7 Warning Signs Your Business is in Financial Distress

It’s always a shock to see a seemingly successful company go under, but this doesn’t just happen out of the blue. There are always warning signs, and the survival of your business relies on you being able to recognise them. The sooner you can spot financial trouble, the sooner you can start working on a solution. Nothing good ever comes from burying your head in the sand, so it’s best to get well-acquainted with the red flags. Here are seven warning signs that your business is in danger.

1. Refinancing 

Let’s be clear: refinancing is common and it’s not always a sign of trouble, so long as you can afford the repayments. Borrowing money against the value of an asset is a sensible way of lowering interest rates and it helps to free up cash for your business. 

It’s when you find yourself refinancing frequently that you need to worry. It indicates that your company is in poor financial health and struggling to make ends meet. What’s more, lenders quickly grow suspicious of businesses who need to refinance all the time and your credit score can take a hit, worsening your problems. 

2. Poor Cash Flow 

Cash flow is the lifeblood of every Tradie business. It’s the key to survival, investment and growth. You need enough cash to cover your outgoings or you risk mounting debt. 

Negative cash flow is part and parcel of launching or expanding your Tradie business, so it’s admissible for a short while. However, your business can’t survive indefinitely without income. You need at least enough cash to cover your outgoings to keep your company afloat. 

For small or new Tradies, cash flow can often be unsteady – all it takes is a few late customer payments to rock the boat. It most definitely pays to be wary of premature expansion and overspending, since these factors can significantly affect your cash flow. 

3. Creditor Pressure

Being chased by creditors is one of the most worrying signs that your business is in financial distress. When you’re dealing with an imbalanced cash flow, it can be tempting to delay your payments but this is a short-sighted approach that sparks a vicious cycle of financial problems.

It’s in your best interests to stay in your creditors’ good graces. Late payments can result in a poor credit score, which will make it difficult to secure loans in the future. Moreover, creditors won’t hesitate to chase you down or resort to legal action to claim what they’re owed. This is disastrous for any Tradie, so stay focused on the bigger picture and make your repayments on time.

4. Over Reliance on Individual Projects or Contracts

A financially healthy business has multiple streams of revenue and consistent income from several customers. Whilst losing contracts is never ideal, it shouldn’t have the power to break your business. If the financial health of your business depends on one particular source of income, it’s a sign that you’re heading towards trouble. 

Similarly, focusing all of your efforts on securing new customers at the expense of your existing ones indicates that there are deeper financial issues at hand. It’s also unwise to antagonise your current customers. Studies show that customer acquisition is up to 95% more expensive than customer retention. Furthermore, increasing customer retention rates by 5% increases your profit by 25-95%. Nurturing your current clientele is vital for the financial health of your business, plus verbal referrals never hurt. 

5. Low Staff Morale

Employee morale is often one of the most accurate indicators of how your business is doing. It’s important to keep your team satisfied. Reduced hours, contractual changes and pay freezes are all signs that a business is in trouble. As a result, morale plummets, with further troubling consequences for the company. 

6. Low On-site Atmosphere

Unhealthy on-site morale causes productivity to take a nosedive. Meanwhile, rates of absenteeism begin to rise, which only exacerbates the problem. What’s more is that your team will catch onto the fact that things are going badly for the business and may decide to jump before they’re pushed, leading to a high turnover. 

7. Your Customers Know Something’s Wrong 

Your customers are smart. It won’t take them long to notice that your team are dissatisfied or that they’re getting less for their money than they used to. Unhappy customers won’t hesitate to defect to your competitors, and word about your financial trouble may get around pretty quickly. This is the last thing a struggling business needs, as it can often prove to be the final nail in the coffin.  

Summary 

None of the aforementioned signs are an automatic death knell for your business. However, if you’re able to spot several of these problems at once, it’s time to take action. The sooner you begin to fix these issues, the quicker your business can start to recover. Don’t wait for word to get around; put out the fire before it spreads. 

It’s always a shock to see a seemingly successful company go under, but this doesn’t just happen out of the blue. There are always warning signs, and the survival of your business relies on you being able to recognise them. The sooner you can spot financial trouble, the sooner you can start working on a solution. Nothing good ever comes from burying your head in the sand, so it’s best to get well-acquainted with the red flags. Here are seven warning signs that your business is in danger.

1. Refinancing 

Let’s be clear: refinancing is common and it’s not always a sign of trouble, so long as you can afford the repayments. Borrowing money against the value of an asset is a sensible way of lowering interest rates and it helps to free up cash for your business. 

It’s when you find yourself refinancing frequently that you need to worry. It indicates that your company is in poor financial health and struggling to make ends meet. What’s more, lenders quickly grow suspicious of businesses who need to refinance all the time and your credit score can take a hit, worsening your problems. 

2. Poor Cash Flow 

Cash flow is the lifeblood of your business. It’s the key to survival, investment and growth. You need enough cash to cover your outgoings or you risk mounting debt. 

Negative cash flow is part and parcel of launching or expanding your small business, so it’s admissible for a short while. However, your business can’t survive indefinitely without income. You need at least enough cash to cover your outgoings to keep your company afloat. 

For small businesses, cash flow can often be unsteady – all it takes is a few late customer payments to rock the boat. It most definitely pays to be wary of premature expansion and overspending, since these factors can significantly affect your cash flow. 

3. Creditor Pressure

Being chased by creditors is one of the most worrying signs that your business is in financial distress. When you’re dealing with an imbalanced cash flow, it can be tempting to delay your payments but this is a short-sighted approach that sparks a vicious cycle of financial problems.

It’s in your best interests to stay in your creditors’ good graces. Late payments can result in a poor credit score, which will make it difficult to secure loans in the future. Moreover, creditors won’t hesitate to chase you down or resort to legal action to claim what they’re owed. This is disastrous for any small business, so stay focused on the bigger picture and make your repayments on time.

4. Over Reliance on Individual Projects or Contracts

A financially healthy business has multiple streams of revenue and consistent income from several clients. Whilst losing contracts is never ideal, it shouldn’t have the power to break your business. If the financial health of your business depends on one particular source of income, it’s a sign that you’re heading towards trouble. 

Similarly, focusing all of your efforts on securing new customers at the expense of your existing ones indicates that there are deeper financial issues at hand. It’s also unwise to antagonise your current clients. Studies show that customer acquisition is up to 95% more expensive than customer retention. Furthermore, increasing customer retention rates by 5% increases your profit by 25-95%. Nurturing your current clientele is vital for the financial health of your business. 

5. Low Staff Morale

Employee morale is often one of the most accurate indicators of how your business is doing. It’s important to keep your staff satisfied. Reduced hours, contractual changes and pay freezes are all signs that a business is in trouble. As a result, morale plummets, with further troubling consequences for the company. 

6. Unhealthy Office Atmosphere

Low office morale causes productivity to take a nosedive. Meanwhile, rates of absenteeism begin to rise, which only exacerbates the problem. What’s more is that staff will catch onto the fact that things are going badly for the business and may decide to jump before they’re pushed, leading to a high turnover. 

7. Your Customers Know Something’s Wrong 

Your customers are smart. It won’t take them long to notice that your employees are dissatisfied or that they’re getting less for their money than they used to. Unhappy customers won’t hesitate to defect to your competitors, and word about your financial trouble may get around pretty quickly. This is the last thing a struggling business needs, as it can often prove to be the final nail in the coffin.  

Summary 

None of the aforementioned signs are an automatic death knell for your business. However, if you’re able to spot several of these problems at once, it’s time to take action. The sooner you begin to fix these issues, the quicker your business can start to recover. Don’t wait for word to get around; put out the fire before it spreads. 

man with cigarette under road at night
Photo by Ryutaro Tsukata on Pexels.com

How Accountants Can Save Your Business a Fortune

Accounting is a crucial part of every Tradie business, from start ups to national corporations. You can’t ignore your accounts, and doing so for even a short period of time can damage your business. However, accounting is complicated, and mistakes can be costly. Hiring a professional accountant can save you a huge amount of time and money, which are often one and the same. Let’s take a look at how hiring an accountant can benefit every Tradie.

Accountants vs. Bookkeepers 

The terms ‘accounting’ and ‘bookkeeping’ are often used interchangeably, they’re not the same thing and it’s vital to understand the difference.

Bookkeepers record and organise financial data, whilst accountants interpret that data. A bookkeeper records all of your revenue and costs, but an accountant prepares that information as a tax return or financial statement. Simply put, bookkeeping is entirely objective whilst accounting is more subjective. These roles certainly overlap, but you may need to outsource both or consider buying software. 

Save Time, Tax and Mistakes 

One of the biggest draws of hiring a professional accountant is that they will save you significant time and energy, even if you only use them once a year for your tax returns. These are hours that you could be re-investing in your business, thus saving you money, too. 

Accountants are also able to use their expertise to help you reduce the amount of taxes you must pay. They can even help you to create a tax-efficient financial plan for your business going forward.

Furthermore, your tax returns have to be 100% accurate and mistakes aren’t cheap. A professional accountant ensures that you won’t be hit with a hefty ATO fine for an innocent error and provides peace of mind, allowing you to focus on what’s important. 

The Importance of Accountants As Your Business Grows 

Accountants are useful in different ways during the various stages of growth. You may not think you need accounting services before you launch, but professional help can really set you up for future success. Here’s how an accountant can help you throughout your business journey: 

Pre-Launch: 

An accountant can help you to put together a start up financial plan for your business and help you to secure investments. They are also able to offer advice regarding pricing and securing equipment. Hiring an accountant this early in your business also helps you to avoid accumulating financial errors which can be difficult to sort out later on. Additionally, their services free up your time to concentrate on other areas of your business that may require attention. 

Start-Up:

An accountant will help you put your best foot forward, financially speaking, during the start-up phase of business. It’s well worth having a professional on hand as you’re learning the ropes. Amongst other things, an accountant can help to set up an accounting system and choose suitable accounting software that will serve you going forward. 

Expansion: 

Whilst it’s advisable to hire a professional accountant as soon as possible, it’s absolutely crucial when your business reaches the point of expansion. Hiring more staff means that you’ll need a payroll system and advice on employee benefits. As your business grows bigger, it’s also more likely to be audited and an accountant can help you to prepare for this. Increased costs also mean that you’re likely to need advice on how to improve your cash flow, since this is essential for the financial health of your business

Exit: 

Although it may seem a long way off, you may want to sell your business or retire from it eventually. For the former option, you’ll need an accountant to help you maximise the business value so that you can sail off into the sunset. As for retirement, an accountant will advise you on pensions, retirement plans and personal investments. 

Accounting Software 

If your business accounts are fairly simple and you’re not sure whether or not you need an accountant, it’s worth considering accounting software instead. If you go down this route, it’s best to use cloud-based software for a more seamless and accurate experience. However, if you’re looking to expand your business then it’s worth paying extra for the financial advice of a real-life professional. 

Conclusion

There’s no question about it: every Tradie needs an accountant. If you want to hit the big time, then the advice of a financial expert is worth every cent. However, accounting software may suit for smaller operations. Whichever route you choose, it’s important to stay on top of your finances and remember that accurate accounting saves significant time and money for your business. 

Four Ways Tradies Can Reduce Costs and Boost Profitability

Not sure why your bottom line isn’t pretty? Sometimes, overspending can hurt your profitability despite your record sales.

Profitability doesn’t only come from sales numbers. And a profitable business isn’t always the one with the most customers and the highest sales.

The sign of a business profitable depends on what’s left in the bank at the end of the month or the financial year.

It’s important to account not only for the cash coming in but also the cash going out. That’s why cutting costs is one of the best ways to boost profitability… assuming that you do it right.

Tip #1 – Address Material Costs

Tradies are most concerned with raw material costs. That’s why increasing profitability can be as simple as lowering job costs were possible.

You’d be surprised at how much this move can make your business profitable over a period.

Tip #2 – Reduce Labour Costs

Is there something in your business that you can replace with an automation system?

Have you considered hiring a VA as opposed to an on-site assistant?

Reducing the amount of money spent on wages can also boost profitability when you draw the line on your finances. So, evaluate the daily tasks that your team members perform and look at some of your own duties as a business owner.

In today’s environment, outsourcing is one of the best ways to cut costs. It’s also one of the smarter ways to hire as you may have access to a wider pool of experts.

Properly executed, you can lower costs and maintain a high level of quality with outsourcing.

Tip #3 – Manage Expenses

Many Tradies are overpaying for marketing.

For example, Tradies may work with a variety of advertising platforms even though a couple of them may be bringing in the bulk of the customer leads.

In that scenario, it may be a good idea to drop the non-performers.

The same principle applies to all other expenses and services. If you pay for things and they don’t end up improving your business or what you offer, these may be expenses worthy of the chopping block.

Needless to say, this would affect your bottom line directly.

Tip #4 – Know What Costs to Cut

If only cutting costs were simple, right?

Most Tradies don’t know where to start. If you’re one of them, it’s ideal to start by performing an internal audit of your finances.

Identify where all the money comes and goes and decide what you can or can’t cut.

Tip #5 – Get Better Deals

Many Tradies work with suppliers and Subbies, which happens to be a great area to look at if you want to boost profitability.

You may already know that it’s possible to renegotiate supplier contracts, though it’s easy to be put on the back burner. Getting better deals, however, doesn’t always have to involve other suppliers, as you can also leverage your relationships with existing suppliers.

You can even consider changing service providers and utility contracts.

Cut Costs Smarter, Not Harder

You don’t have to make massive cuts in a single department. Even small amounts add up to significant savings if you make enough of them here and there.

These tips are particularly helpful as Tradies are operating a cash flow-dependent business. That said, they apply to all businesses looking to boost their bottom lines.

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Photo by Gerd Altmann on Pexels.com

Quick Ways for Tradies to Improve Their Financial Performance

If you want to improve the financial aspect of your trades business, start with smart changes that will bring you great results.

Even when Tradies is doing well, there’s always room for improvement. Especially if you want your business to make more money or have better cash flow.

Here are three quick ways to improve financial performance that apply to every Tradie business, big and small.

Rearrange Expenses

Some Tradies start with the idea that their business needs to make more money to cover all expenses. But what if you reverse the order and see if you can reduce your expenses?

Review your expenses and see if there are areas where your business is spending more than necessary. A couple of rearrangements could make a sizeable difference.

For example, you may want to negotiate with your suppliers to get a better deal. You could also switch your insurance company if another company offers the same level of coverage at a more reasonable price.

Finally, you could discuss a periodic payment plan for larger expenses to make it easier on your cashflow.

Offer More Payment Methods

If you’re working directly with customers, you may offer additional payment options. Doing so may let you attract many more customers at the cost of a little work.

Everyone has a preferred payment method and if you don’t have that option available, they may move on or are at least less likely to buy repeatedly.

If you don’t use Xero, see if your software allows you to add payment methods available for customers. Besides credit and debit cards, some of the popular ones you can offer include PayPal and Apple Pay etc.

Tradies that have broadened their accepted payment methods have mostly experienced an increase in sales and customer satisfaction.

Change Your Marketing Strategy

Many Tradies are spending a lot of money on marketing. Having a marketing budget is fine, but if you’re not doing great, consider downsizing or trying something else.

Social networks and blogs are very powerful tools for building an audience that trusts you. It’s also a cheaper and faster channel to get your message across. Try it and you may realise that you could cut your marketing budget in half.

You don’t have to pay for ads, either. Instead, you only spend time creating content and engaging with the audience.

Building an organic presence on social media won’t happen overnight. But if you know what you’re doing or have someone on your staff that does, a month of constant work may be enough to get your foot in the door.

Smart Changes

If you want to improve your financial performance, you don’t have to do anything drastic. Small and smart changes can already lead you to where you want to be.

Every Tradie can rearrange their expenses, offer more payment options, and get the most out of social media.

Try using these strategies for a few months and you may be pleasantly surprised by the results.

open to new opportunities lettering text on black background
Photo by Anna Tarazevich on Pexels.com

6 Steps to Create a Realistic Business Budget

Your business needs a budget but when you’re starting out it can be tempting to skip this step. That would be a mistake, because a budget is a powerful tool to ensure the financial health of your small business. A realistic budget enables you to make confident financial decisions and save money for future investment and growth. On top of this, your budget will prevent you from overspending and provide concrete goals against which you can measure your success.

It can be difficult to know where to start when it comes to creating a budget, particularly during your first year in business. You’ll need to work with estimates if this is the case, but it will still make financial planning much easier. Once you’ve laid out a realistic budget, you’ll be able to adjust it as necessary rather than starting from scratch. Here are six easy steps to creating a realistic budget for your business.

1. Calculate Your Income

Business income is the money you receive from customers for your goods or services. This is easy to work out from your records if you’ve been in business for a while, but if you’re just starting out you’ll need to make an estimate. Try to be as realistic as possible but if in doubt, always err on the side of caution. It’s better to be conservative with your budget than risk overspending.

If you’ve been trading for a year or more, take some time to analyse seasonal trends. If you’re new, do some research on patterns within your particular trade. Many businesses experience a boom in sales at Christmas, followed by a lull in January.  It’s important to plan for these peaks and troughs as accurately as you can.

2. Determine Your Costs

Once you’ve worked out your projected income, it’s time to take a look at your expenses. Business costs fall into three different categories: fixed, semi-variable and variable.

Fixed: these costs are the easiest ones to calculate. Fixed costs are the expenses that are likely to remain the same for the next year or so, such as rent, internet and insurance.

Semi-variable: this is a bit of a grey area. Semi-variable costs are fixed costs which may increase or decrease in proportion to your workload. For example, a boom in sales might result in increased hires, phone bills or fuel usage.

Variables: these expenses are directly linked to your number of jobs, such as wages or raw materials. This is the part of your budget that you’re most likely to have to tweak over time.

3. Factor in One-Off Expenses

You need some wiggle room in your budget in case things go wrong. Surprise expenses do crop up every now as then, so you need to be ready for them. For example, if a piece of equipment breaks down, you’ll need to replace it as soon as possible so that it doesn’t impede workflow. Of course, some one-off expenses are planned, such as equipment upgrades or new vehicle. Keep a separate fund for this type of cost and don’t be tempted to put it towards your regular expenses.

4. Work Out Your Profit

Your profit represents how much money you’re actually making. You could have a huge income, but that doesn’t mean much if it’s outweighed by even larger costs. To calculate your profit, subtract your costs from your income.

5. Refresh

A budget doesn’t mean much if you don’t review it regularly, and a lot can change in a surprisingly short amount of time. It’s vital to keep checking your budget and making adjustments whenever necessary. Each month, set aside some time to check your finances and compare them against your plan. This will keep you on track and allow you to keep your budget relevant to your business.

6. Use Bookkeeping Tools

Staying on top of your budget can be time-consuming, especially when your business is growing and you’ve got a million other things to do. Cloud-based bookkeeping software is the easiest and most reliable way to keep track of your expenses and you’ll have 24/7 access to your records from anywhere in the world, so long as there’s an internet connection. We recommend Xero, its easy to use and scalable as your business grows.

The Importance of Budgeting

A realistic budget for your business makes it so much easier to plan for the future. However, regularly reviewing and adjusting your budget is essential, or it could quickly become outdated. Your budget is a roadmap for your business and it helps you to prepare for all manner of situations. Most importantly, it gives you control over your finances, which will help your business not just to survive, but to thrive.

Bridgett Fuller

Director – Belle Accounting Co.

PS. Whenever you’re ready, here are a few ways that I can help you to improve your profits, strengthen your cashflow and help you plan for the future.

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Have a Business Gameplan Session

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10 Reasons Why I love Xero & You Will Too..

Prospective clients ask me why they should consider Xero, as I recommend it every time someone is not using Cloud Software (why are people making their lives so hard???). Since I can’t speak with everyone I thought I would make list….It could be longer, but I relented.

1. Simple to Use – user friendly & has free access Xero Support always available. Free training tutorials. Scales with your business. It can do as much or as little as you want.

2. All-In-One Solution – capture your income & expenses, invoice & email direct to clients, send reminders/statements, request payments, run payroll, pay SGC, lodge STP reports with the ATO. It makes your financial data available to you and your Bookkeeper/Accountant. Your information is current & available, super valuable in itself.

3. Inexpensive – low monthly fee, possibly lower it you have your file set up by a Xero Partner who has access to discounts or free periods.

4. Automated – Huge time saver. Auto bank feed and features that massively reduce your admin time.No more manual data entry.

5. Automatic updates & upgrades – Cloud software guarantees you are using the correct tax and payroll percentages. For example, the JobKeeper feature introduced by Xero saved businesses hours of time by adding a free feature to run reports to see it they were eligible, suggesting employees who met the criteria etc. This was provided to all accounts with Payroll Function– I was impressed they didn’t charge a single cent for providing this invaluable assistance to Small Business employers – sorry, side-tracked.

6. Accurate – as the feed is from your bank statement, no human error. Your transactions are captured daily and reports can be trusted. For example, Banks accept Xero reports for financing purposes. Saves time in BAS & Tax return prep.

7. Fuss Free Records – all your business financial records are stored electronically. Saved you time, storage and keeps the ATO happy in case of Audit.

8. Free Back Up – you can keep the required 5-7 years of records required by the ATO in your secure Xero file free. Save additional documents, like business rental agreements for easy access.

9. Easy Reports – you can run a report immediately & get up to date information about your business. What to know who much annual leave your team has accrued – run the report. What to know if a customer is profitable or pays on time? – run the report. Endless information is available when you are up to date to manage your business more effectively.

10. Add-On Apps available – Specialist additions are available for industry to make your life simpler. I recommend Hubdoc to record and upload your receipts on the go. Take a photo of the receipt on your phone, email it to your secure account & move on with your day. No more shoebox, collecting receipts from your vehicle or missing out on expense claims.

Contact me if you want to know more.

Bridgett – Belle Accounting Co.

Bridgett@belleaccountingco.com

2021 – Bring it on !

Bring on 2021!

It would be an understatement to say 2020 has been a challenge for us all and now that we are so close to the end of the year, we can start to plan what could be, for next year.

The last quarterly BAS cycle for the year will be over soon and the days will move at super speed towards the Christmas/New Year period and well-deserved time off, hopefully for most.

It’s a good time to reflect on the past 12 months, what worked and what didn’t (even in these unusual times).

Whether your proirities have changed at all in response to your experiences.

Then consider what it is you want for your business and for yourself in 2021.

  • Considering a different approach or something completely new?
  • Waiting your business to taking off as life is getting back to a safe ‘normal’?
  • Do you want to consolidate what you already have in your business?
  • What are the potential opportunities you see because of this year, that you want to investigate further?
  • What are the weaknesses you identified in the craziness of the past 10 months and how do you want to work on these areas?

Can you imagine what 2020 would have looked like if you were able to plan for it?

  • Be ahead of the information
  • Engaged more resources before the workload took over or disappeared
  • Pivoted quicker
  • Mentally prepared for the onslaught
  • Sacked bad clients earlier
  • Cherished the good clients

Well, I guess the good news is that you can plan for 2021ahead of time.

So what does your 2021 look like?

The first step in planning is understanding where it is you want to take your business – growth or sustainability. There is no right or wrong answer here. Your decision is your own.

If it is growth then you will want to plan out the following:

  • How many clients and who they are
  • What staffing and other resources you need
  • What systems to implement to achieve, monitor, and manage your growth

Each one of these areas could be planned-out to enable consistent successful growth and to avoid that out-of-control feeling.

If it is sustainability, then you may like to work on the level of strength of that existence:

  • Develope stronger foundations to tick along
  • Create greater profits in the services you provide
  • Build deeper relationships with those you deal with

Planning in these areas will avoid you just repeating the same behaviors as other years

Here’s to your business success!

Author Bridgett Fuller,

Director at Belle Accounting Co Pty Ltd
https://www.belleaccountingco.com.au

Bridgett@belleaccountingco.com

How to keep your small business alive

Well the good news is that the Reserve Bank has told us the recession period caused by the global pandemic is largely over and the Australian ecomomy is slowly growing, even with Victoria’s lockdown, which has now lifted. So the worst is past, but you still need to survive.

Cash flow is the life blood of your small business, so lets have a look at what you can do to maximise it.

Cash flow in – geting payment for your goods and services is now the highest priority for your business. If you are invoicing:

Outstanding Accounts

Follow up regularly with any customers that have outstanding invoices and may have a reputation for slow payment. Offer a payment plan if cash flow is tight in their business but in the end you can’t be treated as an interest free loan. Again its a balancing act between looking after your own interests and being reasonable with customers but you will know the ones who derserve some help and those that are stepping over the line.

Consider asking a friend or family member to make the calls to customers with outstanding balances for you. As women we can so strongly advocate for each other but find it hard to do the same for ourselves. I remember a well loved media figure telling the story of how in her early days she would call pretending to be her own agent to book appointments and interviews to avoid having to sell herself. Ask you BFF to be your Emily from Accounts to help you hunt down your outstanding invoices.

New invoicing

Review your payment terms, you may want to reduce the period for payment or ask for payment up front. It is important to look after your regular customers but not at the expense of yourself. Have a chat and see if you can negotiate suitable terms directly with them, communication is essential.

It is vital you invoice promptly, as the longer you take to invoice clients the longer it is til you recieve payment and as we noted ealier, cash flow is the life blood of your business, free it up as quickly as you can.

Consider a third party payment system that direct debits the customer when the job has been completed or item sent. If you have regular customers consider a weekly or monthly ongoing part payment that may help both your and their cashflows.

Free Marketing – Social media and other free form of marketing will help you communicate with your customers and let them know you are open for business. Keeping up your profile is key to a smooth transition into the rebuilding economy. Customer may not be buying now regardless it is important to be visible in your market, particularly at low/no cost. Email your data base or post and spread some positive energy, even if your is feeling a bit low.

Cash Flow out – are there any expenses that you haven’t already reduced that could use some tweeking ? Are there any suppliers that you can call to negotiate payment plans. As we touched on earlier, it is going to improve for everyone and we want as many people to survive with their businesses intact as possible, Contact with your suppliers to see if they can provide any help, just like with your customers, communication is the key.

Weekly review

It’s not much fun but essential that you review your cashflow weekly, put aside 30 minutes in your calender, pour a tea or wine and lets review your cashflow:

  • Make sure whatever system you are using to capture data, a spreadsheet or software like Xero, is up to date.
  • Calculate the payments recieved (cash flow in) and the expenses paid (cashflow out). The goal is for a positive cashflow in week.
  • Have a look at the outstanding invoices and make a plan of how to tackle them for next week
  • Have a look at expenses to be paid and make a plan for these too.
  • Beathe and know you’ll be OK, this too will pass…

This is crucial time spent to help your business survive this period of rebuilding.

Thank you for your time reading this blog post. Please feel free to contact me if you have any questions or would like to connect.

Author – Bridgett Fuller, Director at Belle Accounting Co Pty Ltd

Bridgett@belleaccountingco.com

www.belleaccountingco.com

GST Basics for Small Business – Should I register for GST ?

This is a question asked by small business owners everywhere, should I register for GST ?

In Australia, any one conducting a business with an ABN needs to register for GST (Goods & Services Tax) if their annual turnover is over $75,000. Under this, registration is voluntary.

Why would you volunteer for taxes????? Well, there are benefits and drawbacks that I will cover briefly here.

Firstly, registering for GST is fairly simple via the ATO Business Portal https://bp.ato.gov.au . Your tax agent can also do this for you, if you request, the fee should be minimal.

If you do register, a date for the start of registeration is provided, this can be backdated, generally to include the last quarterly period (Business Activity Statements – BAS are lodged monthly, quarterly or annually – more about this in a moment). Generally you can backdate your GST registration to when you started your business or when you got a bit more serious. I generally recommend the beginning of your Start Up, if recently, as you can claim the GST paid on set up expenses as the refund of GST paid helps in the lean Start up phase, when not a lot of income is around.

Good bit, you claim the GST on expenses, bad bit you need to lodge a BAS, as mentioned you can choose when frequency of lodgement – quarterly is most popular, as it keeps you fairly current, so the GST you owe or can claim is paid more often.

How GST works is that for most Goods and Services there is a tax added which belongs to the government. Examples below:

EXPENSES – Your business buys a GST item for $110.00 (GST inclusive) – you pay $100.00 for the item, which you can claim as a business expense and $10.00 in GST which you can claim in your BAS as a GST credit. The other thing to remember is the invoice needs to be from another registered GST business, so Officeworks is safe. With a smaller local supplier, you will need to check their invoice, which should act as a tax invoice, showing all of the correct details (details below).

SALES INCOME – Your Buinsess sells a GST item for $110.00 (GST inclusive) – Your cusotmer has paid $110.00 to you and you have earned $100.00 in business income and collected $10.00 in GST, which belongs to the government and you will need to pay back as a GST debit in the BAS.

Depending on the amounts of GST credits and GST debits each period is if you get a refund or make a payment to the ATO in your BAS. In the example above, if this was the all the transactions for the period there would be no BAS refund or payable as GST credits and GST debits are even.

Something to note, on your tax invoice, which you are legally required to provide within 28 days if a purchaser requests but also always for any taxable sale over $82.50 ($75.00 in income and $7.50 in GST).

There needs to be 7 items for it to be valid (for taxable sales under $1,000.00)

  1. The document needs to be labelled ‘Tax Invoice’
  2. The sellers’s identity – business name
  3. The sellers’s ABN
  4. Dated when issued to the purchaser
  5. A brief description of the items sold
  6. The price, the GST amount (if applicable) split up or together labelled ‘Total price includes GST’
  7. Each item on the tax invoice must be identified as a taxable or non taxable item, if more than one.

For invcoices over $1,000.00 the buyer’s identiy or ABN is also required.

THINGS TO AVOID & TIPS to stay on the ATO’s good side

  1. Do not charge GST if you are not registered – this is illegal and the ATO deals with it pretty harshly.
  2. Do not claim GST if you do not have a tax invoice, showing the details above.
  3. Try to always lodge you BAS on time, as this helps if you have a good record with the ATO if you need request extensions or payment plans during the business year. A pattern showing you are a responsible business owner is always helpful.
  4. You can get a list of BAS due dates from the ATO website – BAS & Tax agents get later due dates than individuals, so if you are struggling with time it may pay to contact someone professional to help you, this can be an affordable option.
  5. Small Business software like Xero, is incredibly helpful in simplifying your business finances and cost effective with not only preparing BAS, but capturing Annual Tax information, saving time and money at EOFY.
  6. Hopefully you all have access to a helpful BAS or tax agent that can help you with sticky questions or lodgement issues.

If you have any questions or comments please contact me.

Author Bridgett Fuller,

Director at Belle Accounting Co Pty Ltd

Bridgett@belleaccountingco.com

www.belleaccountingco.com