A ‘Financial Roadmap’ will help improve profit and cash flow, by ensuring funds will be available to spend on developing new products and services, marketing, sales, operations, customer service and human resources.  To grow a business you must have funds available at the right time.

The easiest way to develop a financial roadmap is to have a Budget and a Cash Flow Forecast.  Here’s the difference between the two:

A Budget is a financial plan – what you are going to sell – what it is going to cost and what overheads you are likely to incur.  It also includes finance costs such as interest.  The budget sets out how much profit or loss the business is planning to make, usually on a monthly basis.
A Cash Flow Forecast is a plan of when the cash will flow into and out of the business.  It’s important to have both, because a budget may show that you’re going to make profit, but customers take time to pay and suppliers require payment, often before customers have paid you.  It’s vital to plot this all out in black and white, so that you can see where the ‘peaks and troughs’ are likely to occur and plan how you’re going to manage them.
A budget may be required by lenders and only done for that purpose, but do a budget for yourself.  As a business owner, it provides you with a fantastic financial roadmap to help clarify what everyone needs to work towards.

People often say “I can’t do a budget because I don’t know exactly how much I’m going to sell”.  This is a reasonable enough statement, but shouldn’t put you off developing a budget with best estimates.

The best way to start a budget is to work out your ‘break-even point’.  Break-even point helps you to work out how much you need to sell to make neither a profit nor a loss i.e. a zero result.  Obviously this isn’t what you’re in business for, but it will give you targets to work towards and to avoid losses.  To work out your ‘break-even point’, begin with your overheads i.e. the fixed expenses you incur whether you sell anything or not, such as rent, permanent staff wages, equipment leases etc.

You then need to know what your gross margin is on sales.  Gross margin is the percentage you make on sales after direct costs of your product or service, such as cost of the actual product or labour and materials on jobs are deducted.  For example if you know that products or jobs cost you 40% (on average) of your sale price, that means you’ve got a 60% gross margin left to cover your fixed expenses.  If your yearly fixed expenses are $600,000 you will need to sell $1,000,000 to break-even.

Example Calculation:

Monthly Fixed Expenses        =              $50,000

Cost of Goods percentage       =              40%

Gross margin                            =              60%

Formula                                    =              Monthly Fixed Expenses / Gross Profit Margin

Result                                       =              50,000 divided by 60% = $83,333.33

                 $83,333.33 is the monthly break-even sales figure in this example.

Once you know your ‘break-even’ sales figure, you can use this as a basis for your budget, by entering the monthly figures into a spread-sheet and play around with increasing and decreasing the monthly sales, to see what would be the impact of changes.  You could also work it backwards to calculate what profit you desire and therefore what you need to sell to achieve the result, or if you can find ways to reduce your direct costs, how much impact that could have on your profit.

The Cash Flow Forecast is similar to the budget, but looks at the situation from a cash perspective, rather than a profit one.  You begin with your opening bank balance then plot in monthly what income you expect to receive, based on when and how much customers pay, against what you expect to pay out, based on fixed monthly expenses and amounts owed to suppliers. The Cash Flow also includes items such as tax, repayment of loans and dividends, which aren’t included in the Budget.  By doing this forecast, you can see what will be your closing bank balance for each month and where you might experience ‘peaks and troughs’.  Once you know the amount of the ‘peaks and troughs’ you can play around with a spread-sheet, to work out how to retain a positive bank balance or when you may need funds to cover a shortfall.  By doing this at the beginning of the year, you can approach lenders with a clear picture of your requirements, rather than rushing in ‘cap in hand’ begging for help to cover an unexpected shortfall.

Both of these financial tools will help you to sleep easier at night and be able to plan for the best or worst in your business.

This article was kindly provided to JBS Bookkeeping Services by CFO On Call –  a group of professional business advisors with decades of experience working for larger corporations. CFO On Call understand the importance of the numbers within your business. From cash flow to bottom line, they know how to analyse the current data, and help you get more from your revenue with ways to boost productivity, cut operating costs and create business plans for growth.

CFO On-Call Brisbane

Scott Goffage has over 25 years of experience as a Senior Accountant and Chief Financial Controller.  Scott’s mission is to provide business owners with value added services with the aim of improving profit and cashflow through delivering excellent and personable service.

Contact Scott today to arrange a no cost and no obligation discussion on building your business roadmap and increase profit, cashflow and peace of mind.

Mobile: 0402 656 526 | Email: scottg@cfooncall.com.au

Master Plumbers’ has joined forces with a number of various companies to provide unique offerings for plumbers to help them run their business efficiently and JBS Bookkeeping Services is proud to announce that we are now an Industry Associate Member of The Master Plumbers Association of Queensland. This association has come about due to JBS’s ongoing commitment to staying on the forefront of industry developments which enable us to provide the highest level of industry specific services to our clients.

JBS recognises the need for mobile, easy to use and streamlined bookkeeping systems for tradesmen which facilitate efficient business processes, ensure on-time payments and reduce after-hours paper work headaches. We look forward to providing the QLD Plumbing Industry with the customised bookkeeping support and BAS services that play a pivotal role in business success. With JBS looking after the books business accounts are always accurate and up-to-date giving business owners and contractors the power to make growth focused business decisions, maximise cash flow and provide real peace of mind that their hard work is truly moving them towards their goals.

If you are a business owners or contractor involved in the QLD Plumbing Industry and would like to find out more about how to get paid on time, streamline your business systems and spend more time earning money and less time doing paperwork give JBS Bookkeeping Services a call today on 1300 739 424, we understand what works for you!

Owning a business involves making hard decisions. Should I advertise my business more? How much finance should I get to buy more machines? Will my workers cope without me during my business trip to Fiji? Common sense would dictate that you get the best information possible so you can make the best decisions for your business.

In Australia, it is common for individuals to use a tax agent to lodge their personal tax returns. But when it comes to running a business, the involvement of an accountant is crucial in ensuring you make the right choices when it comes to tax planning, business structure and growth.

There is often some confusion among new business owners (and sometimes experienced ones) about who they should be seeking tax advice from. Tax is such a broad term on its own, but in reality, there are a large suite of taxes that a business needs to be aware of, as this can have an adverse affect on your business. Let’s look at the differences between tax agents and accountants:

Tax agents are highly specialised in preparing and lodging Income Tax Returns. Tax Agents focus purely on Income Tax; how much income you have to declare, and how much you can claim back from the ATO. This is distinct from an accountant, who is more concerned with planning and strategy, and would prefer to meet with you at least twice a year to review your tax position and structure.

An accountant’s role revolves around assessing and advising you on what actions to take to maximise your income tax. Nearly every financial move you make has some level of taxation involved, so it makes sense to have the advice of an accountant on hand. A great Accountant should seek to be informed about the direction you want to take the business and more importantly, be involved in how you intend to get there. This means ensuring you are trading with the right entity structures (should you trade as a Sole Trader or form a company?), strategically planning how (and when) you make large purchases (eg. equipment, vehicles etc) or changes within your business and ensuring you meet any additional taxation obligations (for example, fringe benefits tax, import tax etc). He or she will also supply you with clarity on what expenses you really can claim against your income, and work harmoniously with your BAS Agent or bookkeeper to make sure these decisions are reflected in your day to day financial records.

BAS Agents are focused on your day-to-day financial tasks, including bookkeeping and BAS lodgements. With the introduction of the new BAS Agent legislation in 2010, if you are a GST-registered business, you’re money is best spent on a great BAS Agent to prepare your financial records and manage BAS calculations. BAS Agents also offer insight into the best practice preparation of your financial data, making it easier for your Accountant to provide their advice and services. Accountants love a bookkeeper who does their preparation for them – and at the hourly rate they charge, you’d probably prefer to find a good bookkeeper than force your Accountant to sit in the corner doing data entry all day.

Whilst the service is usually offered, many Accountants prefer not to be involved in the bookkeeping side of your business. If you are using the services of a BAS Agent or bookkeeper, encourage your Accountant to keep them in the loop with your tax planning. Likewise, your bookkeeper should touch base with your Accountant throughout the year to ensure that any major transactions are treated appropriately for taxation purposes. Finally, if your bookkeeping is up to date, your reporting is more accurate, and your Accountant can advise you based on real data (not “guesstimates”).

So where do financial advisors fit in? They are a must-have resource for those who truly want to ensure a financially sound future. A financial advisor is focused your financial big picture. Contrary to popular assumption, you don’t need to be wealthy to engage a financial advisor. If you are in partnership, the right insurance is critical. Have you considered your options should a tragedy strike you or your business partner? It’s an awful thought, but this is the reality of being in business. A financial advisor seeks to protect your income streams and provide input on the right entity structure to bring everything together. This means adequate protection of your assets, minimising risk and liabilities, ensuring you have a sound exit strategy in place for retirement or moving onto your next project. It’s important that your financial advisor and accountant are in communication to ensure your well-laid plans stay that way.

Of course, some of these professionals offer a combination of services. There are BAS Agents who bookkeeping services, and accounting firms who provide financial advice (just check they are registered to do so!). However, it’s not always best practice to put all of your eggs in one basket. There’s no substitute for quality, even for multi-service discounts. So surround yourself with a team of specialists, be involved in the process and encourage clear communication between your specialists – their services and advice are only as good as the information you give them.

Here is a quick guide on who does what:

*In Australia, it is illegal for a bookkeeper to prepare or lodge a BAS if they are not a registered BAS agent. See our article “What is a BAS Agent” or visit www.tpb.gov.au

For a limited time only, ABA is offering ABN members the chance to become founding members of ABA find out more if you would like to become an active contributor in more arenas that affect you as a bookkeeper.

More information on employer superannuation contributions changes and proposed phase-in schedule.

I spent some time with Sharon today to get some feedback on the roadshow and after her rave review I just wanted to share some of her comments as they really underline the progressive nature and Gold Standard service that the worlds most beautiful accounting software brings to the online accounts management industry.

What did you find most valuable about the Xero Roadshow?

I find that no matter if you have attended the beginners to Xero sessions in the past that you still come away learning something new as Xero is being developed constantly so it always pays to go to all the sessions to keep informed of new developments that can benefit clients (even if you think you already know it all).  I really enjoyed the conversion to Xero session as it reiterated some excellent points that significantly streamline the conversion process.

A lot of the add-on partners there with stalls and handouts on the various packages which was fantastic as it gives you an overview of what is available, especially when I am speaking to clients with specific needs.  As we have a number of clients who need more than the standard Xero software features, it is essential to keep up to date with solutions for their individual business requirements.

What was the highlight of the day for you?

I was very interested to hear about the new releases due over the next few months and it was exciting to hear about some of Xero’s plans for the future with the introduction of elements of taxation such as electronic filing of TFN forms and PAYG certificates to the ATO; purchase orders and the functionality to convert them to an invoice; developments with Workflow Max which could mean it will be ideal for more organisations to use; and updates to the GST codes so there will no longer be GST exempt and No GST it will just be BAS excluded or GST on purchases which is much more understandable for clients.

What was your overall impression of the Roadshow and Team Xero?

It was clear from some of the changes they are making that Xero listens to what their customers want and it was great  to put faces to names, as you receive emails from Xero staff members so when you meet them its lovely.

The event was really well organised, as always, and the sessions were of an ideal length with speakers who kept you interested throughout.  The speakers and staff are always easy to approach and friendly and it was also very interesting to see the numbers that turned up for the roadshow compared to previous ones I have attended and you can see the numbers increasing all the time.

The decision increases minimum weekly wages by 2.9%. This also applies to minimum wages for juniors, trainees and apprentices, employees with a disability and to piece rates. The new national minimum wage will be $606.40 per week or $15.96 per hour.  The increase to the minimum wages doesn’t take effect until the first pay period on or after 1 July 2012.

For further information, click here or contact your bookkeeper via info@jbs.net.au or 1300 739 424

Yes, it’s BAS time again.  And if you’ve been completing your BAS on your own, you probably just sighed really loudly and thought how much easier it would be to get someone else to lodge the BAS for you…

“Well, I could get my accountant to do them for me but he charges too much already” – did this come to mind?  Even if this is true, believe it or not, your accountant is not necessarily the best person to prepare your Activity Statements.

Let’s take a step back and be clear here.  Your Business Activity Statement (BAS) is a declaration to the ATO of your business’ financial activity over a fixed time period, either monthly, quarterly or annually.  It comes as a distinct, yet innocuous-looking pink form that is the bane of existence for many self-employed workers.  A BAS Agent is authorised to prepare and lodge BAS returns on your behalf and provide advice on BAS-related items (your day-to-day business taxes such as GST and PAYG – pretty much anything listed on your pink form).

The official role of a BAS Agent is relatively new and was introduced in 2009 to regulate the BAS related services offered by contract bookkeepers.  Until this point, most contract bookkeepers were quite merrily calculating and lodging their client’s GST and PAYG obligations, with no training or experience required.  For business owners, this was a great alternative to their accountant’s rather large hourly rates, and so the service of calculating and lodging BAS was almost expected from anyone offering bookkeeping services. Fine on one hand, but where was the accountability? What if they made a mistake?  Or worse, didn’t actually know the law to lodge by?  Quite frankly, it wasn’t pretty and certainly wasn’t fair – if accountants could be fined or deregistered for poorly treated tax calculations (including BAS-related taxes), why could contract bookkeeper’s get away with it?

The Tax Practitioner’s Board passed a bill in March 2009, amending the Tax Agent Services Act.  It offered a very generous transitional period for contract bookkeepers to meet the newly set criteria to become a registered BAS Agent. This criteria covered education, over 1000 hours of experience in BAS services and meeting the “fit and proper person test”. Plus they need to take out Professional Indemnity Insurance and soon, will also need to accrue CPD points.  Not quite as involved as the requirements to be a registered tax agent, but many agree that it suits the scope of services a BAS agent can perform.  From 1^st of March 2010, only contract bookkeepers who are registered with the Tax Practitioners Board as a BAS Agent are permitted to render BAS services to their clients.  Many bookkeepers had to complete or update their educational requirements (mostly surrounding GST legislation), but those who were serious about their work were registered the second they could sign on.

So, as a business owner, what does engaging a BAS Agent mean for you?  In one word – confidence.  There is a strict code of conduct imposed upon BAS Agents, with termination of registration and heavy civil penalties incurred for misconduct (visit www.tpb.gov.au for more information). I can guarantee you there will be very few (if any) errors in your bookkeeping if completed or reviewed by a BAS Agent!  And if there are (and we are still human) you can be sure they will realise in a panic at midnight and correct it first thing the next day.  They are educated and knowledgeable of the tax law surrounding BAS, which should in turn maximise your BAS returns. And if you are a bit behind in your BAS lodgements (and we know some of you are!), engaging a professional BAS agent shows the ATO that you are serious about getting your paperwork in order and will help to ensure less pain around the back pocket area at tax time.

However, at the end of the day, whether using a BAS agent or delegating to an employee, the ATO will still chase you for incorrect figures.  Why? Because the figures they lodge are only as good as the information you give them. So give your BAS Agent some room to work. Book them in to do your BAS early on in the due month, giving you both plenty of time to work through missing documents and get the money together to pay your BAS. Answer their questions in a timely manner (not the day before you have to lodge).  Inform them of possible changes in your business so they can prepare how this affects your GST or PAYG. Let them liaise with the ATO for your payment plans or heaven forbid, overdue lodgements.  And most importantly, make sure they have all of your receipts (yes, all of them) and your bank statements (yes, every single one).  It’s a team effort.

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Tips for small businesses

1. You can find out if a bookkeeper is a registered BAS Agent by checking the public register of the Tax Practitioners Board –  http://www.tpb.gov.au/tpb/agent_register.aspx
2. It’s up to you to make sure that your records are accurate and current.
3. Enter all data, get it up to date and stay on top of it
4. Have it reviewed by a BAS Agent or Accountant before lodging your BAS
5. Keep in touch with your accountant or BAS Agent to discuss what you can claim and what additional items you can claim on your BAS (eg. Fuel Tax Credits) with your accountant.  You could literally save yourself thousands of dollars!

Finding the right bookkeeper for your business should be no different than buying a new car.  Do your homework to get the best bookkeeping mileage for your buck.

Your business is doing well and you are getting more and more customers every month.  Soon, you may find yourself so busy that you haven’t got time to do the books on your own any more.  It’s time to engage the services of a regular bookkeeper.  Choosing the right bookkeeper for your business is an important decision and one you want to get right.  When you buy a car, do you buy the cheapest one?  Not necessarily.  Top notch bookkeeping services will add efficiency and value to your business by meeting these key factors:

Trust and Integrity

This must be the first item on your list when selecting a bookkeeper/bookkeeping service.  Your bookkeeper will have access to your confidential information, business information and personal information.  You need to know that the person you select is trustworthy and honest.  A bookkeeper who is serious about their services should also offer some type of confidentiality agreement; if they don’t, ask them for one – protect yourself.  When engaging a bookkeeper for the first time, ask your business associates to refer you to one.  You cannot get a better seal of approval of a bookkeeping service than through the recommendation of someone who can vouch for their services!  Word of mouth is without a doubt, the best source.

Attention to Detail

Your bookkeeper generates financial records and data that represent you and your business’ financial state.   You need to rely on these figures to make important financial decisions.  There is no room for error here.  Attention to detail is crucial – a small data entry error today can cause a big headache many months down the track.  Keeping up to date with current practices and legislation is especially important for bookkeepers who submit BAS statements (see our article – What is a BAS Agent?).

Relevant Experience

This goes without saying; your bookkeeper needs relevant experience and qualifications in all the areas you require.  If you pay GST, your bookkeeper must be experienced in coding and calculating GST and lodging BAS returns.  BAS agents are bookkeepers by profession – you would be wise to engage a BAS agent from the outset as BAS agents have specialist knowledge of the particular reporting requirements that your business must meet to fulfil your BAS and GST obligations.

Must be registered

By law, contract bookkeepers have to be registered with the Tax Practitioners Board to provide BAS services, or practice as a BAS Agent.   Contract bookkeepers who lodge BAS returns (or BAS agents) must comply with a strict Code of Conduct and legislative requirements when rendering BAS services.  If you are thinking of employing a bookkeeper in-house to complete your BAS returns, they do not need to be a registered BAS Agent, but keep in mind that your employee bookkeeper should be knowledgeable in meeting the current BAS legislation on your behalf.

Questions to ask prospective bookkeepers

Think about what your requirements are – would your future bookkeeper need to manage all of your accounts, or only some parts?  Will you be entering invoices or do you need your bookkeeper to do that too (accounts receivable)?  Will they be responsible for ensuring your bills are paid (accounts payable)?  Who will complete your payroll and superannuation?  Here are some questions you could ask prospective bookkeepers that will help you to select the best person for the job:

1. How long have you been a bookkeeper? OR How long have you been working as a contract bookkeeper?
2. What affiliations, registrations and memberships do you hold? (if they are a BAS Agent, ask for their registered BAS Agent number – you can verify this on the Tax Practitioner’s Board website)
3. What accounting software do you specialise in? (make sure they have current experience in your particular software package)
4. What agreements and confidentiality documents could you provide me with? (you need to ensure that your confidential information and your intellectual property is protected)
5. How will you assist my business through growth/development periods?
6. What happens if my requirements change (e.g. times/days increase or decrease)? Do you offer a scalable service to meet these demands?
7. What value can you add to my business?
8. How and what do you charge? Is there a minimum hourly charge?
9. Are you willing to train me/my staff on how to keep records, use accounting software, reporting requirements, etc?
10. Are you familiar with the payroll requirements of my industry?