The CPA Australia Quality Review Program, performed approximately every 5 years, is an ongoing mandatory condition of holding of a Public Practice Certificate (PPC) under CPA Australia.
Quality reviews are conducted by CPA Australia accredited reviewers, who look at procedures in place within the practice and, through reviewing a sample of files in each practice, provides assurance to CPA Australia that the practice complies with professional standards of quality control.
We are extremely proud to have passed our recent CPA Quality Review with “flying colors”!
We were given 100/100 across all compliance areas and regarded as the best firm out of the 50 he had reviewed so far.
So what does this mean for our valued clients? Here are some comments from the CPA Reviewer:
This is a huge achievement for the Consolid8 team and is testament to our culture of continuous improvement! It also provides assurance to our clients that your data and information are secure, our staff are extremely well trained and your engagements with us are performed to the highest standard.
Being an innovative force in the accounting industry, we look forward to continuously improving our system and procedures to ensure the highest standards and best client engagement for our clients.
Everyone wants to save on tax. The good news for small business owners, you have more ways to save on taxes than most people. Tanya’s checklist shows there are a numbers of simple strategies you can implement to minimise or defer how much tax you will pay this Financial Year.
Depending on your situation, our tax planning process could save you thousands of dollars. That’s cash in your bank account, rather than the Tax Office’s. But, like Christmas Shopping, we recommend you don’t leave tax planning to the last minute. Call or email us as soon as possible so we can make a time to sit down and start planning.
Now ... to Tanya’s checklist:
Defer Income - a simple tip that can defer a lot of tax for you
Sometimes it’s the things you don’t do that save you a bundle. “If your cashflow allows, consider holding off on invoices until 1 July. This will allow you to defer your tax liability to the following financial year and defer tax payable on that income for another year,” says Tanya.
The big tip here, of course, is to keep in mind your tax bracket for both financial years. You need to be sure you won’t be taxed at a higher rate on the deferred income. We recommend having a budget to manage these months’ income and expenses. We can help you with that.
Claim before spending a cent!
Just because you haven’t paid for something doesn’t mean you can’t claim it. Tanya explains businesses can get an immediate deduction for certain expenses that have been “incurred” but not paid by 30 June, including:
Bring forward payments
Consider bringing forward any expenditure that you will incur after 30 June by asking for the invoice before 30 June (i.e. staff training, insurances, subscriptions, donations etc.)
Consider purchasing consumables (stationery, printing, office and computer supplies) before 30 June. Another way to reduce your tax liability is to make payment for repairs and maintenance of property owned by your business or rental properties before 30 June.
Super deals - Pay the June quarter superannuation
Superannuation if paid on time is deductible when paid. Since you have to pay the 9.5% superannuation by 28 July, bring it forward a month and pay it now and claim the deduction. Why wait a whole year to reduce your tax?
Using all of your superannuation cap
The federal government has made some changes to superannuation. But, putting money into superannuation is one of the best ways to minimize your income tax bill. If maximising your superannuation is part of your retirement plan, then don’t forget to contribute as much as you can into your super fund. Make sure you don’t exceed the super contribution caps. We can guide you as to how much you can contribute each year.
The value of your closing stock directly affects your business profit, the higher your stock value the higher your profit and tax. Makes sure you do a complete stocktake before 30 June. If you find obsolete or out of date stock that your business simply can’t sell, you can write it off before June 30 and get a tax deduction this year.
“This will give you a tax deduction equivalent to the value of the asset at the beginning of the financial year,” says Tanya.
Write-off Bad Debts
Your income tax is payable on any invoices you’ve issued, even if you haven’t been paid. Don’t pay tax on any invoice you know won’t ever get paid. Review the list of those who owe you money and write off those ‘bad debts’ now.
Tanya’s Tip - you need to show that you’ve made a genuine attempt to recover the debt. Generally, the debt needs to be over 12 months old. Prepare a document listing each Bad Debt, as evidence that these amounts were actually written off prior to year-end.
Capital Gains Tax (CGT)
Minimising your capital gains tax is often about timing. Ensure the asset has been owned for at least 12 months. If you already have a capital gain, are there any investments making a loss you can sell? Do you qualify for any capital gain rollover relief concessions? Or the Small Business CGT concessions? Again, we can guide you here. CGT is a whole topic on its own, and the potential savings are so great, it is definitely an area in which you should seek our guidance.
Private company loans
If you have borrowed funds from your company we recommend you get in contact with us. You need to have a proper loan agreement in place. We will review your position and ensure that the minimum principal and interest repayments are made by 30 June.
“Its important business owners are aware of this requirement as the penalty for non-compliance can result in the entire loan amount being deemed as an unfranked dividend paid and taxed at marginal rates!”
A word of warning
These strategies need to be assessed in the context of your business cash flow. Tanya explains “Prepaying expenses, purchasing assets or making a voluntary contribution to your super fund will improve your tax position but could have a detrimental effect on your cash flow. Many people get caught out at this time of the year spending money purely to get a tax dedication.”
Don’t forget – any fees paid to your accountant for tax planning can be claimed as a tax deduction. A small investment in tax planning strategies can save your business thousands.
Call us on 1300 222 353 or email us at email@example.com if you would like to talk to us about tax planning strategies that deliver maximum tax savings.
In the past 10 years, we have seen many of our clients in start-up and technology space who come up with inspirational ideas and brilliant concepts. Unfortunately, going from ideas to the finished products takes a lot more than hard work. Just like everyone who has made to success, you need to invest in a lot of research and development.
And R&D doesn’t come cheap.
Fortunately, the Federal Government provide great incentives for companies which invest in R&D activities to boost competitiveness and improve productivity across the Australian economy.
The 30 April cutoff date for lodgement of 2017 R&D Incentive application is fast approaching. Therefore, if you run a company that is investing in R&D, and would love to get Federal Government to partially fund your project, you need to act now!
The R&D Incentive program is jointly administered by AusIndustry and the Australian Tax Office (ATO).
Businesses conducting R&D may be eligible for:
Importantly, core R&D activities must be conducted for the purpose of generating new knowledge (including the creation of improved materials, products, devices, processes or services).
Each year you must apply to register for the R&D Tax Incentive and the application must be lodged within 10 months of your company’s income year.
It is worth noting company is the only type of business structure which is eligible for R&D Tax Incentive. If you are running your R&D activities under a sole trader, trust or partnership, a restructure might be required.
It’s also critical that your company keeps adequate records to show it carried out eligible activities in incurring the claimed expenditure. Documenting your R&D should be a year-round activity. However, towards the end of the year, you should review your records and update if needed.
R&D claim for software industries
R&D in the software industry is perhaps the trickiest to assess for eligibility as developing any software can, on the surface, appear to be R&D since software is developed iteratively, usually involves developing something new, and involves problem solving. However, this doesn’t necessarily make it eligible for the R&D Tax Incentive.
In assessing whether your company is undertaking R&D in its software development, ask yourself the following questions:
Another common issue with software R&D is scope. Rarely does an entire software development project involve R&D. More Commonly, R&D is a component of a project. Take this example – a company is developing an app that allows a user to scan barcodes from common food items in a supermarket, and then provide nutritional information and information about where the ingredients were sourced from. The R&D component of this could be in developing algorithms to recognize barcodes and cross reference to a library. However, the user interface, backed database etc. is not likely to be R&D. In this example, a company should register only the core algorithm development as R&D (with any directly supporting activity), but not the other development activities needed to build the final commercial app.
Shakeel Yusuf from our R&D specialist team has extensive experience in software and IT industries. Shakeel has worked in R&D for over 13 years now and has worked both in AusIndustry as an accessor and then as an advisor in 'big 4' accounting firm.
Recently, Shakeel has helped a client who is developing a graphic design tool to successfully go through the AusIndustry review process. Moreover, we have also secured an R&D Overseas Finding approval for their R&D activities under which their overseas R&D developer costs would be claimable for the tax incentive.
If you’re eligible for the R&D Tax Incentive but not applying for it, you’re leaving cash on the table.
We have a strong R&D specialist team who can help you make sure you tick all the relevant boxes and get the most out of your R&D Tax claims.
Call us on 1300 222 353 or email us at firstname.lastname@example.org if you would like to talk to us about R&D Tax Incentive.
A good accountant is not only a valuable resource for planning accounting and tax for your business; you should be able to turn to them for advice on almost every aspect of your operations.
Finding the right accountant and working with them closely is therefore a vital step – but this is easier said than done for many business owners.
How can you increase the chances of getting what you need from your accountant to grow your business? How do you get the most out of your accountant?
Here are five of the best tips we’ve found for business owners who are looking to develop a rewarding relationship with their accountant…
1. Recognise your strengths & limitations
Do you repair your own photocopier?
While it’s a mechanical task that may be accomplished with the use of a manual, why do so few business owners do it? The answer is generally that they recognise that somebody else can do it more efficiently, reliably, and cost-effectively.
So why do many over-worked business owners take the reverse approach when it comes to business structure set up, tax planning, capital gains tax, financial analysis, and a host of other highly specialised areas?
They get out the text books or ask, “Dr Google” to help them develop professional accounting expertise.
There is nothing wrong with trying to solve problems yourself, if it is cost-effective to do so. However, if the time you spend in accounting tasks was invested in winning more business or improving service delivery for clients, you would generally get better returns.
As a business owner, you need to be across the fundamentals of your business and have a working knowledge of all the important areas for day-to-day operations. But you don’t need be an expert in every aspect of your business.
Recognise your strengths and limitations. Outsource what you are not best at to the professionals and see what a difference it makes to you and your business!
2. Help your accountant to help you
Accountants are essentially paid for their skills, time, and the value they add to your business.
The more organised you are, the less time it takes the accountant to get the work done. More importantly, it also means they can spend more time looking for opportunities to improve your business and fast track its growth.
One of the biggest inefficiencies is when an accountant must revisit a job multiple times because they cannot get the information from clients to complete it. Another is when business owners only tell half of the story at the start (most of the time unintentionally), meaning the accountant must make changes and rework the project later.
Here are a few suggestions for creating more efficiency in order to get the most out of your accountant – and lower your fees in the process:
3. Be prepared!
Before consulting with accountants or any other professionals, it is always worthwhile getting an overview of their expertise and how they may be able to help your business.
Being prepared and doing your homework before the meeting will help you set realistic goals and expectations for their involvement. It will also help you to ask relevant and intelligent questions and to understand and act upon the advice given.
A little preparation will help you to maximise the benefits of the time you spend together and get the most out of your accountant.
4. Take advantage of ‘free’ consultations
Many accountants offer free consultations at one time or another. Take advantage of them!
Again, you will get more out of these consultations if, before the meeting, you do a little homework on what you want to cover. Consider sending the accountant a summary of your business situation, your needs/pain points, and set out the issues you need assistance with.
In this way, the accountant will have enough time and background information to give the issue serious thought beforehand; the discussion in the meeting should then be of greater benefit to you. It will also help you find out whether the accountant really understands your business and has potential solutions for your main issues.
5. Look before you leap - and don’t take short-cuts
We all know that prevention is better than cure.
Business owners, in the spirit of exercising their entrepreneurship, often enter into arrangements without considering the full implications of their actions.
A short telephone call or meeting with your accountant may cost a little now but it can save a lot in reducing missed opportunities and unexpected risks in the future.
Not getting the most out of your present accounting set up? If you need a chat about your situation, feel free to contact us and we’ll do our best to point you in the right direction.
A new financial year is like springtime for your business. Full of opportunities to breathe new life into existing processes and ways of thinking. We love this time of the year for new resolutions. Much better than in January when you’re battling post summer holiday blues.
A simple way to start making big changes is by setting a business budget. Sounds like a daunting task but a well-planned budget is the key to good financial health.
Tanya has a different approach to setting a budget – she builds a budget from the bottom up. Start by determining what profit you want to make. Then review all expenses, looking for opportunities to reduce costs. Your target revenue is determined by target profit plus all business expenses. It should be bottom line profit that drives the top line revenue.
For example: this year you want to make a net profit of $60,000. Your operating costs sit at $150,000 and direct costs are around $230,000. To achieve this profit your annual revenue needs to be $440,000.
Here’s four simple steps for building a business budget:
Step 1: Net Profit
Decide how much profit you want to make in the next 12 months (after paying yourself a salary).
Step 2: Operating Expenses
Look at every operating expense like car registration, phone and internet, insurances. What can be reduced, removed or renegotiated? Small changes to business expenses can make a big impact.
Step 3: Direct Expenses
These are costs which directly contribute to making or selling your product or service like wages, freight. It is harder to reduce direct expenses but look for saving measures.
Step 4: Add Net Profit + Operating Expenses + Direct Expenses to get your Target Revenue.
Break this target revenue down by month (consider any seasonal adjustments).
Now the fun begins. Is this revenue target realistic? Start by validating the number by reviewing historical data. What were your revenue targets 12 months ago? Can you achieve this year’s target?
The process of building a business budget lends itself to strategic planning. How are you going to achieve the revenue target to ensure the net profit? Do you have the capacity within your team to achieve this revenue target? Do you need to review your pricing? Will you need new revenue streams? The start of a New Financial Year is the perfect time to set some targets and KPI’s.
Tanya Titman's free Acceler8 Business Improvement Video Series tackles common pain points that many business owners face. To learn more about the series, watch other episodes or sign up for upcoming videos click here
Tanya has never been afraid of implementing a “crazy idea”. How many small business owners have the courage to build an on-site childcare facility for their staff? Or embrace cloud technology before most accountants even knew it existed? Being a finalist in the prestigious Telstra Queensland Business Women’s Award is testament to Tanya’s innovative, entrepreneurial approach to business.
The Award recognises Tanya’s lifelong commitment to helping women in business improve their financial literacy. As a teenager Tanya managed the financials for her parent’s small business. She watched them endure the trials and tribulations of running a business. This inspired her to help small business owners by ensuring they understand their numbers.
Tanya now transforms the lives of women in business with Acceler8, a 12-month business improvement program designed to educate, empower and inspire business women.
According to Telstra Queensland Business Women’s Awards finalists in all categories demonstrate the unique combination of skills required for professional excellence: the courage to take risks, sound financial management, strong leadership skills and of course, sophisticated business acumen allowing them to thrive.
Winners of the 2016 Telstra Queensland Business Women’s Awards will be announced at a Gala Dinner at Brisbane City Hall on Friday 14 October.
Complete the below form to submit a message of support or congratulations for Tanya.
At Consolid8 we like to practice what we preach. Our business advice and coaching solution starts with setting targets, implementing strategies to achieve these goals and measuring the return. So, this tax season we’ve set ourselves a KPI – to save our clients $3 million in tax through proactive tax planning.
Why tax planning?
By actively reviewing your financial status and implementing our tax planning process we can (legally) minimize the tax you have to pay. Here’s some reasons why you need tax planning:
What’s the process?
Step 1 – Profit and Tax Summary
We will summarise your profit and tax so you understand your current financial position. Once we demystify your finances, we are able to recommend strategies to achieve the best outcome for your business.
Step 2 – Tax Planning Recommendations
You receive a series of expert recommendations and strategies to maximise your tax position. These will ensure you minimise the tax you pay at the End of the Financial Year.
Step 3 – Tax Savings
Not only do you receive in-depth analysis of your finances and recommendations for optimising your tax position, we also outline the potential savings you are likely to make by following the action plan and timeframe.
Step 4 - Action Plan and Timeframe
To ensure you achieve the best possible tax outcome before EOFY, we provide you with an action plan and timeline. This will assist you in achieving the maximum tax saving possible.
Before 30 June?
Absolutely, you need to act now. Our review process is designed to identify the optimal tax planning strategies to suit your circumstances and ensure they are implemented before 30 June 2016.
If you are interested in our Tax Planning Review or have questions about Tax Planning for your business, get in touch with Consolid8’s Tax Team today on 1300 222 353
Every year the Budget illustrates the Government’s fiscal and economical outlook for the whole of Australia but we’re here to highlight the most significant changes for businesses and individuals. Our Tax Gurus have outlined important tax planning considerations and changes for small businesses, medium enterprises and superannuation. As always, if you have a question about how the recent Federal Budget release affects your business, please contact us.
1.1 Increasing the small business entity turnover threshold
The Government will increase the small business entity turnover threshold from $2 million to $10 million from 1 July 2016. The current $2 million threshold will be retained for access to the small business CGT concessions. The eligibility threshold for the unincorporated small business tax discount will be raised to $5 million.
A selection of concessions available for small business and eligible thresholds is as follows:
|Aggregated annual turnover||$20,000 instant asset write-off||Small business CGT concessions/th>||Company tax rate reduction||Discount for unincorporated entities||Small business pool||Immediate deduction for certain start-up costs|
|< $2 m||Yes||Yes||Yes||Yes||Yes||Yes|
|< $5 m||Yes||No||Yes||Yes||Yes||Yes|
|< $10 m||Yes||No||Yes||No||Yes||Yes|
2.1 Reducing the company tax rate to 25%
The Government will reduce the company tax rate to 25% over 10 years. The rate will firstly be reduced to 27.5%, and then it will be reduced progressively to 25% in 2026-27.
3.1 Raising the 32.5% personal income tax threshold
The Government will increase the 32.5% personal income tax threshold from $80,000 to $87,000 from 1 July 2016. This measure will reduce the marginal tax rate on incomes between $80,000 and $87,000 from 37% to 32.5%..
4.1 GST will apply to low value imports
From 1 July 2017, the GST will apply to low value goods imported by consumers. Overseas suppliers that have an annual Australian turnover of $75,000 or more will be required to register for GST and remit GST for low value goods supplied to Australian consumers.
5.1 Concessional contributions cap will be reduced
The annual cap on concessional superannuation contributions will be reduced to $25,000 from 1 July 2017. There will be one cap for all taxpayers irrespective of their age.
5.2 Catch-up concessional superannuation contributions will be allowed
From 1 July 2017, individuals will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years. Access to the unused cap amounts will be limited to individuals with a superannuation balance less than $500,000. Amounts are carried forward on a rolling basis for a period of five consecutive years. Only unused amounts accrued from 1 July 2017 can be carried forward.
5.3 Harmonising contribution rules for those aged 65 to 74
From 1 July 2017, the Government will remove the existing restrictions on people aged 65 to 74 from making superannuation contributions for their retirement. People under the age of 75 will no longer have to satisfy a work test and will be able to receive spouse contributions.
5.4 Personal superannuation contributions will be tax deductible
From 1 July 2017, all individuals up to age 75 will be able to claim an income tax deduction for personal superannuation contributions. This effectively allows all individuals, regardless of their employment circumstances, to make concessional superannuation contributions up to the concessional cap.
5.5 A new lifetime cap for non-concessional superannuation contributions
The Government will introduce a $500,000 lifetime non-concessional contributions cap. The measure will commence at 7.30pm (AEST) on 3 May 2016. Contributions made before commencement cannot result in an excess. However, excess contributions made after commencement will need to be removed, otherwise penalty tax will apply. The cap will replace the existing annual non-concessional contributions caps of $180,000pa (or $540,000 every 3 years for individuals aged under 65).
5.6 Division 293 threshold will be reduced
From 1 July 2017, the Division 293 threshold will be reduced from $300,000 to $250,000. This threshold is the point at which high income earners pay additional 15% contributions tax on concessional contributions. This measure is designed to improve sustainability and fairness in the superannuation system by limiting the effective tax concessions provided to high income individuals.
All businesses (and individuals) are unique so these changes will affect everyone differently. As always, Consolid8 recommends you contact us to schedule a tax planning meeting with one of our talented Tax Gurus to ensure you’re in the best possible position in the lead up to End of Financial Year (EOFY). If you are currently a Consolid8 Client, our team will be in touch with you soon to start the ball rolling.
No business owner wants to be audited and we have no reason to suspect you will be. However, with the prevalent focus on increasing audit activity, it is more likely than ever that your business could be flagged for a tax audit or review by the ATO or other government body. Tanya’s strong view is that every Consolid8 client should have an Audit Insurance policy to protect them if the situation ever arose.
The ATO, along with other federal, state and territory agencies, continue to announce significant increases in their audit activity. Now more than ever, Individuals, Businesses and Self Managed Superannuation Funds are at risk of being selected for a tax audit or review. The ATO’s enhanced data-matching capabilities now enables wider scope to target both businesses and individuals.
Through our partnership with Accountancy Insurance we are able to offer clients an ‘Audit Shield’ Insurance policy with very competitive premiums. We allow clients to group all of their entities together under one policy (which is often much cheaper than insuring each entity with an individual policy). Other providers charge up to $2,500 excess but our clients will not have to pay any excess when making a claim.
What is Audit Shield Insurance?
The policy provides for the payment of professional fees incurred in the event that you are selected for a tax audit, enquiry, investigation or review instigated by the Australian Taxation Office (ATO) or other government body. The cost of being properly represented in these matters can be quite considerable depending on the length of time involved. Even the simplest enquiry can require hours of work.
What is covered?
All professional fees up to a prescribed limit (with no excess) are covered when you engage us in audit activity matters. Our fees, legal fees, bookkeeping fees and other specialist professional advisor fees are covered. Audit Shield also provides retrospective cover so all previously lodged returns are included in the coverage.
Audit Shield insurance coverage is extensive. These are just some of the situations that are covered:
Is it right for my business?
Any business owner can take advantage of the Audit Shield service. Different levels of cover are available for salary and wage earners, businesses and SMSFs. Anyone can be targeted, even if their lodgments are accurate. With this in mind, we offer you the opportunity to protect yourself with our Audit Shield service.
The Audit Shield insurance policy is not compulsory although we highly recommend that all of our clients take up the insurance. Consolid8 receives a portion of the premium and we hold the policy on your behalf. The policy covers one financial year and we will contact you prior to arrange renewal in advance of the relevant expiry date. The Audit Shield Insurance is not automatic and you must opt in to receive the cover.
Complete the form below to get a free quote. If you have questions or would like more information, please get in touch with our Audit Insurance experts on 1300 222 353.
Complete the below form to request a free comprehensive audit insurance quote from Consolid8.
Many business owners are searching for a Business Coach without understanding exactly what kind of advisor they actually need. In fact, I was not sure what a Business Coach does until several years ago, when it was explained to me. If you are searching for an advisor to assist you in your business journey then this may help pin point exactly what you need.
There are 4 different roles that an external business advisor can play – Coach, Facilitator, Mentor and Consultant.
A Business Coach is someone who helps you find your way. They will ‘coach’ you through the tough times, ask the right questions to get you to the best answers. Business Coach is ideal if you know what to do but are having trouble getting your thoughts in line and need someone to keep you accountable. Just don’t expect them to have all the answers!
A Facilitator is someone who works with a group of people. They use a variety of techniques to draw information from the participants to find answers. Facilitation is a great way to bring out ‘group thinking’. Drawing on the experience and knowledge of a group is a great way to discover new ideas, consider different points of view and share the journey in a supported environment.
A Business Mentor is someone who uses their personal and business experience to illustrate a point and help you grow. They act as a sounding board for business owners to check in with and make sure they are on track.
A Consultant is someone who gathers information, assesses the situation and then tells you what to. Consultants are great to have on board to give direction. They tell you what to do when you are not sure how to proceed.
When you break it down, it is clear you will need different advisors for different situations. A great business advisor is one that can adapt to each of these roles as and when required.
When designing Acceler8, our business improvement program, we were aware it needs to be more than a business coaching program. That is why we have incorporated all 4 elements into the learning.
The Acceler8 Program guarantees results. We can do this because:
Acceler8 is a unique business program that ticks all the boxes and delivers results.
Tanya Titman FCPA is a Managing Director, business coach and mother of four.
This client is a professional services firm, employing 5 – 10 staff members, achieving an annual turnover under $2 million. This case study is a timely warning to other business owners who think they are not at risk of an audit by the Australian Taxation Office (ATO).
When the ATO processes tax returns they ‘data match’ by cross-referencing information you have declared, against records provided to other government bodies (e.g. Department of Transport, Centrelink, AUSTRAC, Banks/Financial Institutions).
The client was notified of a Fringe Benefits Tax audit for the previous five years – this was triggered by a data match of their business vehicle registrations. The firm had registered two vehicles under the business but, before they became a Consolid8 client, had not filed FBT Returns to declare the car benefits.
The client faced over $100,000 in tax bills, interest and penalties. The ATO also indicated they may extend the investigations to a full audit of the business and its related entities – including income tax and employer obligation.
The client engaged Consolid8’s Tax Team to manage the entire audit process and liaise with the ATO on their behalf. An ATO audit is a very involved process and can take months to complete. This particular investigation consisted of face-to-face meetings with ATO Compliance Officers and multiple requests for historical data and documentation. Consolid8 was able to support the client during the meetings to ensure all questions about corporate structure, tax treatment and other aspects of their business were answered correctly.
While compiling the requested documentation, our Tax Team found reference to a vehicle logbook (detailing minimal personal use of the company vehicle). Unfortunately, the original logbook had been destroyed in the Queensland floods. Consolid8 applied for a ‘Record Keeping Concession’ with the ATO. As a result, the tax payable has been substantially reduced as well as the penalties and interest.
Consolid8’s correct treatment of financial information and management of the process has ensured minimum liabilities for the client. The client now has Audit Insurance to ensure their accounting and legal expense in relation to tax audits are covered in the future..
Complete the below form to request a free comprehensive audit insurance quote from Consolid8.
For many, the word ‘budget’ is about as appealing as the word ‘diet’. It seems to imply what you will go without, rather than what you will achieve.
For successful business owners the word ‘budget’ has a very different meaning. It’s more like a map than a diet. It’s an outline of where you want to take the business, and what you need to achieve to get there.
Running a business without a budget is like a ship’s captain setting off on a voyage without a map. Sounds ridiculous, doesn’t it. Yet this is, figuratively speaking, what many business owners do.
Successful business owners, on the other hand, not only set clear targets and budgets each year, they monitor them closely each month, even each week, and adjust them as they go throughout the year.
Here are 3 reasons why your business needs a budget, now:
One: If you don’t know where you’re going, how do you know you’re not already there?
If you’re not satisfied with how your business is performing, unless you set clear goals for where you want to take it, it’s probably as good as it is ever going to get. At best, it will just meander along, subject to the whims and vagaries of the economy and general market conditions.
The good news is - your business doesn’t need to meander along.
The first step in charting a clear course for growing and developing your business is objectively measuring ‘where it’s at’ right now. And the numbers do tell a story.
For some, they act as a wakeup call. For others, they just confirm the journey’s starting point.
It’s paradoxical that a large part of the value in a business budget is not in the numbers themselves. It’s in the realisation and acceptance of where you are and where you want to be.
The numbers are just the signposts for the journey.
A factual look at the numbers that describe where your business is right now takes away all the subjectivity, opinions and ‘reasons’ (often excuses, disguised as reasons).
This is the naked truth.
In fact, it is like standing on the scales, naked, looking at yourself in a full length mirror. That may or may not be a pretty sight!
For your business, these factual numbers are the sales, the variable costs, the margins, the overheads, and, lastly, the profit. After all your work, this is the reward you’re left with.
Then comes the first of a series of ‘hard questions’...
Answer those questions, and you’ve just described where you want to be. Congratulations! You have charted your course, which is the first step to maximising your success.
Two: What’s more important to treat? Symptoms or causes?
As you well know, sales just don’t happen. Costs don’t just drop because you want them to. Sales and costs are a result of other underlying factors. Put another way, they are symptoms of causes.
The business budgeting process quantifies the symptoms, and by asking a series of ‘What leads to this number?’ questions, it also identifies the underlying causes.
For example, underlying factors contributing to a sales (revenue) figure could include:
These are all called drivers. The sales figures are simply a result of these drivers. Costs are no different.
For example, the rent paid may be a result of the storage you need for your stock levels. Wages costs may be blowing out as a result of overtime paid but underlying that may be inefficient staff. Or a lack of clear processes.
So in reality what came first was not the sale or the cost, but their underlying drivers. The budgeting process forces you to name and to quantify these underlying drivers.
That’s one of the most valuable aspects of preparing your budget. Not the budget itself, per se, but identifying your business’ drivers.
Because then you can focus on improving them.
That’s what will produce the improved results in your business. No focusing on last quarter’s figures. That’s history.
It’s more fun to create history. And that is, in essence, what you are doing when you are in your own business. You are captain of your own destiny, and you can steer it in any direction you want.
Note that word ... direction. A key point is to have one.
You will enjoy how effectively the budgeting and planning process will get you crystal clear on your direction.
Three: Budgeting is not about accounting. It’s about being accountable.
Once you are clear on the handful of drivers that creates your business’ results, the next question is…
What are you going to do about it?
Your budget won’t just give you a monthly sales target, for example, it will help you quantify the drivers that will produce the result.
For example, if next month’s sales target is $120,000, that end-result figure is not your focus. Not on a day-to-day basis. Knowing the underlying drivers, your focus will instead become, for example:
Now you and your staff have a clear focus and are 100% accountable.
That’s good for them, and good for you and your business.
People in a business want a clear scoreboard and a ‘game to play’ so they know whether or not they are winning. Research has found that a lack of measurement in a job is demotivating to a staff member. Patrick Lencioni’s book ‘3 Signs of a Miserable Job’ gives some great examples of this.
Knowing these drivers, and quantifying a target for each you can then ask questions like:
You can then decide to improve skills, or systems, or attitude, or all three!
As you can see, the power of the budget is in the process of preparing it, and then the budget itself is a tool to hold you accountable to the measurable indicators you’ve chosen.
An added layer of accountability is... us.
We work with our clients on a monthly or quarterly basis as a sounding board and independent party to ask you the hard questions about key business drivers and the results.
We track your monthly financial results back to budget, flag any areas of concern and discuss improvement strategies to keep you and your business on course.
Call us on 1300 222 353 or email us on email@example.com to make a time to talk about creating a budget for your business. We’ll then outline the costs so you know exactly what lies ahead.
If you employ staff in your business you need to know about Fringe Benefit Tax. FBT is applied to most non-cash benefits employers provide to their employees and associates. For most businesses FBT applies to private use of cars, car parking, helping an employee with housing, providing an employee with a loan, paying private expenses like telephone or travel, providing meals or buying gifts for employees.
If FBT is applicable to your business, Consolid8's tax team can provide practical solutions to help prepare your FBT Return and legitimately reduce your FBT liability.
FBT Year End
The 2015 Fringe Benefits Tax (FBT) year ended on 31 March 2015.
Does FBT apply to me?
We recently sent our business clients a FBT Questionnaire to help determine if FBT is applicable to your business. All employers that provided fringe benefits to their employees (including directors) or to associates of employees (typically family members) at any time during 1 April 2014 to 31 March 2015 are required to lodge FBT returns.
When is tax due?
Payment for any FBT is due by 28 May 2015.
Failure to disclose fringe benefits can result in heavy penalties, and payment of prior years' outstanding taxes. This is especially important now with the self-assessment system and the ever-increasing possibility of a tax audit. Having to find the cash to pay the late penalties (on average $1,100 per late return), plus ATO interest charges plus all prior FBT bills can be very stressful. Having to fund these charges is likely to have a significant impact on your business cashflow.
How can Consolid8 help?
At Consolid8, we are determined to provide commercial, real world solutions and deliver tax savings to you. We can provide practical solutions to help you legitimately reduce your FBT liabilities. For example looking for ways to provide exempt fringe benefits, provide fringe benefits that meet the "otherwise deductible rule", make employee contributions, replace fringe benefits with cash salary or pay private expenses from private funds.
Call us today Don't hesitate to give your accountant a call to discuss FBT implication and how we can help you to manage them.
As promised, we've produced a summary of our recent Client Satisfaction Survey. Once again we would like to thank all our clients who participated in this study. We have taken your comments on board and will start developing some initiatives to make improvements. Congratulations to Tracey Praski from Zarraffas Toombul who won the $200 Coles/Myer Gift Card.
Statistics show 8 out of 10 business fail within the first 18 months. Only 50 percent survive to the four or five year mark. Tanya Titman, business turnaround specialist, reveals the foundation to business success - financial literacy.
Understand your business finances
Many business owners operate with limited or no understanding of their businesses finances. They make major decisions based on how much money is in their bank account, rather than an understanding of their true financial position.
Most entrepreneurs and business owners don't have an accounting degree. What they do have is amazing ideas and passion for their business. However, without a full understanding of your financial position, it is easy to make bad financial decisions which can send your business broke.
Overcoming your 'fear of the financials' is easy. Start looking at your financial reports (i.e. Profit and Loss Statement AND Balance Sheet) every month and ask lots of questions. Empower yourself. Find out how to run your own reports rather than relying on someone else. Stop running your business by the bank account and start taking control of your financial position.
Understand where your profit went
Your profit is outlined in a Profit & Loss Statement, it is not the amount left in your bank account at the end of the year. A P&L shows how your business performed. Your Balance Sheet shows where the profit went. By reviewing the difference between last year's figures and this year's figures on your Balance Sheet you will have a good idea of where your profit is hiding.
Understand your financial reports
If you don't know how to read a Profit and Loss Statement and Balance Sheet then find a great accountant who can explain it to you! Set a budget and lock in time with your accountant to review your results every month. Being accountable to someone you trust is critical to achieving financial success.
Manage your cashflow
Cashflow (or lack of it) is a constant challenge for all business owners. 'Cash' is the oxygen a business needs to survive day to day. By predicting when you might start to struggle with cash you can put strategies in place to ensure your business has enough money to keep going. Forecast 12 weeks in advance by listing all the income you expect to receive each week, all the business' payment commitments and when they fall due (payroll, direct debits etc.). Quite quickly you will see when you might need a cash injection.
Understand your pricing strategy
Often business owners think they need more customers to make more money. This is not always true. The biggest impact on your businesses profitability is made by getting your pricing strategy right. If you set prices based on a 'gut feel' or industry trend, then you are most likely giving away your profit. Have you factored all the costs related to selling your goods or services? Get a trusted advisor to review your pricing strategy and revisit your prices regularly.
Understand your business capacity.
How much revenue can you generate with your current resources? Who to recruit and when to do so are critical decisions. Often the business owner start by increasing their sales team. This generally means the business owner ends up doing the admin work. Write a list of all the tasks you do on a daily basis and categorise them. Consider what can be delegated or outsourced. This can often be the key to unlocking revenue and building your business capacity.
Don't run your business by the bank account!
Your bank account is not an indicator of your profit position. It is dangerous to base business decisions on whether you have money in the bank or not.
A business owner who understands their financial position is able to make informed decisions. Understanding your finances is truly the foundation to business success.
You don't have one PC at work anymore! You have an office PC, a work laptop, maybe a Mac at home, an iPad or tablet and a smart phone. You don't have staff in the same office any more, you have team members in the office, interstate, working from home and possibly an international support network. Static desktop, remote desktop connections and local drives don't cut it anymore. Office 365 is all about up-to-date secure software that is as flexible as you are.
8 reasons why Office 365 for Business is the Cloud Software you need:
1. Familiar (but better!)
Office 365 keeps itself up-to-date so you always have access to the latest versions - right now its 2013 Outlook, Word, PowerPoint, Excel, OneNote, Access and Publisher. When new releases are available you have access to them at no additional cost. All the updates, installs and syncing is taken care of behind the scenes, saving you time, keeping you up-to-date and reducing your dependence on IT support. Full desktop versions mean you can work online or offline (on the plane or when the internet goes down), and means all your documents and presentations look professional and polished at all times.
2. Flexibility (that saves you money)
Everyone's team works differently - you might have 4 people in an office, 2 working interstate or from home and a few support staff overseas. The different licence levels mean you can have a mix of full desktop or online only access which saves you money. You can also add licences as you need them. A range of options, including month to month billing, gives you scalability to increase your licences as your team grows.
3. Secure Online Collaboration & Storage (great for teams)
OneDrive Team Site & Library means all your company documents are in the cloud and can be accessed by the whole team, or locked down to a select few. Share files internally and externally, work together on the same file, ensure everyone is looking at the latest version, saved in the same place and each user has 1TB of storage so you will never run out of space.
4. Lync (online meetings, web chat and video conferencing)
Lync is a fantastic tool for teams. The software allows you to initiate online voice or HD video meetings, fast instant messaging and connect to Skype users. Our team has found Lync improves productivity by reducing interruptions. It reduces office noise allowing team members to concentrate and keeps our team connected, in touch and included even when they are not in the office. We also found that Lync increased our internal communication and reduced the number of emails we send and received.
5. Free Apps
Office for iPad, iPhone, Android tablet, Windows Phone means you can edit Word, Excel and PowerPoint documents from all your devices, wherever you are and on whatever device is in your hand. Quick changes, done quickly.
6. No upfront costs
and low cost monthly pricing is easier on your cashflow.
7. Add licences as you need them
No need to contact IT support and wait from them to respond. Quick, easy, done - no down time.
8. Each licence has 5 device installs
So you have the full up-to-date versions on all your devices (your office pc, work laptop, home Mac, iPad and tablet) without any additional fees - work more productively wherever you are.
Of course Office 365 is powered by Microsoft so it's also reliable (99.9% uptime with a financially backed guarantee) and secure. If you lose your phone or ipad, don't panic - You can wipe your data from any device remotely to prevent unauthorised access to your information.
Consolid8 are authorised Microsoft Partners and can assist you with the setup of Office 365 licences. Call Roxanne on 07 3420 8447 to find out how.
Cashflow (or lack of it) is a constant challenge for all business owners. I often refer to 'cash' as the oxygen a business needs to survive day to day. It is a critical factor which leads to the success or demise of your business.
If it's this important, why don't we have better tools and processes in place to manage it? Cashflow management is time consuming but it's also critical to your business operations. There are many articles on the internet featuring textbook answer to cashflow management and links to resources, however these are often ineffective and confusing.
So, here are some of Consolid8's 'real world' tips:
Keep it simple!
Are you searching for an amazing, fully automated tool that will manage your cashflow, forecast your cash position daily and tell you when the business will need more cash to meet daily operational requirements? Unfortunately, it doesn't exist (yet!). I have reviewed most cashflow management tools on the market and in my opinion, the products that pitch this are not there (yet). They will help you map cashflow but they are totally dependent on the information entered into your accounting system. Often this is where the problem starts.
I feel a simple spreadsheet is the best tool to manage cashflow forecasting. If you are struggling with cashflow management, email us for a copy of our template to get you started.
Forecast your position
Cashflow management is about looking forward. You need to understand the business' daily and weekly payment commitments (and when they fall due). You need to project when income will be received. It's also about constantly updating for your current bank balance. By forecasting your cash position on a weekly basis, you gain a much greater control over cashflow. I suggest you forecast 12 weeks in advance to identify any potential cash shortages and put strategies in place to manage these.
Stretch it out
How many times have you had to put money into your business to pay bills or wages? What would happen if you didn't have any money to put in? If you know in advance there is likely to be a cashflow shortage (by using our cashflow template), then you can put a plan in place to overcome it. Call people who owe you money, contact creditors and stretch out payments or make a payment arrangement with the people you owe money to. By 'managing' your cashflow in this way, it's amazing how far you can stretch it - without the need to put your personal funds into the business.
Understand your cash conversion cycle
A key part of cashflow is understanding your business cycle. How many days does it take for you to convert your time or inventory into cash? How many days does it take you to collect money owed to the business? On average how many days do you take to pay your bills? This is known as the 'cash conversion cycle'. You can calculate and track these numbers. This is a great way to understand the efficiency of your business cycle and start putting strategies in place to improve it. If you can reduce your cash conversion cycle by a few days, you can increase your business cashflow by thousands of dollars!!
Managing cashflow is a challenge for all business regardless of turnover. We have great tools to help business owners and years of 'real world' experience.
Contact your Account Manager at Consolid8 on 1300 222 353 to discuss how we can help you mange cashflow.
Xero recently unveiled a new look dashboard, making it easier for users to get a clearer view of their business' financial performance. This update paves the way for Xero's upcoming Business Performance Dashboard due out early 2015.
Here is what our team love about Xero's Facelift:
Arieta Park, Accountant
You can now send multiple statements at the click of a button (previously you had to send these one at a time). So much more efficient. The inbuilt calculator function is really clever. Like in Excel- you can now type a formula into the amount cell in Xero and it will calculate it for you.
Kayla Jackson, Accountant
I like the new Aged Receivables report - it shows which debtors' invoices are falling due but have not reached the first aging period (becoming overdue). Easy way to manage your debtors. Also the new quotes system gets top marks. It allows you to turn an accepted quote into an invoice straight away! This is a really cool seamless function.
Kana Mizue, Senior Accountant
The ability to add comments, feedback and insight to a Profit & Loss Statement or Balance Sheet (or any reports listed under 'New reports') is a great way for us to communicate with clients.
Roger Vergara, Business Analyst
One new feature I think is handy for business owners is the Total Cash In and Out graph. It provides a quick snapshot of the business' cash flow. This is a great tool for flagging the need for funds in the short term.
Peta Cullen, Financial Controller
My favourite thing about the new Xero is the ability to hide deleted and voided invoices on customer and supplier invoice reports - this means you aren't sifting through unnecessary data!!
Call Consolid8 on 1300 222 353 if you would like more information about these new features or help with converting your accounting system to Xero.
How well are you sleeping at night?
We might ask this question again at the end of this article.
But first, let's start with some trivia to see if you even need to read this article.
How did you go?
As your tax agent we can help you with:
As a tax payer you are responsible for:
A simple salary and wage earner return is pretty easy but when you are in business and have different legal entities, plus borrowings which are often cross collateralised with one or more banks, complying with all of the tax legislation is a lot of work.
Consolid8 recommends that a taxpayer considers the following questions at least annually:
The reality is that for the past 4 years the ATO has been investing in significant programs, staff changes and computer system upgrades to link together a whole host of information sources.
The ATO serves an important function and without taxes Australia could not prosper. The ATO have some excellent people and some excellent systems and even if you do everything by the Tax Act you can still come up for a tax investigation / audit. Some audits are random, some can be an anonymous tip but most are generated by algorithms within ATO computers based on new 'taxpayer risk profiles' the ATO is building up with the benchmark data they are collecting on individuals and businesses.
Our experience at Consolid8 is that some taxpayer reviews / audits by the ATO can go on for 2 to 3 years and involve a number of face to face meetings with the ATO. These reviews / audits often involve a number of written requests for further information from up to 5 years prior. Some ATO investigations are for a single transaction where they investigate the GST or Capital Gain involved with the sale of a business and other investigations involve your whole group of companies and entities. Rarely do these investigations happen right after the event. Often times you are being audited many years later and you might have even changed accountants.
So how is your memory and how was your record keeping? As a Client of Consolid8 we have extensive file storage of records for each of our Clients and we have a range of checklists to assist with ensuring full and transparent disclosure is made to the ATO. However the cost of a tax review / audit for Clients can run into thousands of dollars. Unfortunately, we have very little control over the time taken by the ATO or the extent of their investigation. As a taxpayer you have little choice but to provide the ATO with the information they require in a 'reasonable' time frame and as we all know, often times there are a number of 'grey' areas of the Tax Act that are open to interpretation, so it is very important that you are guided through the process of responding to the ATO.
Your annual compliance fees simply do not cover the time a tax review / audit takes. Unfortunately, we are talking thousands of dollars. So you either make sure you have the money to pay for help when you get an audit request from the ATO or now you can take out audit insurance. Consolid8 encourages clients to take a commercial mindset when it comes to insurance because at the end of the day, you are in business to make a profit and you will have to take some risks.
Audit Shield is a new type of insurance which is available for taxpayers. This cover applies to official Government audits of:
A claim can be lodged for the professional service fees required to walk you through the review / audit by the ATO or a State Based Authority review / audit.
So how well are you sleeping at night now...?
The choice is yours but we highly recommend all taxpayers give consideration to their tax affairs and how well placed they would be to fund an audit from the ATO.
Please contact Consolid8 on 1300 222 353 if you wish to know more.
Complete the below form to request a free comprehensive audit insurance quote from Consolid8.
The ATO recently announced the introduction of 'Single Touch Payroll'. From July 2016, when employees are paid using Single Touch Payroll, the payroll information is automatically reported to the ATO.
This eliminates the need for Business Owners to report PAYG Withholding in Activity Statements and issue Annual Payment Summaries. The processing of Tax File Number declarations and Super Choice forms will also be streamlined.
This initiative builds on the Federal Government's investment in Standard Business Reporting (SBR) which was introduced in 2010 to simplify business reporting obligations for employers. SBR is built into accounting software such as Xero.
The great news for Business Owners is simple tax and superannuation reporting obligations means less time spent filling out forms and more time to focus on growing their business.
Call Consolid8 on 1300 222 353 to discuss how you will benefit from the Single Touch Payroll system or converting your accounting system to Xero.
Many Business Owners put their heart and soul (not to mention their life savings) into their business with a hope that one day it will provide them with a retirement nest egg. Unfortunately, many of these business owners do not seek advice on the value of their business until they are ready to sell. By this time, they have lost the ability to plan for the sale and increase the potential sale price.
Business valuations have a definite science behind them. Your business value is determined by assessing the relevant risk profile of your business, as well as the cash flow that the business is able to generate and the 'normalised' profit that the business has achieved over the last 3 years.
To get the maximum value out of your business you need to plan ahead.
Like any financial plan, if you are basing your retirement on the eventual sale of your business, you need to be prepared. Start by understanding the value of your business now. Then identify how much you need to generate from the sale of your business to be able to retire comfortably. The difference between these two figures is what's known as the Business Value Gap.
How to bridge the gap?
Once you know what the gap is, you can put in place a strategy to increase your business value. You may need to delay your retirement plans for a few years, but if that means you can retire comfortably, it is probably worth it.
Having your own business gives you the power to write your own retirement cheque. Having a business advisor on board to help you bridge the Business Value Gap means you can maximize the size of that cheque.
So far we have determined financial information is really important for business owners to understand, and the Profit your business is making doesn't necessarily translate into money in your bank account.
But let's get back to Profit. What are all those adjustments your accountant does at the end of the year - is it 'creative accounting' or 'fee justification'?
I can confidently say it is neither.
To determine the actual Profit or Loss that your business has made, it is important the income earned matches with expenses incurred. This matching principle is commonly referred to (in accountants speak) as 'accrual accounting'.
Many businesses start with 'cash based accounting'. With this accounting method it's easy to ensure the bank reconciliation is done and all transactions are accounted for but your financial statements are purely a representation of your cash flow but not your actual financial position.
Let's think about income - is this generated when the money hits the bank account or when the sale is invoiced? For some businesses the sale and payment occur at the same time. But for others it could be months apart. A sale made today could take more than 30 days to translate to money in the bank. The decisions you make about your trading terms will impact the amount of cashflow you have in your business. To capture the implications of this, you must record your income when the sale is made rather than when the cash is banked.
Likewise, expenses should be recorded when the expense is incurred (i.e. when an invoice is issued to you) not when you pay the bill. Expenses should be recorded as at the date of the invoice.
These two simple changes to your bookkeeping system will allow you to get much greater insight into your cashflow and how to create better cashflow in your business. They will also provide you with a more accurate picture of your business profit.
Together, this will give you the ability to make informed decisions in your business and create a financial strategy that will put you back in control.
I recently introduced the concept of a Balance Sheet in my last blog. For many business owners, their Balance Sheet is part of the bundle of financial statements they receive from their accountant every year. Unfortunately it is often over looked or not referred to. The business owner's focus is on the Profit and Loss Statement and how much tax they need to pay. One of the most common questions I'm asked is "Why do I have to pay tax on my Profit when it's clearly NOT in my bank account?". Many business owners even doubt the figures are correct - as the profit showing in their Profit and Loss Statement does not come close to the cash position of the business. So, are the figures correct or is this just a revenue raising scheme devised by the ATO?
Well, I can confirm that your Profit (or Loss) as described in the Profit and Loss Statement is a correct measure of how your business has performed. There are a few factors that can influence 'how correct' the profit is but I will save that conversation for my next blog.
So, if the Profit is correct, then why is it not sitting in my bank account? The answer is in that ill-regarded financial report that you get from your accountant each year - the Balance Sheet. There is a direct link between your Profit and Loss Statement and your Balance Sheet. The Profit and Loss Statement shows how your business performed, the Balance Sheet shows where the profit went.
Don't just believe me - let's test it. Grab the last Annual Financial Statements prepared by your accountant. Your Balance Sheet usually shows you two periods - last year and this year. Calculate the movement in each line item in your Balance Sheet between these two periods.
For example, cash at bank this year was $35,000 and last year it was $20,000. So write down $15,000 next to this item. This indicates that $15,000 of your profit is in your bank account.
Accounts receivable (the money that your customers owe you) this year is $140,000 and last year it was $90,000. This indicates that $50,000 of your profit is currently 'funding' your customers (rather than sitting in your bank account). Continue through each item in your Balance Sheet and the sum of the increases and decreases in assets and liabilities should add up to your profit.
Your financial accounts should not be a mystery to you. Understanding the information in your Balance Sheet is essential for making good financial decisions. Imagine if you had this information at your fingertips every month rather than looking at it once a year. Would you have made different decisions in your business with up-to-date financial information?
Tanya Titman's free Acceler8 Business Improvement Video Series tackles common pain points that many business owners face. To learn more about the series, watch other episodes or sign up for upcoming videos click here
It is not uncommon for business owners to review their financial results once a year - with their accountant at the time of lodging their tax return. This can be up to 11 months after the end of financial year. This is when most business owners reflect on the year that was.
Typically, they focus on two things, did I make a profit or a loss? And how much tax do I have to pay?
I'd like to present a different scenario.
Imagine you have complete control over your financial information. Complete control meaning you know the financial implications of every decision you make before it happens AND you know your profit result before you get to 30 June. You make decisions around financing your business with confidence and you know when to scale up or scale down in real time (not after the damage has been done).
These two situations are in complete contrast to each other. Unfortunately, the majority of Australian business owners operate without any financial information. Even worse, they make major business decisions based on how much cash is the bank, rather than the true financial position of their business. This gives us some insight into why the failure rates of businesses in Australia are so high.
Australians have a love affair with small business. It is a dream for many Australians to run their own business with many pouring their life savings into buying or establishing a business. So why do we put the blinkers on when it comes to financial information? Is it the fear of bad news? Or is it the lack of knowledge of what to look at?
In my experience it is the latter. Most entrepreneurs and business owners do not have an accounting degree. What they do have is amazing ideas and passion for their business. Unfortunately, this is not enough. Without a full understanding of your financial position, it is easy to make bad financial decisions and send your business down the drain.
"Ok, I get it but I am not about to go and do an accounting degree".
Well the good news is you don't have to. Overcoming your 'fear of the financials' is easy. Start looking at your financial reports (i.e. Profit and Loss Statement AND Balance Sheet) every month and ask lots of questions. Ever wonder why you have a profit that you are paying tax on but no money in the bank account? The answer is in your Balance Sheet - and it's so simple to work out!!
Find out how to run your own reports rather than relying on someone else. Stop running your business by the bank account, and start taking full control for your financial position. Empower yourself, make business decisions with all the information, rest assured the results will be outstanding.