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When you own a small business, it's vital you understand how money flows into and out of it. At a basic level, you need to know where your income comes from and what your expenses are. At a deeper level, knowing how money moves through your business can help you make strategic decisions about growth, invoicing, and debt management. The consequences of not understanding money can be drastic-poor financial management is one of the main reasons businesses fail.

That's why you need to understand cash flow.


1. What is cash flow?

Before you can start to understand your cash flow, you need to know what cash flow is. Cash flow refers to the movement of money into and out of your business. It's essentially understanding how much money is coming into your business (your income, loans and transfers of personal money into the business) versus how much is leaving (your expenses, taxes, and loan payments).

2. How do I conduct a cash flow analysis?

Some accounting software programs allow you to conduct a cash flow analysis through the platform itself or possibly via an addon. Open the program and often a cash flow statement can be found under a "Reports" tab or something similar. So if you're already using accounting software, you can have a cash flow statement with minimal effort.

If you don't use accounting software, you'll have to conduct the analysis manually. Here is a very basic cash flow analysis (This can easily be done using a spreadsheet):

First enter the amount of cash your business actually had in the bank at the start of a financial period (say a month). Second, add up all the money that came into your business in the month. Include only money that actually came in, not money still owing from clients. Third, add this to the cash from the start of the month (in Step 1). Fourth, add up the cash that went out for the month, including rent, cost of goods, fixed costs and loan payments. Fifth, subtract the total in Step 4 from the total in Step 3. This gives you your cash at the end of the month, which is also your starting balance for the next month.

If the cash in your account is lower at the start of each month from the previous month, you have a cash flow problem that requires further analysis.

3. Why is cash flow important?

Not making enough money to cover debts is a major reason small businesses fail. Understanding your cash flow can help you take the steps you need to identify and address issues before they threaten your business.

A cash flow analysis can tell you if you're allowing clients too long to pay their invoices, making you financially vulnerable. You can then determine if you need to charge a deposit for your services or shorten the payment terms. It can also tell you if you're spending too much in areas that are not profitable for you. This can help you figure out where you need to cut back on spending-or charge your customers more.

Regular cash flow analysis can also show you what times of the year your business drops off - such as if you have a seasonal business. That can help you plan for those times to make sure you have enough money to cover a loss in revenue.

Final thoughts


Understanding your cash flow and making strategic decisions about your company's future is vital for business survival. Unfortunately, many small business owners make the mistake of not understanding or, even worse, ignoring the importance of cash flow and that often results in losing their business.

Get in touchNeed help managing your cashflow? We can help. Have a chat to us today.



 

 

 

Small business owners already have a difficult and time-consuming job running their business. If their business is open five days a week, they usually need the weekend to catch up on paperwork, pay bills and manage any tasks they didn't get to during the week.

For those with a seven-day-a-week business, there's even less time off. They often feel the need to be onsite any time the business is open, to deal with unanticipated issues, help the staff out, and ensure all tasks are completed.

Being onsite seven days a week isn't healthy or productive, however. It can cause burnout and result in errors being made. It affects the business owner's personal life and quality of life, not to mention their overall well-being.

Here are three tips for getting your life back when you operate a seven-day-a-week business.

1. Hire a trusted manager

The next best thing to having you onsite all the time is to have a manager with authority similar to yours who can be onsite when you aren't. Invest money in hiring a manager to deal with operations so you can take days off. Train that person to deal with any issues you anticipate and make sure they know and understand the business inside and out. Give them the authority to make decisions in your absence. It might take a little time to build up the trust with that manager, but when you have it, they will be invaluable to you.  

2. Delegate tasks you don't need to do

As a small business owner, you have regular duties that need to be done but could be better done by an expert. Doing them yourself takes up a ton of your time and forces you to be on the jobsite more. Look at your tasks and determine which ones are eating up your valuable time. Could you hire a bookkeeper? An accountant?

Virtual assistants can now be hired to deal with invoicing, collecting payments and making phone calls on your behalf. That frees you up to deal with other tasks at your jobsite, which means you may get your other duties done and find you have free time.

These outside service providers cost money, but they are worth the expense when you consider the time and energy you'll save by not taking on those tedious tasks. Especially when you factor in the extra personal time you'll have.

3. Start slowly

The worst thing you can do is wait until you feel you're about to have a nervous breakdown before you think about taking days off. That increases the chances that you'll need a day off at exactly the wrong time-during the busy season or when there's a work-related crisis emerging.

To get yourself comfortable with taking days off and get staff used to you being away, start slowly. Maybe take an afternoon off during the weekday that's typically the slowest. When you're comfortable with that, start taking a full day off here and there. After a while, you'll be fine taking two days off, even during busier periods. You may not always have a five-day-a-week job, but at least you'll be okay taking days off for yourself. 

Final thoughts

You need time away from your business to maintain your sanity and stop yourself from burning out. Having trusted staff and expert service providers in place will help you take a break from your worksite and get yourself some personal time.

Tips for switching off during the holidays

The holiday season is once again here, and with it comes time to relax, focus on family and friends and take stock in what is really important in life. Unless you're a small business owner. Every small business owner knows that being away from the office can be just as stressful as being in it.

Phone calls from employees dealing with a minor crisis will pull your focus from your family, or your Christmas dinner will be taken over by business talk. Like the merry bells of Christmas, your cell phone will constantly chime with the sounds of urgent text messages and emails that must be dealt with. Clients will need your attention.

It's easy to let business take over personal life, but as a small business owner it's vital that you get some time away from work.

Here are some tips for helping you switch off during the holidays.

Shut down entirely for the week

If your business can be shut down for a week, consider closing from Christmas to New Years. Your employees will love the time off and you won't be bothered with urgent texts about something that just went wrong at the office. This time is generally not as productive for workers anyhow, as they all want to get home, be with loved ones, and celebrate the season.

Just make sure you give your clients some notice that you're closing up. Good clients will respect your decision and even encourage it.

Have someone trained to deal with your absence

A big headache for small business owners is constant calls from employees who can't carry out basic tasks or make decisions. If you plan on taking time off but are leaving the business open, have someone senior available to answer questions or take over duties other employees can't.

Make sure employees are prepared for situations that could arise, but they can fix on their own. Can they use someone else's computer if theirs dies? If a client calls with a crisis, which staff members can deal with each situation?

Assign one or two people-not you-to be contact people in case staff needs assistance and give those two people strict instructions about when they can contact you. You don't need phone calls on your days off because someone doesn't know how to work the coffee machine.

Resist the urge to plan meetings during this time

When a client comes to you just before you take your days off and requests a meeting over the holidays, it can be difficult to resist that urge. That meeting, however, will take up time and space in your brain aside from the actual meeting time. You'll prepare for it, you'll think about it, you'll plan what to say. If the meeting doesn't go well, it will affect the rest of your days off.

Instead, push the meeting until after the holidays. Unless the situation is dire, an extra week won't hurt. Or ask another worker to attend the meeting for you.

Final thoughts 

If you're taking time over the holidays, really take time. Don't take time off but then spend that time constantly checking for work-related texts and emails or attending meetings. Put your cell phone away. Stop checking your email. Set an outgoing email that lets people know when you'll respond to their messages and change your voicemail to note your days off. That way you can rest, relax, and enjoy your break.

If you're a small business owner, you'll need this time to restore your energy for January. Now go hide your cell phone.

 

 

 

 

3 Must Have Apps for Tradies

When you run your own trade business, your life involves a lot of long days being on job sites while managing projects, staff and clients. There probably are not enough hours in the week for you to deal with all the issues that arise while keeping your customers happy, and taking time out of your schedule to manage your business is probably the last thing you want to do.

Thanks to a variety of online software companies, running your business is now a lot easier. You can efficiently manage your projects, employees, finances and records all through your computer or your tablet, freeing you up to focus on your clients.

Here are three online software companies you should consider adding to your technology toolbox.

Xero (xero.com)

Unless you're an accountant, anything to do with finances probably isn't on your list of fun activities. You don't want to spend your time writing up invoices and chasing down clients for payment, or tracking and reviewing your expenses. You want your energy to go to an exciting project or finding a solution to a client's problems.

Xero lets you do just that. It offers a user-friendly invoicing system that allows you to accept payments through the software. You can connect Xero to your bank account so transactions are imported to your Xero account daily, meaning you don't have to manually enter them. You can even manage your inventory and conduct bank reconciliation through the program.

All those stressful accounting tasks are taken care of, with minimal effort from you.

Receipt Bank (receipt-bank.com)

As Receipt Bank astutely notes, you didn't go into business to do paperwork. Receipt Bank makes it easier for you to keep track of your expenses, including storing receipts, classifying expenses, reviewing data, and sharing the information with your accountant. It connects with other accounting software, including Xero, so you don't have to manually share information between various programs.

Leave the paperwork to the experts and focus on the activities you love to do.

ServiceM8 (servicem8.com)

ServiceM8 makes project supervision more efficient and easier to control. You can track a project from the first time a client calls you for information to the moment their invoice is paid in full. The software allows you to manage your employees, provide quotes for potential clients and record notes and other project data.

You don't even have to be on the job site to see where your staff is or keep up with an ongoing project, you can simply check through the software. You can also schedule your appointments and receive reminders about upcoming meetings. ServiceM8 can even help you make dispatching decisions about your staff, figuring out who is closest to a jobsite or can reach a client quickly.

Final thoughts

For many business owners, the management is the least fun aspect of business. It drags you away from the work you love doing and drains your time and energy. Using technology to help you out in areas that you don't enjoy is a way to ensure those tasks are completed correctly.

Adding these technology tools to your toolbox makes running your business easier, more efficient and more enjoyable.

Get in touch with us to find out how we can help your trades business.

 

 

 

 

What are the hidden costs for buying a house?

A word to the wise if you're shopping for a new home: the list price is only a baseline. You'll want to have a substantial buffer in your budget for a host of additional unseen fees.

This article will help you understand all the associated costs of buying a house so you're prepared.

Purchase Fees

Appraisal 

Before a lender will approve your mortgage you may be asked to undertake an independent assessment of the property's value. This helps your lender determine the mortgage amount, calculated as a percentage of the appraised market value. It also lowers the lender's risk of loss; an appraisal helps confirm that if you default on your payments, the loan could be repaid by selling the property.

Home Inspection

This additional expense is in your best interest. If major problems are uncovered, you can ask the seller to fix them as a condition of sale – or walk away if they refuse and the cost of repairs exceeds what you're willing to invest. Some home buyers choose to opt out of an inspection, but many lenders won't approve a mortgage unless one has been done.

Legal Fees

You'll need to retain the services of a property lawyer to protect your interests. A legal professional will complete title searches on your behalf, prepare the documents for property purchase as well as mortgage documents, manage the transfer of funds, and register your name on title when the sale is complete.

Insurances

Title Insurance

There's a growing demand from property investors, mortgage lenders, and auditors for additional protections that lower risk. Title insurance protects you from unforeseen issues that could lead to major trouble including:

·       Errors and defects (i.e. in existing surveys or the public registry)

·       Omissions

·       Restitution for unresolved issues with a previous owner

·       Undisclosed property heirs

Mortgage Insurance

Also known as a mortgage indemnity guarantee, this insurance protects the lender if you are unable to make your mortgage payments and/or if the lender has to repossess your home. Mortgage insurance is often a requirement for buyers applying for a high-ratio mortgage. 

Home Insurance

Also known as property, home owner's, or house insurance, home insurance protects you from damage or loss to the building as well as your home's contents. Proof of home insurance is often a condition for mortgage approval and, depending on your agreement, would protect you from loss due to earthquake, fire, flood, and theft.

Property Taxes

Property taxes cover infrastructure costs in your community (e.g. road construction and maintenance, traffic lights, sidewalks), recreation, public transportation, and the salaries of your local government employees including police, fire fighters, and city workers. Your portion is based on a property value assessment – so the higher the value of your home, the higher your taxes.

Utilities

As a home owner you'll need to pay for your electricity, water and gas usage (and possibly waste collection and recycling). Don't forget to include internet, phone, and TV hook up – as well as monthly service fees – in your monthly budget.  

Moving Day (and beyond)

In addition to hiring a rental truck or moving company, other potential costs could include:

  • New appliances

  • Renovations or repairs

  • Home furnishings

  • Strata fees (for condominium owners) and

  • Landscaping equipment

Final thoughts

If you're looking for a way to soften the financial blow of buying a home, talk to your lender.

You may be able to roll your mortgage insurance costs in with your mortgage payments – or qualify for a home equity line of credit to help cover your moving expenses and any required renovations. 

Three innovative tips for finding employees

We all know the usual process for finding new employees. Advertise a job. Read resumes. Conduct a telephone interview. Conduct a face-to-face interview. Choose someone. The steps to recruiting new talent have been the same for decades, leaving many people to think these are the only way to find new employees.

There are many top-notch employees that you might not be reaching if you don't change your strategy, however and these days there are many new and exciting ways to reach out to possible staff and attract qualified employees to your business. All you have to do is be willing to be creative in your thinking.


Get your current employees on it
Besides you, who knows better what you need in an employee than your current employees? Not only do they know what you need, they can vouch for the people they recommend. Using an employee referral program can save you the costs associated with advertising a position, undergoing extensive interviews, and then training and retraining employees who don't work out.

How does it work? Your employees recommend people for a job with your company and if their recommendation is successful they get a reward. This can be a cash bonus, a gift, additional days off work, or the opportunity to work from home for a few days.

Make sure the program's details are clear: does the referred employee just have to be hired for the benefit to kick in, or do they have to work at your company for a specific period? Does the gift get more extravagant if they recommend more successful recruits? 

Keep the rules simple and make sure all employees know about the program.

Turn to social media

Social media isn't just a great way to build your customer base, it's also a fantastic way to build interest in working for your company. Employees of all ages-but especially younger generations-use some form of social media to look for work. That could be LinkedIn, but it can also mean Facebook, Twitter, Instagram or a variety of other sites.

Even if someone who sees your post isn't interested, they may share it with their friends or followers, who will share it with theirs, vastly increasing your reach. Be sure you know who your target candidates are and what social media channels they use, and tailor your ads or posts to them.

If you have the time to have a long-view of recruiting, start building your company's employment brand online early, by releasing content that highlights your corporate culture. People may see those posts and come to you so you can build your talent pool. At the very least, you'll already be on their radar when it comes time to hire.

Reach out to past candidates
Just because someone wasn't the best candidate for a job in the past doesn't mean they aren't now. There could have been many factors that resulted in that person not being the best fit at that time. Perhaps they've taken courses or developed their experience since you interviewed them. 

When you interview people that you really like but they don't quite make the cut, keep their resume on file and consider reaching out to them when a position opens up. You never know when the time will be right for them.

Final thoughts
There are many things you can do that can be successful in finding the right employee for your business. As an added bonus, some of these strategies won't necessarily cost you a lot of time or money and may get you highly qualified and loyal employees.

Try some of them the next time you're hiring and see if that gets you the candidates you need.



These days your personal data is everywhere, and that information is valuable to marketers, hackers and everyone in between. If you want to prevent the unauthorized use of your personal information, you need to take a proactive approach to protecting yourself and your identity.

You can no longer afford to be blasé about your data security - if you are not taking proactive measures to prevent the use of your personal information, you are opening yourself up to all kinds of problems. Here are some tips you can use to protect yourself and your data in this age of data breaches.

Check Your Privacy Settings on Social Media

There is an old saying in the tech world - if the service is free, you are the product. Nowhere is this more true than in the world of social media. Avoid the Facebook may be getting all the headlines, but other social media companies operate in the same manner, selling your personal data to advertisers and serving up targeted marketing messages.

While there is nothing inherently evil in targeted advertising, it can become obtrusive when bad actors get involved. If you want to protect your data from the next Cambridge Analytica, you can start by adjusting your privacy settings. Controlling the type of data that is shared, and who it is shared with, can go a long way toward protecting your privacy.

Designate an Online Shopping Card

Shopping online is convenient, but it is important to stay safe. With so much credit card data being stolen, it has never been more important to be proactive about protecting yourself and your money.

You can start by designating a single card for all your online shopping. Use that credit card whenever you shop online, then check your statements carefully for signs of fraud and unauthorized use.

Avoid Saving Your Credit Card Data at Shopping Sites

It may be convenient to save your payment information, but it is also risky. Avoid the temptation to save your credit card information and instead take the time to enter it each time you shop.

This proactive measure will protect you in two ways. First, it will prevent your credit card information from being revealed in the next data breach, but it will also reduce the impulse purchases that might otherwise wreck your budget.

Use Strong Security on All Your Devices

Your online security is only as strong as your weakest link, so make sure all your devices are well protected. From your tablet to your smartphone to your laptop, make sure you have strong antivirus and malware protection on every device you use.

Implementing strong security and keeping it updated is one of the best things you can do to protect yourself from the next data breach. Think of your online security as a chain, one that requires the robust participation of every link along the way.

Data breaches are inevitable, and the bad guys keep coming up with new ways to steal your personal information. If you want to protect yourself in this dangerous digital world, you need to take a proactive approach, and that means building security into everything you do online.

 

If your small business operates on a tight budget you might be tempted to eliminate costs that you think aren't necessary. Often small business owners choose to go without business insurance as a way of saving money, but doing so can be incredibly costly in the long run. 

Business insurance is something that may seem like an unnecessary expense in the short term, but is worth the cost now in case something terrible happens in the future. It's better to spend some money to avoid paying a lot of money later, especially if there's a chance you could face a lawsuit. Unfortunately, even the most diligent business owners could wind up dealing with clients who think they have been treated unfairly, or who injure themselves while at your place of business. 

Here are three reasons you need small business insurance.
  1. You have clients visiting your business
    If you have an office, store or other facility that clients visit, you need general liability insurance to protect you in case a client is injured while on your premises. No matter how well you maintain your location, there's still a risk of someone slipping and falling, and injuring themselves. If that happens, you could face a lawsuit. Your general liability insurance will protect you in that case.
  2. You have a building or equipment
    If your business owns a building or has valuable equipment, you need protection against damage to either. Damage to your building or your equipment can affect your ability to maintain your income, and if you have to raise the money to replace your equipment you could be out of income for a long time.
    A business owners' policy will protect you in such circumstances so you don't have to put out thousands of dollars to repair or replace your damaged equipment or building. Don't assume your homeowner's insurance will cover any work equipment you keep in your home. It often does not, just as personal automobile insurance won't necessarily cover equipment you carry in your personal vehicle if it is stolen from that vehicle. 
  3. You offer professional services
    No matter how good you are at your work, there is a chance you'll come across a client who won't be happy with the work you provide. Professional liability insurance protects you in case a client claims you provided negligent services or otherwise failed to uphold your end of a contract. If your business works with subcontractors, having professional liability insurance protects you in case a contractor makes an error or fails to perform.   

Final thoughts
Too many small business owners only learn how important business insurance is when they realize their home insurance doesn't cover their business, or their auto insurance doesn't cover theft of work tools from their personal vehicle. Unfortunately by then it's often too late.

You've worked hard to build up your business, you shouldn't lose it due to a lack of insurance. Despite your best efforts, you can't foresee what sort of liabilities you may face in the future, and your ability to cover them with insurance may mean the difference between keeping and losing your company. Understanding what insurance you need and how it will protect you will go a long way to your peace of mind. If you need advice on who to talk to, or what insurance is right for you, reach out to our team.






4 questions you should ask your accountant

4 questions you should ask your accountant Ideally, you and your accountant are more than just "adviser" and "client". With your combined skills, expertise, and shared mission to support a thriving business, you're more like strategic partners. The key to achieving success in any partnership is, of course, strong communication. At your next meeting, be sure to ask your accountant these four important questions.
  1. What's my best strategy for increasing revenue?
Every business owner strives to improve profit margins – but the best way to quickly and/or sustainably grow revenue will vary from business to business. When reviewing your financials, ask your accountant to pinpoint and suggest smart strategies for driving greater revenue. For your unique company that might mean focusing on new leads, encouraging customers to buy more frequently, incorporating cross-selling or up-selling, and/or re-thinking your pricing strategy.
  1. How would you assess our financial performance this quarter/year?
It's part of your accountant's job to stay current with your company's financial statements and reports (i.e. your balance sheet, income statement, profit and loss statement, and cash flow reports). Some small business owners – especially those who lack confidence in their financial literacy skills – may only want to know the basics, in simplest terms. Let your accountant know you'd like a more thorough analysis of your finances when you next meet, and help understanding what the numbers mean. Ask for key ratios, like your gross profit percentage, and an assessment of the big picture, drawing comparisons with past performance as well as trends in your industry. Also ask for any insights your accountant might have into the reasons for new or surprising developments, and what you can do to correct areas where your business is falling short – as well as what actions you can take to continue any positive trends.
  1. How can you help me grow my business?
Your accountant should be prepared to offer professional advice to help your business expand and grow over time. Scaling a business can be tricky as it requires a company to do everything it must to keep their customers happy while adapting to change – such as new staff and new systems to accommodate a greater volume of customers. Financial systems may need to change as your business expands; likewise, your company's financial management may need additional support as you transition to a larger company. Ask your accountant how you can best work together to facilitate smooth, sustainable growth with minimal disruption to operations, and for tips on how to successfully scale based on past experience with other small business clients.
  1. What are your most successful clients doing?
Chances are your accountant serves as a trusted advisor to a number of clients – and therefore, will be privy to the inner workings of companies who are struggling and others who are thriving. Neglecting to ask your accountant about their clients' success stories is a missed learning opportunity. Even if a business has little in common with yours – operating in a different industry, or as a seller or products versus services – there's value in learning what yielded impressive results for another company. Alternately, you might ask your accountant how their clients overcame challenges similar to yours to help you brainstorm possible solutions. Final thoughts Your accountant is an incredibly valuable resource for your business – and not just at tax time. Be sure to check in every quarter so you have the up to date financial info you need, and your accountant's professional advice when it comes to making key business decisions.

What you need to do before you retire

If you haven't given any thought to what your retirement will look like, now's a great time to start. It might not be the most fun thing to think about-not when there are vacations to plan or houses to buy-but retirement planning is a vital part of your overall financial plan.

Most people dream about they day they no longer have to work. They dream of having a leisurely coffee in the morning without running to a meeting or they want to spend six months of the year visiting exotic locations. Being able to do so requires planning. It means you have to think about your financial future and take steps to make sure you can afford the lifestyle you want to live.

Here are some things to do before you retire.

Examine your retirement needs

Before you can even begin to think about how to save for retirement, you need to know what you want your retirement to look like and how your finances will affect it. Consider how you want to live in retirement. Will you want to travel a lot? Downsize your home? Have your regular home and a holiday spot? Will you need to renovate your house?

You also need to know what you'll have to pay for, and how. Do you currently own a home but plan to sell it to move into something smaller? Will your home be paid off by the time you retire? Do you want to maintain certain investments in your senior years or would you prefer to be liquid?

Next look at the income you'll have. What will your current investments likely provide for you as you age? What will your pension be? Will you have income you can count on beyond a pension? Are you eligible for other entitlements?

Having a firm understanding of how you want your life to look as you age and what money you'll have to live off will help determine how you can start saving today for retirement and help you sort out when you can afford to retire.

Deal with your debt

Next you need to look at the debt you currently have and make a plan to deal with your bad debt. Although many people think all debt is bad, in truth there is good debt. Good debt is part of a strategy that builds your wealth over time. Owning a home can be good debt. Bad debt takes away from your wealth. This may be through interest, such as on credit cards for example.

Retirement will be less financially stressful if you can reduce your bad debt before you retire-and preferably well before you retire.

Then examine whether there are other financial matters that need addressing. Do you have a current will? Is your insurance up to date? Should your investments be reviewed? Is it worth it to make additional superannuation contributions?

Final thoughts

Once you know what you want your retirement to look like and you have an idea of your finances, you need to develop a financial plan. Retirement savings don't just happen with good intentions. It takes planning, saving, and understanding what financial vehicles are best for you to make your dreams a reality.

Talking to us can help you sort out what you need to do now, a few years in the future and as you enter retirement to ensure you're as financially comfortable as possible.

Chartered Accountants Australia + New Zealand MYOB Intuit Quickbooks Xero