee to the outstanding bill. This acts as a great incentive for the customer to pay the bill, before the penalty fees start mounting up.

Invoice customers as soon as you can

In a business-to-consumer (B2C) environment, your customers will generally pay for their goods and services immediately. But when you’re working in the business-to-business (B2B) world, you’ll need to send your customer an invoice, asking for the money to be paid.

A customer can’t settle their bill until you send them an invoice. So, it’s vital to send out the invoice as quickly as possible, so you can minimise the gap between doing the work and being paid for the work.

In some industries, the project will be broken down into multiple invoices, paid across a period of time. This makes it easier for the customer to pay, and means you (as the supplier) don’t have to complete the project before receiving the money you’re owed.

Ideally, you want your invoices to go out as early as possible. This allows your payment terms to kick in and makes it easier to predict when cash will be coming into the business.

Be organised about your payment admin

Getting paid is a process – and the more organised you make the process, the quicker the payment will be received.

When you send out the invoice, make sure you send it to all the relevant people in the payment chain. This will usually be:

• Your main contact at the client – the person who you usually deal with
• The person who will approve the bill – the person who will green-light the payment
• The finance team – the person (or people) who will actually action the payment.

It’s also a good idea to quote any relevant purchase order (PO) numbers that the customer has raised, and to give a very clear description of the work done, or the goods purchased.

Embrace the available payment technology

Invoices used to be hard-copy printed bills, but in the digital age the vast majority of companies will send out e-invoices.

Electronic invoices are easy to raise (usually from your accounting software or project management app) and can be emailed out instantly.

Doing everything in the digital realm also makes it easier to keep records and keep track of payments.

Many e-invoice systems will also let you add a variety of different payment options for the customer.

You could just include your bank details and wait for the customer to make a direct payment to your account. But you can also include payment buttons in the e-invoice that give customers the option to pay via digital payment gateways, like Stripe or GoCardless.

Offering more ways to pay makes the whole process more convenient for your customers. And it will generally result in faster payment times as a result.

If you want to speed up your payment times and boost your cashflow, please do get in touch. We can help you streamline your payment processes and embrace the latest in payment tech.