The Secret to a Successful Business

The use of the word secret in regard to a successful business can simply be expanded to say that some small businesses today do not understand or realise the main ingredients that drive a business to success.

Success of a business

is a fine mix of several important factors such as:

1. The expertise and proficiency to apply your skills to the highest quality.
2. Satisfy your clients as without clients there is no business.
3. The ability to manage time effectively to balance work and life.
4. The ability to diversify and the willingness to make changes to improve the business.
5. The main ingredient is the ability to understand the financial operations of your business.

Most business owners are able to manage factors 1 to 4 without too much difficulty. Where they tend to fall down is on the main ingredient number 5 the management of the financial position of the business. This is backed by the alarming rate of insolvency by professional tradespeople, professionals and small to medium businesses alike. Simply put Bookkeeping and that means the recording of all financial transactions including sales, purchases, income, and payments by an individual or organization.

And here is a little tip smart businesses outsource this roll knowing the savings against having an in house bookkeeper can be quite substantial and businesses that attempt their own bookkeeping are making a huge mistake.

Successful business operators understand the enormous strengths of using the services of a professional bookkeeper to assist in the management of the company finances. They can provide a business owner with not only the profitability of the business but also the cash management plan.

A good bookkeeper

will provide you with information to assist you in making informed business decisions such as regular financial reports and cash flow reports. They will identify the areas of your business that may need some attention.

One of the requirements of the Australian taxation office means that all businesses are now required to keep adequate records. Calculating and lodging your Business activity statement forces this requirement. Your bookkeeper is trained in the area of record keeping and the preparation and lodgement of Business activity statements. As such the tasks are completed in a fraction of the time that it may take a business owner with no knowledge to undertake these tasks.

One of the main areas of concern for a large number of small businesses is the GST tax regime. A director of a company in Western Australia was recently sentenced to three years jail for not declaring cash income and underpaying GST obligations. The ATO

Professional Bookkeeper

compliance program is increasing its focus on non compliant businesses.

In order to ensure that your business is compliant, seeking the services of a professional such as a Bookkeeper/Registered BAS agent provides the confidence that the business is meeting its obligations.

Another area of concern is cash flow. Establishing the terms of payment with your clients up front can ensure that you are receiving payment when expected. While there will be some clients who fail to pay on time, setting the guidelines assists in the follow up process.

Your bookkeeper will be able to provide regular cash flow reports and use these as a guide to steer the business in the right direction and toward a healthy cash flow. And let’s not forget payroll and the numerous changes that occur in regard to entitlements to employees, including superannuation and salary sacrifice

To sum it up what this means is that the owner of the business has more time to concentrate on growing the business and allows for more time for activities outside of the work environment. Think of a qualified bookkeeper as a navigational guide driving your business in a forward direction.

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Business and your Bookkeeping Requirements

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Summary: One of the major causes of business failure is the lack of understanding of the financial information that is provided to the business owner and the lack of cash flow management   http://www.learnbasicbookkeeping.com.au/

Choosing a Professional Bookkeeper

Small Business owners in today’s fast paced world either don’t look at their financial situation often enough of they don’t understand the consequences of what they are reading.
Two of the biggest causes of business failure are the lack of collection of debts resulting in poor cash flow. A Qualified Bookkeeper can provide you with information that will highlight any areas that require investigation and change and will ensure that those debts are collected on a regular basis.
There is a move in the bookkeeping industry to professionalise the field making bookkeepers accountable for the work they undertake for their clients.

Part of that move is linked to the changes to the legislation in regard to BAS agent registration.BAS agents are now required under the law to be part of a professional association, hold professional indemnity insurance and be a fit and proper person.

Professional Associations
Your bookkeeper should be a member of an accredited professional association. This ensures that your bookkeeper abides by the code of ethics laid down by that association and disciplinary action is taken as a result of a breach. The professional associations also require their members to continue their education and keep up to date with the latest changes by providing continuing education courses and information.

The Tax Practitioners Board provides a list of accredited associations in relation to the BAS Agent registration. http://www.tpb.gov.au/

Safeharbour provisions and your agent.
Safeharbour provisions relate to services provided to a client by a registered agent whether that is a tax agent or a bas agent.
Under the provisions a taxpayer is not penalised for acts carried out by a tax agent or bas agent where due care has not been taken to ensure the information provided to the Australian Taxation Office is correct and that lodgement dates are met. The provisions excludes act that disregard the tax law.
To put it in simple terms make sure that your bookkeeper has professional indemnity insurance, they are a member of a professional association and when preparing tax documents that they are registered with the Tax Practitioners Board.

Professional Indemnity
Professional indemnity applies if there is an act that resulted from negligence or a breach of duty in any work carried out by your bookkeeper resulting in a financial loss for your business.
In simple terms it is an insurance policy that protects you as the client and your bookkeeper
.
What does that mean for you as a client?
As a client you need to ensure that your bookkeeper has adequate professional indemnity insurance. Where you are undertaking the services of a contract bookkeeper it is important to keep these considerations in mind as they provide protection for you as a client that you would otherwise not have.

For your professional bookkeeping information

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WHAT SHOULD A BOOKKEEPER PROVIDE

The answer is simple and the following is just a brief outline of what a reputable can and should be providing for your business.

Affordable Professional Reliable

Bookkeeper

With the global financial crisis still fresh in everyone’s mind it is time to consider if you have the best information at hand to make informed business decisions. When the crisis hit a lot of small businesses suffered and were forced into closure. The statistics show that for the September quarter in 2008 over 4000 firms failed, the September quarter for 2010 shows nationally administrations in total across Australia were 8561, the largest portion on this was bankruptcies at 6260. The statistics of failed business can be quite alarming when you consider these are ongoing and increasing in number.

What does all this mean for your business?  A large number of businesses fail for two reasons firstly they don’t collect their debts when due and secondly a poor cash flow.

Cash is a vital resource in any business and without a good cash flow plan the business will struggle to meet its obligations resulting in possible closure. Monitoring your cash flow on a weekly basis will highlight areas of concern before they arise.

A healthy cash flow can be achieved through the use of a number of tools.

1. Providing regular cash flow reports.
2. Reviewing the Aged Receivables report (Debtors, people who owe you money).
3. Reviewing the Aged Payables report (Creditors, people who you owe money).

The cash flow report should also take into consideration other cash expenditure for example Payroll, Superannuation, GST, leases, bank loans and all other liabilities of the business. Timing of the inflows and outflows of cash is also an important part of the cash flow plan to ensure that you do not have all your liabilities arising at once.

Your bookkeeper should also follow up your debts with the niceties such as telephone calls and letters and ensure that your invoices and statements are sent out on a regular basis. It is outside the scope of a bookkeeper to provide legal advice.

It is not a good practice for the business owner to chase their own debts as it creates a difficult situation between the owner and the clients. The role of the business owner is to build and maintain a good working relationship with their client.

The Aged Receivable and Aged Payable should be reviewed on a weekly basis along with the cash flow report and the bank reconciliations to ensure the business owner has sufficient information to make decisions on future growth, current and future obligations and to correct any issues that may arise that will have a negative impact on your business.

Utilising a bookkeeper to process and prepare your financial information on a regular basis saves the business considerable time ensuring decisions are based on current data in accordance with all relevant changes to legislation.

Before you decided to hire an external bookkeeper make certain they have the required qualifications and experience to undertake this role.  More information on these requirements can be found on the National Institute of Accountants or the Australian Taxation office websites.

For a free consultation to discuss your business needs go to our website for more information and contact details at www.aprbookkeeping.com.

Resource:

http://dnbsmallbusiness.com.au/News/More_than_2700_firms_hit_the_wall/indexdl_6851.aspx

http://www.itsa.gov.au/dir228/itsaweb.nsf/docindex/Statistics+&+Research-%3EStatistics