Renae Pitargue, Author at BUSY01 and First Class Accounts Ovens and Murray - Page 22 of 29

All Posts by Renae Pitargue

Saving time and money with a bookkeeper

Saving time and money with a bookkeeper

Turning a profit will be high on your list of goals as a business owner. And if you want to generate the best margins, that means keeping an eye on the money that’s going out of the business, as well as what’s coming in.

So, how can your bookkeeper help with this?

The days where your bookkeeper just did the bookkeeping, compiled your accounts and filed your BAS are well and truly over. Modern bookkeeping firms are far more interested in helping you with your financial performance, your business strategy and offering flexible value-add services that put you in better control of your finances.

If you partner with the right bookkeeper, we can actually save you money – in both the short, medium and long-term. And that’s good news for the growth of your business.

Key ways your bookkeeper can save you time and enhance your financial health

The less expenditure you have as a company, the bigger your profit margin. It sounds incredibly simple, doesn’t it?

The smaller your costs, the larger your profit. But if you’re not fully in control of your financial management, it’s very difficult to know WHERE you’re spending money, and WHY you’re not achieving your profit targets.

This is where working with a bookkeeper adds a huge amount of value. Your bookkeeper helps put you back in the driving seat of your finances. And that’s never been more needed than in the current economic climate.

So, what specific things can your bookkeeper do and what will the impact be on the future of your business?

Cashflow management and advice

‘Cash is King’ may be a cliche, but it’s true. Unless you can balance the cash inflows and outflows from your business, you’ll never have the liquid cash to pay your bills, cover your payroll costs or cover your operational expenses. We’ll show you where money is going out, and coming in, so you achieve the ideal positive cashflow position.

Cost control and spend management

To improve your cashflow, you need to reduce your cash outflows. An important way to do this is to focus on cost control and spend management, reducing your expenditure, removing unnecessary costs and negotiating better deals with your suppliers. The more you cut costs back, the better your cashflow will be and the easier it will be to thrive, grow and become more profitable.

Forecasting and financial modelling

When we understand the key financial drivers in your business, we can build you a full financial model. This allows us to change the variables, run different scenarios and forecast the various future paths of your business. Being able to project these numbers forward gives you a clearer view of the path ahead. And that’s invaluable in the challenging economic times that we all face at present.

Better management reporting and information

Your decision-making stands or falls on the information you have available to you. We provide detailed management accounts, breakdowns of key metrics and forecasts of your cashflow, spending, aged debt and revenue – all of which helps you to save money, make sound decisions and keep the revenues flowing into your business.

There are a number of Apps that create efficiencies with cashflow management and forecasting to help you save time and money, and have a life.

Rather than spending your life working in your business and trying to do everything yourself, you'll be saving time and money with a bookkeeper. We’ll help you optimise the most profitable parts of the business and increase your overall return on investment.

Let’s talk about how we can work together to support your ongoing business profitability.

Safeguard your business

Safeguard your business

Small business is all about relationships. But when these go wrong, it is devastating.

Ensure you have the systems in place to routinely look at where your money’s going in order to safeguard your business and your relationships.

Being able to trust your team is gold standard but introducing a few simple processes ensures that is much harder for someone to abuse your trust.

Think about these tips to safeguard your business and keep your trusted relationships strong.

Housekeeping

Good systems make it easy to understand and hard to hide things. If you have a system, make sure it’s documented. They don’t have to be complicated. For instance, when you refund a customer, make sure it’s signed off by a manager or yourself and recorded somewhere central. Checklists can make a system easier for staff to understand and work with too.

Have systems in place to routinely look at where your money’s going or that require you to sign off on key transactions.

Monitoring

Do you have regular reporting? Things to look for are unusual customer refunds or credits, a spike in new suppliers or payments to existing ones. Do your sales look right? Is there a dip in cash sales?

Know what benchmarks other businesses in your industry are hitting. Compare your profit to overhead ratios with theirs and question inconsistencies.

Risk Assessment

Conduct an annual risk assessment of your business to make sure your systems and monitoring are still relevant and in place. 

Talk to us about setting up or reviewing the systems you have in place.

strategic alliances

Strategic alliances: the benefits of working together

Strategic Alliances: the benefits of working together

Your business may compete head-to-head with a number of other companies, but this doesn’t mean you have to treat ALL other businesses as if they are the competition. In fact, there are real benefits in creating strategic alliances with other like-minded organisations.

When you look at the wider marketplace, you’ll see that there are businesses out there that may well compliment your offering. And by working together (rather than against each other) it’s possible to become valued strategic partners. Collaborating to serve your joint customers, improve brand awareness and, ultimately, expand your target market.

If this sounds like a positive strategy, now’s the time to do your homework and start hunting down the best strategic partners for your business.

Working to serve a shared customer base

Strategic alliances are all about finding the common ground between you and your intended partner. This means finding the best ways to combine your efforts.

If you can share the same customer audience, and create a complementary way of meeting their needs, that creates a broader, more connected way of growing both companies.

Finding a company that’s interested in forming a strategic alliance

Find partners in complementary sectors

If you’re an professional services business, like us, it makes sense to partner with solicitors, lawyers, accountants, marketers, and other professional services providers who can help your clients.

If you're a manufacturer, find a shared audience or customer need, and to create some real synergy between your two businesses. For example, if you're a maker of shoes it makes sense to partner with a clothing manufacturer that shares your same sense of style and purpose. 

Take part in business networking and events

To get a wider understanding of your local, or industry specific, business network, it’s worth taking part in plenty of online and offline business events. You’ll meet new people, hear about new brands and will find it easier to find your ideal strategic partner. The wider your business network, the more choices you have for an alliance.

Look at crossover between your target audiences

Once you’ve found a potential strategic partner, it’s important to take a detailed look at the crossover between your partner’s audience and your audience. Do they shop through the same channels? Do they fit a certain age group or social demographic? Are these customers local? Or are they part of a national or global online customer base? How large is their database?

Cross-reference your customer databases

By sharing and comparing your client relationship management (CRM) data, you can cross-reference both sets of customer data. Then see where there’s overlap, or where you may already share some of the same customers. The better you understand each other’s customers, the more likely it is that you’ll find some common ground for shared marketing and promotion.

Run joint events and promotions

Present joint webinars with your strategic partner, or run joint promotions. By finding a common theme, you bring both audiences together and reinforce the alliance between your two brands. You also reduce the expenditure by sharing the costs and reach a wider audience.

Combine your R&D efforts

To move your alliance forward, you can also try combining your research and development (R&D) activity. Find new products, new services and new ways of keeping your joint customers happy. By sharing the time, costs and effort of developing new offerings, both companies will benefit. And you keep your businesses at the cutting edge of their respective sectors or specialisms.

Strategic alliances are all about finding the common ground. If you share the same customer audience and create a complementary way of meeting their needs, you can significantly expand your target market.

cash flow vs profitability

Cash flow vs profitability

Cash flow vs profitability.

We all know that understanding cash flow is vital to the success of your business.

And having cash reserves is important to make sure you are never left short at crucial times, such as when wages are due, and when tax and loan repayments needs to be paid. Or, as 2020 has shown us, if the unexpected occurs.

That’s why it’s important to be able to forecast your business’ cashflow.

An accurate cash flow forecast should take into account your business’ current performance across revenue, operating costs, payment habits of both, financing commitments etc.

It should also include what you know about future trends and seasonality.

Cash flow vs Profitability - What’s the difference?

Having positive cash flow is different to being profitable.

Positive cash flow means your revenue comes in on time to pay your expenses and keep you from running out of cash.

Profitability means your revenue is greater than all the expenses required to keep your business generating that revenue.

Basically, timing is the difference between the two.

An example

If you sell $1,000 of goods every month and spend $500 in a month, you will make +$500 profit.

But if you’ve paid your suppliers for the $500 expenditure within the month and fail to collect the cash from the sale of goods within the month you would have -$500 in negative cash flow.

Why it's important to understand the difference between cash flow and profitability

Unfortunately, many businesses fail due to poor customer payment collections, and not understanding the difference between profitability and positive cash flow. 

It’s important not to rely on a profit showing in the Profit and Loss statement, as it is more reflective of positive cash flow than actual profit.

When relying on your bank balance and the P&L to indicate your business performance, you are at huge risk of forgetting all of the items you are responsible for “below the fold” on the Balance Sheet.

Often, the biggest, lumpiest cash out flows that you are responsible for appear there: GST, payroll taxes, loan repayments etc.

This is why it’s important to implement forecasting in your business. A great option to implement forecasting is Futrli. 

Talk to us about how we can help you forecast your business cashflow and profitability.

Setting Sales Targets

Setting Sales Targets

Setting Sales Targets

Setting sales targets for your business is standard practice for any aspirational, growing company. If you’re going to stretch the sales and marketing teams, it’s important to have clear, unambiguous targets for them to aim for.

Setting sales targets in uncertain times

In uncertain times it’s more than likely that your established sales targets will effectively become unrealistic and impractical for your teams to use.

So, how do you set sales targets when the world has changed? 

And how can you ensure these targets are meaningful, accurate and workable for your business goals?

Understanding your strategy and sales numbers

Knowledge is power, especially when it comes to defining your business strategy during uncertain times. The better you understand your position, the easier it will be to agree on the right strategy and to set sales targets that support these aims.

With a plan in place and targets to meet, everyone knows what they need to achieve. A list of key tasks to do at each point along the sales journey adds real value. Even if you don't end up gaining new business, you’ve made every effort to solve the customer's needs.

Important steps for setting sales targets:

Understand your turnover and profit goals.

Do you know how many sales to make if you’re going to break even, or want to actually make money? 

Understanding your gross margin, your break-even point and your desired profit margin helps you calculate how many sales will be needed to achieve this profit goal.

Bear in mind, of course, that your sales will, most likely, be down during uncertain times. And work this into your figures and targets.

Make your targets SMART

If you set sales targets then these numbers have to be Smart (Specific, Measurable, Achievable, Realistic, Timely).

Break them down into achievable goals, such as weekly or monthly targets, and track your actual sales over time. That way you can see how you’re performing against your sales target. 

Look at regular performance reports and make these part of your regular management meetings. Discuss how you’re tracking and what action you can take if you’re not hitting your desired targets.

Track other sales elements

It’s also worth considering what other elements of the sales process you can measure, to get a handle on how you’re doing as a business. Track things like calls/enquiries, visits to your home page, trials, bookings or customer demos.

Analyse what drove these enquiries or visits, so you understand where things worked well and can do more of the same.

Run forecasts and scenarios

Use your tracking data to project your sales position forward in time. Base your projections on the historic information you have available and the other drivers you’ve identified. 

Run different scenarios. For example, 75% sales based on prior year numbers, 50% sales and 25% sales. And see how you’d need to tweak your sales targets to account for these drops in sales activity.

Fill the information gaps

Are there any gaps you could fill to get a better understanding of the market and your customers?

A proactive effort to make more follow-up calls with existing customers can be incredibly informative.

Running a customer feedback survey can also help to gauge where the sales process works well, where you could do better and what their future buying intentions might be over the coming months of the crisis.

Talk to us about your sales targeting process.

contractor or employee

Contractor or Employee

Contractor or Employee 

What You Need to Know

Should your staff be contractors or employees?

There are many factors to assess and, as a business owner, it’s your responsibility to get it right.

So, what is the difference between a contractor and an employee?

An employee

  • works in the business and is integral to that business
  • has rights and entitlements under the Fair Work Act 2009
  • has a reasonable expectation of ongoing work, agreed hours and duties
  • is covered by the employer’s workers compensation insurance
  • is paid superannuation guarantee.

A contractor

  • is actively running and advertising their own business
  • is responsible for their own insurance, equipment, licenses and tax
  • has a high level of independence, discretion and control as to how and when the work is performed
  • is able to delegate work
  • is liable to fix mistakes at their own cost
  • may or may not be paid super depending on the nature of the work engagement.

It is the business owner’s legal responsibility to determine the nature of the work and the correct basis of engagement. We can help you get it right.

Multi Factor Test

There are many factors involved in deciding whether a worker is an employee or contractor. And the guidelines must be applied individually to each working relationship.

There is no single overriding factor, rather, the totality of the working relationship and nature of the work being done is taken into consideration.

Sole Trader as a Contractor May Not be Right

When sole traders are engaged as contractors, the business owner needs to check whether they really meet the criteria for being engaged as a contractor. Many sole traders engaged as contractors are not actively carrying on a business, and do not have the level of independence that a contractor should have. This is even if they have their own ABN. 

Sole traders are often engaged for their own services and labour. However they are not free to delegate the work to someone else and must work under the direction of the employing business. In this case, they should be engaged as an employee and not a contractor.

Factors to Consider

This is not an exhaustive list but some of the main factors to assess.

  • Is the worker engaged to achieve a specific result or are they engaged for their labour?
  • Are they able to delegate their contract to another worker within their own business?
  • How much choice do they have in where, when and how the work is performed?
  • Is the service integral to the business?
  • Do they advertise services and accept work from other businesses?
  • Who is liable to fix damages or mistakes?

Contractor or Casual Employee?

If you are not sure whether a worker is an employee or a contractor, check the ATO Employee or Contractor information first.

It’s okay to engage a worker as a contractor initially and to reassess the engagement three to six months later if the situation is unclear.

However, at that point, if the worker does not meet the contractor definition and you don’t need a permanent employee, put them on as a casual employee. This is often the best solution for both parties.  It means the employer is compliant with tax, super and employment laws. Plus the worker retains some flexibility while being paid super and having tax taken care of.

The ATO and the Fair Work Ombudsman are particularly concerned with the validity of sole traders treated as contractors. This is because they are the workers most frequently disadvantaged by being classified incorrectly as a contractor when they in fact meet the test for being an employee.

Get it Right to Avoid Penalties

A business that should have engaged a worker as an employee will be liable for back-payment of entitlements (such as leave, overtime and allowances), and superannuation.

Some situations are straightforward to work out. But many contractor or employee decisions are not so easy with so many factors to consider.

Let us help you get it right and sort out the tax and superannuation obligations for all your workers whether contractors or employees.

benefits of forecasting

What are the benefits of forecasting?


What are the benefits of forecasting?

There are many benefits to forecasting for your business.

First and foremost is that you’re more likely to maximise your profits if you are able to accurately project your revenues and expenses.

Additionally, accurate forecasting helps you to identify potential opportunities and manage your cashflow. And when you have this information you are able to make educated decisions at the right time for your business.

Here are some examples of questions that an accurate forecast of your cash flow could help you answer:

  • Can i start creating a new product/service?
  • Can I open a new office/location or start selling in a different area/country?
  • Can I afford another member of staff or outsourced assets?
  • Can I take more money out of my business?
  • Am I at risk of running out of cash?

How do you create a forecast?

The short answer is you don’t have to do it manually anymore.

Forecasting Apps, such as Futrli, mean that the complex, manual time-consuming forecasting is a thing of the past. Forecasting is now possible with the click of a button.

An added benefit of using Futrli to forecast, is that you can test out your decisions before you make them.

Using automated predictions means you have a second brain on your business 24/7.

Futrli

  • Creates separate predictions for invoices, cash transactions and journal entries
  • Works out how many days it takes for invoices to be paid for every account
  • Considers ‘what we thought the month will look like’ compared to current month actuals and adjusts accordingly
  • Reads account names and looks for account-specific patterns
  • Creates staff payroll predictions just like your payroll software does

And the information is presented in chart format, making it easy to understand.

How far into the future should I forecast?

Forecasts are most beneficial for looking at the next year. They should be used in the short term for immediate planning and decision making and medium to long term to assess and extrapolate current trends.

It’s important to remember that the further you look into the future, the less accurate your cash flow forecast will be as there are too many unknowns yet to pass.

Talk to us about forecasting and how Futrli can benefit your business. 

Coming out stronger

Coming out stronger

Coming Out Stronger

What does the future look like?

2020 and the COVID-19 pandemic has brought significant challenges for many people, including business owners.

While we are starting to see an easing of restrictions and a return to (Covid) normal the impact of these challenges cannot be underestimated.

While we cannot be sure of what’s ahead, it’s important to be looking forward and planning for your future.
If you're a small business owner, you can become more resilient and in control by applying these few strategies.

Coming Out Stronger Strategies

  • If you have been receiving JobKeeper 1.0, forecast your eligibility for JobKeeper 2.0 and 3.0
  • Prepare and maintain a cashflow forecast with and without JobKeeper
  • Know the key dates where Government support changes, reduces, or ceases
  • Prepare a breakeven analysis for various scenarios
  • Regain perspective by booking a meeting with your bookkeeper 
  • Set a regular review meeting to review and interpret your monthly numbers and key indicators
  • Do a check of your first quarter profits and do a forecast of your future profits to work out if any 2021 tax needs to be set aside
  • Document your future plans for your business - immediate exit, gradual exit, continuation, diversifying
  • If you haven’t already done it, get your 2020 Income tax done or scheduled for completion as soon as possible
  • Review your systems and processes to see where improved efficiencies can be made, especially through the introduction of apps that can reduce paperwork (and the time involved) considerably

If you are seeking advice on business Apps, we specialise in understanding the different options for different industries and businesses. We provide you with insights and guidance on what Apps would best suit your business.

Or, if you're interested in any of these measures contact us to discuss how we can help you become more strategic, resilient, and in control.

demystifying your balance sheet

Demystifying your balance sheet

What story does your Balance Sheet tell?

Do you understand the story your Balance Sheet tells about your business? 

It’s important you understand the components of your Balance Sheet and the key ratios that measure the health of your business.

1. It measures the net worth of your business.

Your Balance Sheet is made up of all of your assets and liabilities; your net worth is your total assets less total liabilities.

Current assets are assets which are expected to be converted into cash within 12 months; current liabilities are expected to be paid within 12 months

Non-current assets aren’t expected to be converted into cash in the short-term; non-current liabilities are long-term liabilities which aren’t expected to be paid within 12 months

Your net worth is the owners’ interest in the business. In other words, if your business was to be wound up this is how much you’d be left with as the owner of the business.

2. It tells you if your business is solvent.

Solvency is the acid test for survival. If your business is insolvent, without immediate action to remedy this, it’s unlikely to survive for long. There are two components to solvency:

Current ratio greater than 1 (current assets / current liabilities)

Positive net assets (total assets - total liabilities)

If your business is insolvent, you’ll struggle to pay bills on time and you may be personally at risk. It’s imperative you seek help immediately if your business is insolvent.

3. It allows you track the strength of your business.

By comparing your Balance Sheet to previous periods, you can track whether your net worth is increasing or decreasing.

The stronger your Balance Sheet, the easier it will be for your business to survive a downturn.

For example, if your retained earnings are diminishing over time, it’s clear that you need to take action to strengthen your Balance Sheet to ensure you’ll receive value upon the wind up or sale of your business.

4. You can calculate key ratios.

Key ratios not only allow you to compare your results year on year or to industry benchmarks, they also highlight areas for improvement.

For example, calculating your debtor days may show that it takes on average 35 days for customers to pay you. If your payment terms are within 7 days of invoice, it’s clear that your debtor processes need to be strengthened.

Perhaps you calculate how long it takes inventory to sell and see it’s taking twice as long to sell this year than it did last year. Or, maybe a specific product is taking a lot longer to sell than others, which may indicate you should discontinue it. Key ratios calculated using your Balance Sheet can tell a us a multitude of things.

As a business owner you should be able to read your Balance Sheet and understand what it's telling you. 

If you need help demystifying your Balance Sheet and identifying key areas for improvement, get in touch now!

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