Bookkeeping Archives | McAdam Siemon

3 reasons a personal budget is vital for achieving financial goals

Posted on July 6, 2018 by Carolina Jaramillo

If a business owner said to you that they run their business without a budget, what would you think? You’d think they were incompetent. Or perhaps lazy? Or both?

But what do most families do?

When you think about it, a family is actually a mini business. There is income, there are expenses and there is, hopefully, something left over to invest and to enjoy.

So why don’t most families operate to a budget?

After all, a personal budget helps you to see your financial direction and helps you stay (or get back!) on track. It’s a great comfort.

One reason some people don’t put together a budget is a feeling of overwhelm, of being too busy, of feeling like life is too complex to keep track of all that.

Well the good news is we can handhold you through the process and make it easy for you.

But before we look at the ‘how‘ aspects, let’s consider 3 more reasons why a personal budget is such an important tool to help you achieve your financial goals and dreams.

1. Most of your money is already spoken for long before you get it

The money you earn has already been promised to keep the electricity on, make the loan repayments and pay for the insurance. Most of what many people think of as budgeting is really honouring the commitments you have already have.

Now since we are all honest people and plan to pay these bills, the first step is to track these bills and see what is left over for your day-to-day living.

2. Your day-to-day living money is spread all over the place…

Some of your day-to-day living money is in the bank. Some is in your purse or wallet. Some is with your partner or children if you have them.

You need a simple system that allows you to track day-to-day expenses such as fuel for your car, shopping and your discretionary spending expenses.

We suggest you don’t attempt to keep track of every cent of your day-to-day living money. It’s not worth the effort for the benefit you’d get out of that level of detail.

Instead, you need to identify your main day-to-day expenses and make allowance for all other minor day-to-day expenses as a total expense.

Here’s a key: You need a system that is so easy to use that you keep using it.

You can track these day-to-day expenses by entering them into a spreadsheet, or better yet, use a tool such as Pocketsmith or Pocketbook that can automatically pull in bank feeds to save you a lot of data entry.

3. The Number 1 reason people give up on their budgets is that they don’t have the right attitude

It’s ALL in the attitude!

Have you ever attempted to budget and given up in frustration? What is the reason your budgeting attempt failed? What will make you stick to it?

Think about this…

One of the top reasons—if not the top reason—so many people give up at budgeting is attitude. If you think of it as a penny-pinching sacrifice instead of a means for achieving your financial goals and dreams, how long are you likely to stick with it?

It’s like the difference between going on a diet and eating healthily. One is negative and restrictive; the other is positive and allows you to indulge every now and then and yet still achieve your goals.

To increase your chances of success, work on your attitude first.

Many people refuse to budget because of budgeting’s negative connotation. If you’re one of them, try thinking of it as a ‘spending plan’ instead of a ‘budget’. Once you’ve attempted to budget and failed, the bad feelings associated with any type of failure can keep you from trying again. Don’t give up!

The cold hard reality

Let’s face it. Money is a tool that enables you to reach your goals in life. But the cold hard reality is that until you know where your money goes, you can’t make conscious decisions about how to use this tool effectively.

A budget (or spending plan!) shows you exactly where your money goes and provides a clear plan that lets you save for the things that are important to you: a new house, a new car, a comfortable retirement, a tertiary education, high quality health care, travel, or whatever your particular goals and dreams happen to be.

And that’s exciting.

Whatever YOU decide you want to save for and achieve, you can. With the right attitude, a focus and a (spending!) plan.

Avoid This Pitfall

There are several universal budgeting concepts that every successful budget will include, but one of the most important features of a successful budget is for it to be easy to use and suitable for your needs.

Don’t try to use a generic, complex, one-size-fits-all budget. A simpler approach makes it easier to stay committed. If you stick with a realistic, effective budget long enough, the rewards will keep you motivated. In the meantime, do whatever it takes to keep yourself going.

The 3 steps for effective personal budgeting (spending planning!) are:

Build a Budget,
Track Income and Spending, and
Compare Budget to Actual.

Once you start budgeting with a positive attitude, you will see the difference a budget or spending plan can make in your life.

Your next step … Call us on 07 3421 3421 or email us on cpa@mcadamsiemon.com.au to make a time to meet. We’d love to discuss this with you and help you to get on track towards achieving your financial goals.

Unmasking liability: 6 signs that contractor is really your employee

Posted on November 21, 2017 by Carolina Jaramillo

In a lot of situations, hiring a contractor to get a particular job done makes perfect sense. It may require expertise or skills none of your employees has. You may only need someone for a short timeframe to clear a backlog of work. Or maybe you just want to avoid having to go through a formal recruitment process.

But be careful. Even though you hired them as a contractor, the Australian Taxation Office (ATO) may actually see them as an employee. And the penalties for disguising an employee as an independent contractor (known as “sham contracting”) can be up to $51,000 per instance.

So how can you tell whether your latest recruit is an employee or a contractor? Well, here are some of the major differences between the two.

Where and how they work

An employee is considered part of the business, and in most cases works on the premises (unless they’re telecommuting). They generally have to accept any work assigned to them, and can’t ask someone else. And they have do the work themselves.

A contractor, on the other hand, runs their own business. And while they may be asked to work on the premises, they can work pretty much anywhere they can get the work done. They can also sub-contract or delegate the work to someone else.

How they’re paid

Employees are paid regularly for the time they work, by the item or activity they complete, and/or a commission.

Contractors have a contract stating the work they’ll do (but not how they’ll do it), and for how much. And while they can ask for partial payment up-front, they’re generally paid when that work is completed.

Tools of the trade

Employees are given all the tools they need to do their job, whether it’s computers, earthmoving equipment or anything in between. If they need something else to do their job, the employer either buys it, reimburses them or gives them an allowance.

A contractor will have their own set of tools, which they use to perform the work they’ve been asked to do. If they feel they need another tool, either to complete the job or to do it more efficiently, they use their own money to purchase it.

The risk factor

Employees aren’t under any financial risk while they’re working. They don’t make a profit or a loss–the company does.

But contractors can make a profit or a loss on every job they do. If they finish the job quickly, they’ll still be paid the same amount than if they took their time. But if the job takes longer, or they have to put in more work because the job was done poorly, they could well make a loss.

Entitlements

Employees are entitled to receive superannuation contributions from their employer, which gets paid into a nominated superannuation fund. They are also entitled to paid leave (e.g. annual leave, personal/carer’s leave, long service leave), or a loading in lieu of leave entitlements if they’re casual employees.

Contractors are generally responsible for paying their own superannuation, although in certain situations they may be entitled to receive superannuation contributions. And they don’t receive any paid leave.

Tax

Employees have tax deducted from their pay by their employer, whereas contractors pay their own tax (including GST) directly to the ATO.

Of course, the distinction between employee and contractor isn’t always so cut-and-dried. A contractor may have all of their equipment supplied, or get paid every fortnight. They may even receive superannuation contributions.

Fortunately the ATO has come up with an Employee/Contractor Decision Tool to help make the distinction. By answering a series of questions, you can quickly see whether the ATO sees your latest recruit as an employee or a contractor.

Paying someone as a contractor when they’re actually an employee can have serious consequences for your business. As well as the financial penalties, your business may end up with a bad reputation that drives both customers and potential employees away.

So use the ATO’s decision tool and if still in doubt, get in touch and we’ll help you make sure your contractor isn’t really an employee.

The 4 most common mistakes with management rights audits

Posted on November 9, 2017 by Carolina Jaramillo

Another year has almost passed and many businesses are considering audits.

Here we look at a few of the most common mistakes companies make with their management rights audit… but first a quick industry update.

Management rights: Industry update

From our perspective the industry is still maintaining a healthy level of activity.

I think everyone would agree it has subsided from the lofty heights of the past couple of years but this reduction in activity has been driven by a number of factors: in particular, banks have tightened their lending criteria.

Purchasers can still get finance but the process seems to be a little longer and purchaser analysis is more stringent – not necessarily a bad thing.

Body corporates have become more aware of their power in the purchasing process and are exercising it more readily now. Some would say ‘over zealously’ at time, but this is the world we live in now.

Lastly, the oversupply to the market, especially in the inner city suburbs of Brisbane, has forced a slowdown. This was expected and will rectify in time. However, there will be casualties along the way. If you are located in these areas, get ready to bunker down for the long run!

4 common mistakes with a management rights audit

Audit is sometimes regarded as just something we have to do to maintain our licence. But taking the right approach to a management rights audit is important; otherwise it can waste a lot of your time.

Licensees have various opinions and approaches to audits and audit visits. We believe it should be a very positive process that allows for education as well as compliance outcomes.

Most of our lessons come from mistakes we have made and as long as we learn from these we can move forward.

So we have compiled a list of the most common mistakes we are finding with management rights audits this year:

Non-trust money not being withdrawn

Funds collected into the trust account that do not relate to the agency relationship between you as manager and the owner of the unit are classed as ‘non-trust money’.

These funds must be withdrawn from the trust account to your general account within 14 days of receipt.

An example of this is gardening charges that you charge a tenant, which they deposit as part of the weekly rent.

(Act reference – Agents Financial and Administration Act 2014 section 18 No other payments to trust account).

Late EOM reconciliation

Your EOM reconciliation must be prepared within five days after the end of the following month. The date for the end of month reconciliation must also be the last day of the month – not the day the reconciliation is prepared.

(Act reference – AFA Regulation 2014 section 17 Trust Account Cash Book Reconciliation)

Bank transaction receipts not printed

We find many cases of bank transaction receipts not being printed when funds are disbursed from the trust account. A bank transaction receipt must be printed and filed for auditing purposes.

(Act reference – AFA Regulation 2014 section 14 Payments By Electronic Funds Transfer)

Trust account receipts with incorrect information

Licensees are forgetting to sign the receipt upon completion and a lot of the receipts are missing two dates on the receipt: when the trust money was received and when the trust account receipt was completed.

(Section 9 – AFA Regulation 2014)

If you would like to discuss your upcoming management rights audit or any of issues relating to your business or the industry, please don’t hesitate to contact your auditor or our management rights team: 07 3421 3421.

Small business, big decisions: Why savvy business owners ‘rent’ CFO-level experience

Posted on September 20, 2017 by Carolina Jaramillo

Larger businesses have a Chief Financial Officer (CFO) on staff. But what can small and medium sized businesses do in this regard?

Clearly, larger businesses can afford an in-house CFO. But it goes beyond an affordability issue: Large, successful businesses also understand how crucial the CFO role is to their business performance.

The CFO in a business:

Keeps a close eye on the numbers and trends,
Alerts management when preventative actions are required,
Helps management create sound forecasts and plans,
Ensures the cash inflows and outflows are managed well so the business never runs out of cash or needs to borrow in haste,
Reports on revenues achieved compared with targets,
Gives solid information on a range of Key Performance Indicators (KPIs) to the business decision makers, and also
Helps management with decision making.

This is management input that all businesses require regardless of their size. But how can small and medium sized business access CFO-level input and guidance?

The answer: You out-source it. You get a part-time, out-sourced CFO until you can afford one full-time.

That’s where we play a role for many of our business clients.

Our ‘Your CFO’ service has been developed with input from our clients to make sure it’s the ideal mix of support services and affordability.

As your CFO we roll our sleeves up and work with you in management meetings throughout the year on:

Cash flow – Efficient management of cash flow to provide cash for saving or investing in growth
Profitability – Identifying key drivers of profit and focusing on these
Business value – Growing a valuable and saleable business asset
Structure management – Staying on top of risk and taxation issues

As business owners we all need to measure and monitor Key Performance Indicators (KPIs). That is, the handful of numbers that really matter in running our business.

It is also important that you have a ‘KPI dashboard’ to display your KPI targets compared with your current KPI performance. This helps tremendously in monitoring and managing your business’ performance and, ultimately, hitting your targets.

As your outsourced CFO, we will bring to each meeting that we conduct with you clear financial reports, easy-to-understand KPI information, as well as our commercial experience to interpret the information, make suggestions and help guide your decision making.

Items we’ll discuss each meeting include:

Profit (historical and future)
Cash flow (historical and future)
KPIs: A mixture of focusing on Lead Indicators which drive performance and Lag Indicators that measure the outcomes
Marketing activity and effectiveness
Operational efficiencies such as work-in-progress or workflow
Financial indicators such as debtors, inventory, stock turn (depending on your industry and type of business)
Team efficiencies, knowledge management, morale and safety.

By helping with your forward planning for achieving the next period’s targets, and by being a sounding board for you as you strive to meet your targets, our ‘Your CFO’ service and support gives you a crystal clear focus for what needs to be done to achieve the goals of your business.

Your next step … Call us on 07 3421 3421 or email us on cpa@mcadamsiemon.com.au for a no cost and no obligation meeting to discuss how we can work with you as your outsourced CFO. We’ll outline for you what’s included and what costs are involved so you can see how the service can be comfortably included in your budget.

Exit Plan: How a succession plan can save your business (and protect your family)

Posted on September 14, 2017 by Carolina Jaramillo

While everyone wants their businesses to be successful and operate for a long time, you may not necessarily want to remain at the helm.

At some point, you may want to pass the business on to your children, or to someone else in the company. You may want to sell your share to your business partner. Or you may want to sell the business to another person or company, and retire on the proceeds.

Ideally, you will choose the timing and method of your exit from the business. However, the way life unfolds sometimes, business owners do not always have a choice in what happens, or when.

For example, what would happen if you or your business partner suddenly passed away or became incapacitated?

That’s a stressful enough time for everyone as it is, without having the business (and the financial well-being of the families involved) suffer as a consequence.

To ensure the future of your business, and to cater for loved ones, you need to plan for a range of possible exit scenarios.

This is what’s known a Business Succession Plan.

Every business needs a succession plan, just as every person needs a professionally prepared Will and Estate Plan.

Horror stories happen. Don’t be one of them.

You may not think you need a succession plan. After all, you may have children old enough to take over the reins. Or perhaps you have people in your company who’d love to run the business.

But without a business succession plan, anything could happen.

Imagine this scenario…

A business with two partners or shareholders suddenly experiences the loss of one of the partners in a car accident. Without a succession plan in place, the surviving partner automatically goes into business with the deceased partner’s spouse. They might have had a great relationship on a personal basis, but running a business together and making financial decisions changes the nature of the relationship, instantly. The partners may not agree on the direction of the business, the growth plans for the business, or on how much various people in the business should be paid.

It’s a recipe for conflict.

Or perhaps the surviving spouse wants nothing to do with the business and wants to be bought out of the business as soon as possible.

But what if the surviving business partner does not have the available funds to buy the remaining share in the business, despite being offered a very reasonable price.

They’re stuck. The business–and their stress levels–will suffer.

So, what can you do to avoid such horror stories?

Passing on the baton

So who will be your successor? Will it be someone in your family? A senior employee of your company? Another business owner?

While you may want to “keep it in the family”, it might not be such a good idea with research showing that more than 65% of family businesses fail in the hands of the second generation and another 20% fail when the business passes to the third generation.

Your successor needs two things above anything else: a passion for the business and the skills to run it. And while you can bring them on board early to learn the skills, passion is something you can’t create for them. They either have it or they don’t.

If it turns out someone in your family is passionate about the business, and they have the skills needed to run it (or can learn them), then great. But if that’s not the case, you may be better off handing the baton on to someone else.

Plan early, plan often

So when should you create your business succession plan? According to Craig West, chief executive and president of the Australian chapter of the Exit Planning Institute, you should have started about two years ago.

In an interview with Startup Smart, West says it can take up to two years to get a business ready for sale, and to find the right buyer.

“It takes 18 months to two years to exit successfully. If you do it quicker, you’ll leave money on the table,” he says.

So if you don’t have a succession plan in place for your business, you need to get started now. (If you’re not sure how to get started, get in touch so we can help.)

And like nearly all business documents, a succession plan needs to be kept up-to-date. Families grow and mature, employees come and go, and your plan needs to take all of that into account. There’s no point in planning to appoint a son who’s lost interest in the business, or a senior employee who has since left the business. Review your plan annually.

But first things first… you need to document your Business Succession Plan.

We can guide you in developing an effective succession plan and also ensure you have insurances in place that, for example, can fund the purchase of a deceased or incapacitated partner’s share in a business.

A well thought out and properly funded (insured) Business Succession Plan will make sure the business can continue to operate as smoothly as possible, and conflicts between surviving business partners and spouses, avoided.

You’ve worked hard to build your business. Don’t let it all fall apart once you move on.

Why a good cash flow can be more important than a big profit

Posted on July 10, 2017 by Carolina Jaramillo

There’s a saying in business, “You can go broke making a profit.” And another, “Cash is king. Profit is theory.”

As you know only too well, you don’t pay rent, meet payroll or pay your bills with profit.

You pay them with cash.

A business can make a lot of sales, have a book full of orders, have delighted customers and clients, have a great reputation, be growing, and yet still go broke.

Why? Cash flow.

The business might be profitable on paper, but have no money left in the bank. They become insolvent.

A growing business is often hungry for cash … hungry for inputs so it can make the business’ outputs, be they physical products, services or a combination of both.

The tragedy in this is that cash flow crises can often be averted. They can be predicted, planned for, and then contingency measures put in place.

For example, if a business has seasonal effects where some months are busier than others, or if a business knows it has some jumps in expenses or fixed costs approaching—such as moving to a larger premises or hiring more staff to cope with growth—then these expenses can be planned for and compared with the planned income in those months.

Which would you prefer to do?

(A) Call your bank manager and ask for a short-term loan or increase in overdraft when you are urgently in need of the cash (and therefore stressed, and desperate, and not in a great frame of mind to negotiate good terms), or

(B) Call your bank manager 6 months in advance and meet with him or her to explain the coming cash crunch, the reasons behind it, and plan for the funding in a calm, relaxed, totally-in-control manner?

Not only would you get the loan, you’d impress the bank manager and strengthen the relationship for further funding, should it be needed to support your growth.

The bank manager would see you are a professional operator with a planned approach to your business, not a fly-by-the-seat-of-your-pants operator. (They see a lot of those. They don’t like doing business with them.)

Apart from the relationship with your bank, there’s the immediate effect of sleeping better at night.

We all seek a level of certainty to comfort us. Knowing what lies ahead in business and planning your cash flow gives you a peace of mind and confidence in your day-to-day work that will rub off on those around you…

…in your workplace and at home. It’s a good feeling.

This is one of the reasons we are so passionate about helping our clients put together cash flow forecasts, to help them keep their business on track and to avoid any stressful, unpleasant surprises in the coming months.

It doesn’t matter whether a business is a one-person hairdressing or lawn mowing business, or a 10 person, 20 or 200+ person business.

Every business needs a cash flow forecast.

Running your business without a cash flow forecast is like driving a car at night along a dark country road with only your normal headlights on. It’s hard to see what lies ahead. Some wildlife might come right out in front of you, leaving no time for you to react. CRASH!

On the other hand, a cash flow forecast is like driving along that country road with high beam on. You can see so much more. You can drive with much more confidence. Less stress. And avoid the CRASH!

Another thing we often find in helping our clients build realistic cash flow forecasts, is that we can spot problems and make suggestion that help improve the business’ cash cycle. This puts money in your bank account.

For example, a combination of negotiating better terms with suppliers, tightening up or at least clarifying and enforcing your business’ own credit terms, and reducing stock holding and waste can have a powerful positive effect on your cash flow.

So, if a cash flow forecast is so crucial, why do many businesses not have one?

Simple. Business owners get busy. Busy pleasing customers or clients. Busy dealing with staff. Busy paying suppliers. Busy generating sales.

Also, it’s easy to get ‘too close’ to your own business. “You can’t see the forest for the trees,” as the saying goes.

Having an independent and fresh pair of eyes come in and look at your business—especially cash flow which is its life blood—allows opportunities for improvements to be identified. Things that are there, but difficult for the business owner to see amidst the ‘busy-ness’ of it all.

So, what should do about it? Call us. Take action. A cash flow forecast costs less than you think.

It’s time to turn those high beams on!

Your next step … Call us on 07 3421 3421 or email us on cpa@mcadamsiemon.com.au to make a time to meet and discuss your options. We’ll then outline the costs so you know exactly what lies ahead.

Changes to super contribution limits: How it will affect you

Posted on April 14, 2017 by Carolina Jaramillo

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It’s that time again.

With the 2016 Federal Budget came several shake-ups, in particular the changes to contribution limits. With many other changes announced in the budget now passed by Parliament, you can have more certainty when it comes to planning your Self-Managed Super Fund (SMSF). Especially regarding the SMSF contributions you might wish to make to your fund.

The Government is lowering both the concessional (pre-tax) and non-concessional (after-tax) contribution limits as of 1 July 2017.

Knowing this—and with tax time fast approaching—it’d be wise to start getting your financial ducks in a row.

SMSF contribution limits

One of the original proposed measures which received a lot of comment and caused concern, was the $500,000 lifetime non-concessional contributions (after-tax contributions) limit. This proposed measure was dropped and replaced with a $100,000 annual limit on after-tax contributions.

Pre-tax contributions will be limited to $25,000 for all taxpayers, beginning on 1 July 2017. Below is a summary of the changes for both concessional and non-concessional SMSF contributions.

After-tax contributions

The $500,000 lifetime limit has been dropped in favour of a $100,000 annual cap. The rules allow the opportunity to bring forward three years of contributions – making it possible to contribute $300,000 in one year.

For the 2016/17 year, it is still possible to make a contribution of up to $180,000 for one year, or to bring forward three years’ contributions – so you are able to make a contribution of up to $540,000. If you do not use this full limit of $180,000 or $540,000 in the 2016/17 year, then you will be limited to the $100,000 annual, and $300,000 bring-forward caps for future years.

Where the bring-forward of contributions has been triggered before 1 July 2017, transitional contribution caps may apply. If you have a balance of $1.6m or more in your SMSF at 1/7/2017, then you will not be able to make further after-tax contributions.

When approaching the $1.6m cap, care will need to be taken with the bring-forward rules, as these are restricted by the new $1.6 million balance restriction.

Pre-tax contributions

The concessional contributions cap is lowered to $25,000 per year for all taxpayers as of 1 July 2017. Taxpayers who were aged 49 or over on 30 June 2016 can make up to $35,000 in pre-tax contributions in 2016/17. Those aged under 49 on 30 June 2016 can make up to 30,000 in pre-tax contributions in 2016/17.

Some of these changes may require you to adjust your SMSF contributions strategies going forward. This will most likely be the case if you have a superannuation balance of over or close to $1.6 million, or were planning on making contributions to superannuation in the next few years that exceed these new limits.

How we can help you with your SMSF contributions

If you are concerned that the Government’s changes to contributions for superannuation are going to affect you, please feel free to get in touch to arrange a meeting. We’ll discuss your situation in more detail and find a solution that works for you.

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Why modern business means cloud-based business

Posted on January 23, 2017 by Carolina Jaramillo

“The cloud” is a phrase that means something very different these days, due to the increasing use of cloud computing. But what exactly is cloud computing? And is it a good option for small businesses?

First, a quick definition. Without getting lost in ‘geekspeak’, cloud computing simply means both the software apps you use and your data are stored on remote servers on the Internet, rather than ‘locally’ on your computer’s hard drive or your own server(s).

That idea—of the data not physically being in the same place as you—used to sound scary to many. What about security? What about the risk of losing your data? Surely it’s best to have your data on a computer you can see and touch on your own premises?

Well, that’s out-dated thinking these days.

Counter-intuitively, your data is likely to be more secure when stored in a cloud app, compared with storing it yourself on your own computer or server on your premises.

Why is that?

Security

Your own IT security is likely to be far less robust than that of a cloud app provider. If you access the Internet and use email, then you’re vulnerable even if you don’t use any cloud-based apps. Hackers can access the data on your computer or local network simply due to the fact that you have Internet access. It’s like a door. And they often know how to pick the lock.

Reputable cloud app providers, on the other hand, use solid security measures such as SSL certificates that support—sorry, some geekspeak coming up—256-bit SSL (Secure Sockets Layer) encryption. This is the same level of encryption used by online banks.

Let’s face it: This bank-grade security protocol is likely to be far more secure than your own computer and IT security protocols.

Theft

Another advantage of having your apps and data stored “in the cloud” is that if your computer, server, smartphone, tablet or other device you use is lost or stolen, your data is safe because it’s not on the device. It’s in the cloud, stored securely behind encrypted passwords.

And your data is far more valuable than hardware. Hardware is easily replaced. Data is not.

Disaster

This same “you can relax because your data is in the cloud” factor also applies to disasters such as flood and fire. A business using cloud-based computing could have its premises burn to the ground overnight and continue “business as usual” from another location as long as they had access to the Internet. (At least from a customer, financial, accounting, human resources/personnel and other business data perspective. Clearly it does not apply to physical operational aspects of a business.)

Hardware

Computer hard drives are like car engines. It’s not a question of if they will ever break down, but rather when they will break down. That’s why we all diligently do daily data backups, right? And we all take these backups off-site each day, don’t we? And we all do weekly tests where we restore the backups to ensure the backups are working as intended?

No? Really? That’s bad. Shame on you.

And yet it’s precisely what most small businesses fail to do.

That’s another great aspect of cloud computing. No more data backups to do. The cloud app providers back up your data automatically and they simultaneously store your data in multiple locations around the globe. This means that if one of their buildings was subject to, for example, a catastrophic earthquake, your data would be safe because it is also stored in different cities, on different continents.

But even if technology got to a point where computer hard drives never failed, there’s one thing they always do, eventually: fill up. They run out of space.

And that’s a major inconvenience with the old-school approach of storing data locally rather than in the cloud: You have to (or you have to pay IT providers to) move data across to new hard drives or servers, and reinstall the various apps and databases. It’s an expense and a disruption.

With cloud computing you can kiss that inconvenience goodbye.

Software

For many small businesses, when they fully adopt cloud computing they can reach the “no IT person required” stage. By that, we mean you won’t need an IT contractor to come on site to upgrade servers, maintain databases, fix software conflicts and so on, all of which is the norm when running old-school desktop apps and local servers.

Why is that?

With cloud-based apps there is no software to install. No software updates or “patches” to install. You just log in to each app and it’s always up to date. Nice.

The one exception

There is one exception here of course. If your business is in a region where you do not have reasonable Internet speed (e.g. 5 Mbps or more) with reliable connections, then cloud computing is not for you. Not yet.

Technology continues to evolve in this area, and it won’t be long until every business on the planet has Internet speeds that support cloud computing.

Here’s where cloud computing gets exciting…

While the security, risk and convenience aspects of cloud computing are worthwhile, they are not the most exciting and compelling benefits of cloud computing to a business owner.

Let’s look at some of the “wow” aspects of cloud computing.

Efficiency via Data Flows

Every business wants to be more efficient. It saves money. Saves time. And it allows you to provide even better service.

By adopting cloud computing and building an “app ecosystem” for your business you can eliminate a number of inefficiencies where data is being manually re-entered into multiple systems.

Your data can seamlessly flow from one app (area of your business) to the next without the added step of manual data entry. Manual data entry is not only an expense and an inefficiency that slows down your business processes, it introduces the opportunity for error.

Work to eliminate all manual data entry in your business. If you see anyone in your business manually entering data into an app, you should question why it’s being done. Look for ways that data could automatically flow into that system from another app where the data is already stored.

App Ecosystem Example

Imagine your business has fully embraced “the cloud”, and has connected various apps so data flows automatically from one app to the next.

Let’s say someone then searches Google for your type of business, product or service. They find your website. They see something on your site they would like to access, such as a PDF document with helpful information in it. They enter their email address and perhaps their first name in order to receive it.

They are now in your business’ marketing database and Contact Relationship Management (CRM) system. And they did the data entry.

Over the following few weeks this prospective customer or client receives email updates and e-newsletters from your business that gradually educate and build trust with the prospect simply by being helpful and sharing relevant hints and tips based on what they previously downloaded.

And this happens automatically thanks to your marketing automation app such as Infusionsoft.

The prospective customer then clicks on a link in an email and comes back to your business’ website. They’re ready to talk to someone, so they enter their information into the Contact Us web form. This time they enter their last name and their telephone number.

This data also flows straight into your business’ CRM.

Next, you’re speaking with them on the telephone and they like what they hear. They request a quote or proposal. You use a cloud-based proposal creation app (such as Proposify) that integrates with your CRM to automatically pull in the prospect’s information. You click a few boxes on screen to select the product and service options to include in the proposal.

You click a button and the proposal goes to your prospect via email.

They open the email, click on the link to the electronic proposal and view it online. They decide to go ahead so they click Accept, sign it digitally (on screen) and then enter their credit card details to purchase.

This automatically adds them as a customer to your cloud-based accounting app such as Xero It also enters their credit card details into your secure eCommerce payment processing platform linked to your marketing automation app. And then your payment processor (e.g. eWAY) processes the credit card transaction.

Xero automatically emails them an invoice marked as Paid, and the live bank feed will bring in the transaction ready to be reconciled (matched) to the invoice within 24 hours. So your bookkeeping and accounting is up to date, and yet no-one in your business had to enter—let alone re-enter—any data.

You have a new customer, the money is in your bank account, and you’re ready to deliver.

The purchase also triggered a fulfilment list and email instructions to your relevant team members, and added the job to your workflow (job tracking) system.

Your business is amazingly efficient. You move with velocity thanks to data flows. You amaze your prospects and customers with your service, and impress them with your tech savvy. You’re saving tens of thousands of dollars a year on old school IT and administration approaches that would require a additional staff and contractors.

You’re a modern, cloud-based business. And you’re loving it.

Where to start with ‘going to the cloud’

The process of going to the cloud starts with deciding on your cloud-based accounting and CRM systems. That’s because your financial and customer data are crucial, and will receive and send data to and from your other operational areas.

Your ideal accounting system and CRM platform will depend on your type of business and the apps you already use. Building your business’ app ecosystem is one of the most important areas for any business owner or entrepreneur to focus on.

That’s why we love advising businesses as they move to the cloud.

If you’d like to sit down with us and have a chat about your move to the cloud, get in touch to make a time.

Going to the cloud is no longer an option for a modern, competitive business.

Cash Machine: 7 Reasons to Stop Treating Your Business as an Automated Teller Machine

Posted on January 20, 2017 by Carolina Jaramillo

Think back to the days before you started your business, when you were working for a boss. Chances are you were rewarded for your hard work with a regular salary. It may not have always been the same amount, but it came through like clockwork. And for the next week, month or however often you got paid, you’d do your best to make it last.

But now you are the boss, and so you don’t need to be restricted to a set salary, do you? You can simply draw money out of the business whenever you need it, right?

Wrong.

7 good reasons to pay yourself a regular salary

As a business owner, here are seven reasons why you should pay yourself a regular salary instead of treating your business like an automated teller machine.

It’s what you’re used to.

When you first started working for someone else, you couldn’t ask the boss for more money whenever you ran out. All you could do was hold out until the next time you got paid. And having a regular income also made it easier to budget for your income and expenses, manage your money, and save up for a mortgage or investment.

So why change now?

Much of the money in the business’ bank account is already spoken for

It’s easy to think all the money sitting in your business’ bank account is yours. After all, it’s your business, isn’t it?

But that money actually belongs to the business—not you personally—and is needed to cover things such as:

Salaries and wages
Paying contractors and suppliers
Stock purchases
Equipment
Rent and utilities
Future tax payments

It doesn’t matter how profitable your business is. If the money isn’t there to pay the bills when they’re due, your business is as risk of becoming insolvent (i.e. you have more commitments and bills to pay than cash or available funding to pay them with).

Having sufficient cash flow is vital for any business. And it’s far easier to manage cash flow when you have predictable expenses you can plan around—including your salary.

You need money to grow your business

A growing business is a cash-hungry business. As it grows you may need to move it to a larger premises or invest in new staff or technology to grow your capacity. Even if you can keep a lid on your fixed expenses, your business may require an increase in variable inputs such as materials.

And all this ties up cash.

So whatever your growth plans, you’ll need enough money in reserve to fund them. And that’s on top of the money you need to keep the business running at its current level.

As you can see, knowing exactly what cash is flowing in and out of your business, and saving as much of your profits as you can to build up your cash reserves, is important for a growing business.

But if you keep ‘raiding the till’ whenever you’re short of cash, you’ll never know how much cash you have in reserve, or when you have enough funds to initiate the next stage in your growth plans.

You won’t be risking ‘lifestyle creep’

The lifestyle we lead is largely dictated by the amount of money we have readily available. So if your business does particularly well one week and the bank balance is up, you might be tempted to draw a little extra money and spend it on dinner at a fancy restaurant, a weekend away, a new ‘toy’ or some other indulgence.

It’s okay to spend money in these ways if it’s a bonus for achieving a certain result or milestone in your business. But these bonuses should still be within the planned and documented salary and remuneration package the business pays you.

If you’re not disciplined in this area, it doesn’t take long for these indulgences to become part of what you consider a ‘normal’ part of your lifestyle, and so you start drawing extra cash on a regular basis.

And that’s not good for the health of your business.

By living off a regular salary (and nothing more) instead, you’ll learn to live happily within your means, which is a key to building wealth.

You’re more likely to fly under the taxman’s radar

Governments’ tax departments are used to people being paid a regular salary. It’s generally how things work. And by giving yourself a regular salary, you’ll be seen as just another salary earner and be more likely to fly under the radar.

If, on the other hand, you start drawing large amounts from your business at irregular intervals, you may raise a few eyebrows with the governments’ tax auditors. And that’s never a good thing.

You could be creating a tax liability for your business

When wage and salary earners are paid, the employer must withhold and set aside a portion of their pay as tax, which is periodically paid to the government on the employees’ behalf.

When you withdraw money from your business, it’s not ‘free money’ (i.e. tax-free). These amounts need to be properly accounted for as:

wages/salaries
drawings or a loan from the business
dividends (a portion of your profit) depending on your business structure.

Your actions here could be building up a potential debt that will need to be paid at some point. And that debt could lead to severe cash flow problems down the track, especially when it comes time to sell the business.

You’re much better off accounting for, setting aside and paying taxes as they fall due. It will not only help your business, but also the quality of your sleep.

You’ll more easily qualify for mortgages and other loans from the banks

When it comes to assessing a person’s ability to service a potential loan, banks much prefer consistently earning wage and salary earners to sporadically earning self-employed business owners.

The bank wants to know you can comfortably service the loan each month, and by paying yourself a regular salary you’ll have the payslips and bank statements to show a steady cash flow history.

So the sooner you set this up in your business, the better.

A successful business is a great way to create creation and accumulate wealth. But don’t disadvantage yourself by presenting a poor case to the banks when applying for a mortgage or other type of loan.

How much should you pay yourself?

As you can see, there are many good reasons to pay yourself a regular salary instead of continually raiding the till. The question is, how much should you pay yourself?

That’s a question we can help you answer.

Obviously you need to pay yourself enough money to cover your basic living and lifestyle requirements. The last thing you want is to be stressing about your personal finances, especially when you’re trying to make business decisions.

But it’s not a good idea to pay yourself too much in salary—even if the business can easily afford the cash flow. Depending on your business structure, there are probably more tax-effective ways to receive income from your business, such as dividends.

Every business and person’s situation is different in this regard, so it’s important to get one-on-one advice in this area. Don’t view this article as personal advice to you—it’s not. We’re simply opening your eyes to the many benefits of paying yourself a consistent salary as a business owner.

To work out the right amount to pay yourself regularly, you’ll need to consider things such as:

What your business’ cash flow can comfortably pay you on a regular basis
What you feel you’re worth (e.g. if you were employed by someone else)
What will let you achieve your personal and family wealth creation goals, such as paying off your mortgage and building your investment portfolio
Tax considerations so you pay yourself the optimum amount to meet your needs without needlessly paying too much personal income tax
The business’ projected profitability for the financial year. (Your shareholding percentage and dividend policy on withdrawing profits or retaining and reinvesting profits in the business will determine your projected profit dividend.)

As you can see, it makes sense to get professional advice on calculating your salary as a business owner. We’ll help you work it out by taking into account your current business and personal situation. We’ll also set up payroll systems to automatically create and distribute the necessary tax-related paperwork each pay period.

You enjoy being your own boss.

Now it’s time to also enjoy being your own employee.

Business Owners: How to Eliminate the Administrivia of Saving and Filing Receipts

Posted on November 24, 2016 by Carolina Jaramillo

They say only two things are certain in life: death and taxes. For a lot of people, there’s also a third certainty in life: the pain of keeping track of every receipt when it’s time to do the taxes.

How many times has your bookkeeper asked you for a receipt (that you swore you stuffed somewhere in the wad of receipts in your wallet) that you’ve then had to scramble and search everywhere to find?

You think to yourself: “I’ve got better things to do than this,” and you’re right. It’s a waste of your precious time that you could otherwise be investing in the growth of your business or maybe even going on a shopping spree and filling your wallet with a fresh wad of receipts!

Thankfully there are now some pretty cool apps out there that can take the pain out of tracking your receipts. Read on to see a list of the top four apps below.

Traditional bookkeeping is dead. Live bank feeds killed it.

Keeping on top of the books is hard. But what’s even harder is making good business decisions without real-time and accurate financials. If you want real-time financials, you need a real-time (cloud-based) accounting package like Xero, or MYOB Online.

The hallmark of cloud accounting is the live ‘bank feed’ functionality, where your bank transactions are automatically imported daily, which eliminates the majority of the tedious data entry associated with traditional bookkeeping.

This not only saves time and labour cost, it also allows you to have accurate numbers on your business – especially when you get into the habit of matching your bank transactions to your bills and invoices on a regular basis and asking us for support when you need it.

Automatic vs Automagic

We need to be realistic about the efficiency gains of using the cloud. Although your bank transactions are automatically imported into Xero, for example, your financial data can still be inaccurate because of two reasons:

Not matched: Errors in matching your bank transactions correctly to bills, invoices etc. The other thing to make sure of is the applicability of tax/GST. Making a systematic error with your account and/or tax/GST coding can quickly throw your financials out of whack. Not sure if money you’ve invested should be revenue or a loan? What about tax, is that an expense or a liability? Learning the basics goes a long way. Take the time to watch self-help videos online or ask your accountant for help if you’re unsure.
Not documented: Not having the supporting documentation for your expenses – by law you are required to keep proper written evidence for business expenses that are deducted from your taxable profit. This will save you from getting pushed around by the tax man if you’re ever randomly selected for an audit.

Ideally, you want your scanned receipts to ‘live’ in your accounting software so all your information is in one place. But isn’t it incredibly time-consuming to scan each individual receipt and then attach it to the respective transaction?

Thankfully not.

Receipt-keeping add-on apps such as Receipt Bank or Shoeboxed can help by ‘automagically’ pushing your receipts from their software into Xero.

Bookkeeping on cruise control

If you’ve ever been on a long road trip, you know how helpful it is to switch on cruise control so you can worry less about maintaining the right speed and focus more on steering. Using a receipt-keeping app is the cruise control of your accounting toolbox!

The core benefit of using a receipt-keeping app (there will be slight differences in your workflow depending on which add-on you choose) is that you’re able to ditch the scanner and forget about manually dragging and dropping your receipts in your accounting software.

The top two reasons for using a receipt-keeping add-on are:

Your receipts are read by an intelligent machine (and often double-checked by a human) and the information is recognised via optical character recognition (OCR). This means you have to enter a lot less of the data in your receipts (i.e. date, amount, tax etc.)
The receipt-keeping add-on is able to learn ‘rules of thumb’ for allocating your expenses to their corresponding expenses categories. For example, you can teach the app to allocate every digital receipt for Google to your computer expenses account category.

Here a four popular apps for you to consider integrating with your accounting software:

Shoeboxed: Their name is inspired by the good ‘ol days when you would cram your mountain of receipts in a shoe box and hand it over to your accountant to worry about (and probably delegate the data entry to the junior). Instead, you send your receipts via Shoeboxed’s ‘magic envelope’ and they process and verify all your receipts and get them ready for you to push to your accounting software. You also have the added option of using the smartphone app to take a snap of your paper receipts or email your receipts to your Shoeboxed digital inbox.
Receipt Bank: This is a user-friendly alternative that has the same functionality as Shoeboxed (except there is an extra charge if you decide to use the postal option). Another handy option is using the Dropbox integration that automatically synchronises with Receipt Bank which means you retain ownership of your data if you ever decide to stop using the service.
Entryless: A ‘no-frills’ low cost alternative to Receipt Bank and Shoeboxed that allows you to email your receipts to your digital receipts inbox.
Expensify: This app will help you keep track of your receipts, but it’s geared towards viewing and approving your employees’ submitted expense claims. Expensify also allows you to track billable time.

If you’re falling asleep behind the bookkeeping wheel because of boring manual data entry, it’s time we had a chat about how paperless receipt-keeping solution can shift you into cruise control.

Get in touch to make a time for us to have a chat about your receipt handling systems. If we do it over a coffee, it’ll be our shout. (And we’ll scan the receipt!)

How to Win in the Game of Business: Lead vs Lag Indicators

Posted on November 16, 2016 by Carolina Jaramillo

The principles behind winning in business and winning in sport are similar in many ways.

Take tennis, for example. If you’ve ever watched a match on television, you’ll know that along with all the hitting, running and grunting there are a lot of numbers involved.

And we’re not just talking about the score here. Each player’s performance can be measured in other ways—percentage of first serves in, points won at the net, number of unforced errors on forehand versus backhand, and so on.

But while the statisticians may love all those details, everyone else is just interested in the score, right?

You might not be interested. But the players certainly are.

Admittedly they may not know the percentages down to the decimal place. But they’ll know if they’re making too many mistakes at the net or wasting their first serves. And they’ll change their game accordingly—by staying at the baseline or slowing down their first serves a bit—to fix the problem.

Yes, the score is important. After all, the players obviously want to win. But the only way the players can actually change their winning percentage is to change how they play.

And it’s the same when you’re a business owner. You business may actually have several scores—number of sales, profit made, etc. But while they’re a great way to keep track of how your business is doing, you can’t do much about them once they’re available.

They are—quite literally—history.

They’re what we call “lag indicators” (or sometimes “results KPIs”). And apart from putting them in your reports and sharing them with your stakeholders, there’s not much else you can do with them. They’re done.

What you should be more interested in are the things you can change. These are what we call “lead indicators” (or sometimes “activity KPIs”), and can lead to improved results for your lag indicators (your score).

For example, if you want to increase the number of sales your business makes, you might want to measure things such as:

Your website traffic
Your website’s conversion of visitors to buyers or email opt-ins
The size of your marketing database of contacts
Email campaign open rates and click-through rates
How many sales telephone calls you make each week
How many sales meetings you have each week
Your conversion rate of enquiries to quotes/proposals or sales (depending on your business model)

And for profits, you might want to measure:

How much it costs you in materials to produce each unit (or service)
How much time and labour cost it takes to produce each unit (or service)
How many units are being returned by the customer, and so on.

Once you know what your lead indicators are, you can tweak them to see how much they affect your lag indicators.

For example… Improve your site’s SEO to improve website traffic. Increase the number of sales calls you make each month. Give your existing customers an incentive to tell their friends about your business. Look for efficiencies in your production line so you can produce your items more quickly.

The beauty of focusing on your lead indicators is that when you improve them, then your lag indicators—the scoreboard—will improve as a natural flow-on effect.

And lead indicators are things you can control this month. This week. Today. With measurement of your performance in these areas you can refine your activities and feel a greater sense of control in ‘improving the scoreboard’.

Lead and lag indicators are both vital measures of how your business is doing. But by looking after the lead indicators you’ll be keeping your eye on the ball when it really matters, rather than looking at the scoreboard of what has already happened.

Ask yourself, what lead indicators are you focusing on improving this month? How are you looking at that data? Do you have real-time dashboards and weekly or even daily reports on these lead indicators?

If not, we should talk. We can set up lead indicator tracking for you which is the surest way we know to improve your business’ scoreboard.

Book keeping service

Posted on February 24, 2016 by Carolina Jaramillo

As the digital world continues to change at a seriously fast pace we recognised the need to establish a book keeping service for our clients to ensure that they are using the correct accounting package effectively and efficiently for their business to save time and money.

The book keeping service is charged at book keeping rates and everything is fix price upfront (we don’t use timesheets)

The services we offer you are:

Establish and set up accounting package
Training
Ongoing book keeping services from monthly reconciliations to full service (payroll, debtors, creditors reconciliations)

Our experience to date is that clients have either been able to take back the book keeping service, saving them thousands of dollars, to reducing staff due to increased efficiencies.

Samantha O’Rielley heads our book keeping division and is a qualified accountant.

She is an accredited Xero accountant with many years’ experience having run her own bookkeeping business.

Please feel free to contact her to discuss your bookkeeping needs.

Phone: 07 5474 8955

February 2016 Testimonial

” Having been a small business owner for over 10 years the time and cost of doing BAS every quarter was considerable. Xero has been a great introduction to our business not just in reducing time and cost but the reporting available really helps us manage our cash flow and the support and training from McAdam Siemon and especially Sam O’Rielly has been fantastic “

“Brant Dillon”