Cash is King
8 Bad Money Habits to Kick – Part 3
David Balwin
CPA | Accountant | Business Advisor
Welcome to Part Three of four Blogs in which we will look at 8 money habits business owners should make sure are NOT occurring in their business.
Not seeing how the little things add up
“While I’m here I’ll just grab some of this and some of that – I’m sure we need it or it will be useful somehow in the business.” or “I know there is a fee if I withdraw from this ATM, however, my Bank’s ATM is outside and round the corner, and the time it would take me ….”
Sound familiar? It’s the little purchases and expenditures that start to add up and can significantly affect cashflow and health of the finances. Make sure you monitor what office supplies and purchases are needed and when .. and only spend to the plan! If you need to withdraw money, either keep a petty cash float or go the extra mile to your bank- those charges can really add up.
Generally think … do I need to spend that money … am I maximising the money I am spending … so there are no nasty surprises at month end.
Not planning for retirement.
Of course we’re planning for retirement … the retirement funding plan is established and superannuation is set up – usual questions such as, is there enough contribution and is the fund performing well, are being asked and monitored.
But what about the business at retirement time?
Plans need to be developed to migrate the business when it is time to enjoy the fruits of your labour. Is it intended to sell the business? If so, what lead time would need to be considered? Will the business be wound down? If so, how will this occur?
As with start up, at business end we need to plan, plan, plan.
Call me today if you need help managing your business’s wealth – (07) 3264 4783
8 Bad Money Habits to Kick – Part 2
David Balwin
CPA | Accountant | Business Advisor
Welcome to Part Two of four blogs in which we are looking at 8 money habits business owners should make sure are NOT occurring in their business.
So far we have looked at:
- Spending without a Budget
- Carrying a Balance on Credit Cards
Read on for this blog’s money habits not to have.
Not Monitoring Interest Rates
Whether it is your investment rate or what you could get on a borrowing refinancing it pays to continuously monitor borrowing and investing prices. No one wants to lose money if they could have got a better investment rate – and no one wants to pay more than they have to for debt. With profit margins reducing and costs of running businesses rising it is good management to stay on top of interest rates and trends which impact both your business and personal finances.
Not properly insuring for income protection and disability
Anyone who runs their own business and supporting themselves needs to consciously assess the risks of not properly insuring for loss of income due to injury or illness. If something prevents you from working for a few weeks or more, proper insurance could be the difference between tightening the businesses expenditure for a while until you are back on your feet and closing the doors. Business insurance coverage can be expensive with defined conditions. Do your homework and shop around for the best value for money for your price range. Remember, with the benefits of being your own boss comes the responsibility to ensure proper business coverage.
If you wish to find out more, follow our Blogs or contact Balanix Solutions for a free one hour consultation.
8 Bad Money Habits to Kick – Part 1
David Balwin
CPA | Accountant | Business Advisor
Generally, I am seeing and hearing slight improvement in business confidence now and for the future. This is a great time to take stock of money habits and put in place improvements to strengthen your business. Over four Blogs, we will look at eight money habits business Owners/Managers should make sure are NOT occurring in their business.
Spending without a Budget
When in business, there is a tendency to focus on sales/billable hours and customer service, without always keeping an eye on what it is costing to provide these services and products. It is vital, to ensure success of a business, to operate with a budget. Business owners need to plan and monitor for the money going out as much as for the money coming in.
Businesses owners need to forecast and track expenditure to understand and optimise where the money is going. Businesses owners also need to account for the non regular spending and perhaps put a bit aside for the emergencies.
Carrying a Balance on Credit Cards
Carrying a balance on credit cards is a very expensive way to do business. Even with relatively small amounts owing, add up over time. For example, if a business is carrying $5,000 on a credit facility with a 18% rate, and makes minimum repayments each month, it would take approximately 26 years to pay the debt off at an all up approximate cost of $12,000 (assuming the original debt is never increased, payments are made on time and not fees are incurred).
Consider paying credit balances in full each month. If budgets and cashflows have been developed and are being monitored, utilising credit should be manageable. If an unforeseen situation arose requiring an emergency use of the credit facility, consider not using credit again until the balance is paid in full.
If you wish to find out more, follow our Blogs or contact Balanix Solutions for a free one hour consultation.
Stay safe – is your BAS agent registered
David Balwin
CPA | Accountant | Business Advisor
The Australian Taxation Office advises that if you use someone to prepare or lodge your business activity statement (BAS), you need to make sure they are registered with the Tax Practitioners Board (TPB). If they are not registered, there are significant risks to you and your business because they:
- are acting illegally
- may not have the qualifications and experience required of a registered BAS agent
- may not have professional indemnity insurance cover
- disqualify you from the protection available under the penalty safe harbour provisions which we administer.
The transitional registration option is only available until 28 February 2013.
Don’t take their word for it … ask to see their registration certificate or check the Register of registered and deregistered tax agents and BAS agents on the TPB website.
You will find Balanix Solutions on the register! Need a professional bookkeeper on Brisbane North (Strathpine) – Call us – we can help!
(Source: ATO SME Communicator December 2012)
Why Manage Cashflow
CPA | Accountant | Business Advisor
One of the biggest issues many small businesses will face is their failure to plan how much cash they will need in the foreseeable future. Therefore, planning needs to occur in relation to how much cash the business will need (preferably over the next 12 month period) and how the business’s current practices can be improved to enhance the forecasted cashflow. As a starting point business owners need to sit down and map out, on at least a month to month basis, what the expected cash the business will need to meet commitments and what the expected cash the business will generate from sales or services. Businesses need to be as honest and as accurate as possible, including all revenue and expenses items; for example,
List Revenue (including cash from):
- Sale of goods and/or rendering of services;
- Royalties, commission, fees;
- An insurance entity for claims, annuities and other policy benefits;
- Tax refunds;
- Receipts from contracts;
- sale of property, plant equipment,
- sales of equity; and
- receipts from repayment from loans made to other parties;
List Expenses/outgoings (including cash for):
- payments to suppliers;
- payments for bank charges;
- payments to employee including PAYG, superannuation, leave loading and long service (if taken in forward period);
- payments for insurance policies for building/contents/stock/loss of wages, workers compensation;
- payments due under contracts;
- payments to acquire property or equipment;
- cash advances or loans made;
- payments to owners where redeeming equity; and
- mortgage, lease payments.
This list is not exhaustive, however, hopefully gets the thinking juices going about where businesses’ money can go. A great resource for working up these lists is the last 12 months cashflow of the business.
Also, make sure the one-off payments and receipts are not forgotten – they could, in the case of receipts, get you over the line in a tight period or, in the case of a payment, cause the business severe stress if not planned for and suddenly appears.
Once expenses/payments and receipts have been allocated to the relevant month the business is now in a position to see where it stands.
How does it look? Is enough revenue being generated to cover costs over the period (including salary for the business owner/s)? Are there any months where expenses are greater then receipts and has the business sufficient reserves to meet the shortfall?
If the business needs short term funding for a period during the year, now is the time to plan the best way to meet the shortfall: not when it happens! By planning and researching options, the business will have a far greater chance of securing the required funding at the best rate, in time to meet payments.
Remember, even though things are good and the business is generating positive monthly revenue, there maybe something lurking around the corner that is out of direct control. By ensuring access to other funds (e.g. overdraft/loan) or even better still the business’s own reserves that have been put aside during the goods times, the business has a far greater chance of surviving.
By having a proactive cash flow projection based on sound numbers, which is constantly reviewed and adjusted for changes in financial circumstances, the business is in a good position to achieve the desired result. Remember to always seek professional advice from properly qualified people as part of your business strategy. It is always a good idea for the business to discuss any issues or management matters with its accountant, legal advisor, financial adviser, financial institution and/or other business professional, well in advance.
