by Diana Todd | Monday, October 29, 2018 | Business
A question I get asked a lot is when is the time to invest in accounting software?
In this day in age, there’s not really an excuse for a business owner not to have a system in place because there’s a lot of affordable options, from free to fancier paid options. I am a firm believer in when you’re starting a business, cash flow is limited and so any time you want to spend money it’s important to make sure that you’re getting a return on investment, right?
Either the money you’re spending is going to help you grow, get more sales, or streamline your processes. This is the theory I like to apply to the question in answer. When you’re running a business you need to keep business records to track your income and track your expenses. How else will you know how much profit you’ve made without a system in place?
How else will you know what you’ve spent money on to grow your business? How else will you know if you’re charging enough for your products and services? These are all answers that can easily be obtained if you have accounting software that allows you to run reports to see the inflows and outflows of cash in your business. So first I want to talk about a free option.
There’s one called Wave. Wave is a great software if you’re just starting out and don’t really have the money to invest in a more robust paid option. It will connect to your bank feeds and does a lot of the same things as the paid options except for once you get to the point that you need to register for GST in Australia, it won’t be able to help you. This is because it’s an American program, and GST is an Australian thing. But eventually, as your business grows you’re going to get to the point where you’re going to have to register for GST and you’re going to hit that $75,000 in sales threshold. At this point, it’s definitely worth considering spending the monthly subscription fee in order to get on a paid software program. There’s a lot of choices out there. The one I am the biggest fan of is Xero. I am a Xero advisor and Balance Tax Accountants is a silver status partner; what this means is that we do a lot with Xero!
Xero is great because it keeps your business finances organized and it gives you the ability over time to run reports to track the status of your business so you can actually see trends. You know the question, “How’s business?” and the default yet truthful answer of “it’s busy”. How great would it be if instead of the run of the mill reply, you can actually say, “hey, you know what? Last month I have had my best month in sales”, or, “I’ve cut my overhead expenses by 10%”. Isn’t that amazing?
That means I’m making more profit by putting in the same amount of effort into my business. It’s invaluable when it comes to growing your small business. It’s imperative that you keep on top of your number, and a cloud accounting software can help you do just that.
Another great feature that Xero has is it can connect to apps. There’s a huge movement in the cloud accounting space to connect to apps that are industry specific.
Some apps that Xero supports are Stripe, PayPal, Receipt Bank, Spotlight Reporting, Workflow Max, Harvest, and a lot more.
by Diana Todd | Monday, October 29, 2018 | Business
When do I know that it’s time to get help? The amount of work has gotten to the point that you can’t handle it on your own, and you’re not able to deliver the level of customer service that you are happy with for your business.
Now, I am a big fan of outsourcing. It’s one of the very first things that I did. As an accountant, I did something that’s a bit different from traditional accounting firms, and that is the first thing that I outsourced was marketing.
I knew that I could be the best accountant in the world, but if my marketing did not tell people that I was the best accountant and that I was available to accept new work, nobody would know. Nobody would get to experience the awesome skills I have, that I can share with them to make their businesses and their lives better, right?
So the first thing I did is I outsourced marketing. I outsourced marketing before I could even afford to do it. Now, I’m not saying that you should spend money that you don’t have, but what I am saying is that, if your goal is to grow and scale your business, it will have to be bigger than you.
When you have gotten to the point that you’ve decided that you need to get help, what should you outsource? There’s a lot of ways to go about doing this, but a couple of tips I can give you is: Number one, know your strengths and your weaknesses.
The first thing I would do is sit down and write a list. What are the things that you enjoy most about your business and what are the things that you enjoy the least? What you’ll probably find is that the things that you enjoy the most are what you’re good at because they’re easy for you. So when you’re deciding what to outsource first, it might be worth considering outsourcing those things that take you a long time to do or that you don’t necessarily enjoy.
Another tip when it comes to deciding what to outsource is to write it down and make a list of all the activities of your business. List everything from getting new customers to servicing existing customers to completing admin, marketing, maybe appointment scheduling tasks, and assign a dollar value to each of them.
Things like getting new customers, those would definitely be worth the highest dollar value. Things like admin, answering e-mails, scheduling appointments, organizing onboarding paperwork, those are tasks that would be less dollar value.
As a business owner, your time is best spent doing the high dollar value tasks. Why is this? Because nobody is going to be able to draw new customers to your business like you will be able to. You have a passion, you have a fire inside of you for your business, and people are going to be able to see that and identify that when they hear you speak about what it is that you do, right?
So those are the types of things that I would prioritize your time for. I would look at outsourcing those that are either on your weaknesses list or that are low dollar value tasks.
Remember, if your plan is to grow and scale your business, then it must become bigger than you. This means your vision must be bigger than yourself. Also, you have to have systems and processes in place that will allow the workflows to occur and be assigned to different people and to allow different roles to be completed within your business.
by Diana Todd | Monday, October 29, 2018 | Staff
You’ve made your decision: You’re going to hire your first or second employee. You might already have one but you’ve realised you may need to expand further. Did you know that there’s more cost to your business than just wages when hiring additional staff? Obvious things that people think about when they hire employees is, “I’m going to have to pay their salaries”. Salaries could be your hourly or annual rate for having someone on board.
1. Payroll
One thing you may not realize is that now if you have employees you’re going to have to process payroll; either weekly, fortnightly or monthly. However often you pay your employees, someone will need to do the work to process the payroll and make sure that all of the employer obligations are being met. For example, withholding the right amount of tax from your employee’s pay and paying them the correct amount of superannuation. The administrative cost of hiring employees is something that is not often thought about.
2. Staff cost
The second thing I want to point out as a cost of hiring employees, is where are they going to work? Unless you’re planning on having your staff work remotely, you will need to have a space for them to work from. In this space, it will need to be fitted out with furniture, desks, internet, laptop/computer, printer, office supplies, paper – whatever the employee needs in order to get their work done. They will need the tools and equipment to do their jobs, and this is often paid for by the employer.
In my experience, I’ve had staff for over two years. The first set of people that I hired I was fortunate that the roles were small enough that we could all work remotely, with just internet meetings or video call meetings happening periodically. I was fortunate, as a business owner, because I didn’t have to provide my staff with a desk or computer because they already had their own.
However, things were a bit different in my third year in business. I had staff turnover, and as new employees came on, I added additional staff roles to Balance Tax Accountants. My new staff didn’t have their own computers and didn’t have their own place to work. Also, what I found was that when we were growing we got more done when we worked together. I had to buy computers, office supplies, and find a space that we could work together from; whether that was a co-working space or whether that was an actual leased office space. These are all things that you don’t necessarily think about when you hire staff, I for sure didn’t!
3. Insurance
The last thing I want to talk to you about when you hire staff is insurance. Because I had employees, I was required by law to have worker’s compensation. Worker’s compensation insurance isn’t something that I necessarily had when it was just me working in my business by myself. And so, this is something I had to go out and make sure that I had the right amount that I needed, based on local laws.
I also needed to buy insurance to cover the equipment, because I had bought all these computers and I had leased an office. I needed insurance in case we had damage done to our equipment, in case they were stolen, in case we couldn’t work in the office or we had a business interruption that prevented us from servicing our customers. Insurance is the third cost that people often don’t think about when they’re hiring employees.
by Diana Todd | Monday, October 29, 2018 | Staff
Now, I think the first thing to be said is that not every business needs to scale to be successful outside of the owner and it’s your decision about how big you want your business to be.
My vision for Balance Tax Accountants was to help small business owners. Since I’ve started, what I’ve found is that the number of people who came to us asking for help, I could not give a level of customer service that I was happy with without involving more people into the business. This is the reason why I personally decided to hire and grow Balance Tax Accountants beyond myself.
Now, after you’ve actually made the decision to introduce or to hire another person into your business, it’s really important that you make sure that they are the right person. The right person for the right role. What I did when I was hiring a junior tax accountant, for example, in the job ad I did not once mention you must have five years experience in this or you must have a degree in that. In my job application, I talked about the values of Balance Tax Accountants, what makes us different from your average accounting firm, I talked about how we support local, we pride ourselves in doing a great job, that we have work-life balance; we go home and we eat dinner with our families every night.
I also talked about how in the accounting industry it’s really difficult to find people with personality – who are friendly and approachable. How I needed somebody who actually enjoyed working with other people and talking to clients. Finally, the last value I talked about was that we treat other people the way we want to be treated. In the accounting industry in order to get ahead, it can be very cutthroat. The pressure to build as many hours as you possibly can and well, yes, we need to make money. This is a business. At the same time, it’s more about teamwork, getting the job done well, making sure our clients are happy, and treating other people inside and outside of the business the way we want to be treated.
What I found when the applications for this role started coming in, it was really easy for me to choose which applicants made it to the next round. An advertisement from an accounting firm asking for a junior tax account, people would not apply unless they felt like they were qualified for it. And so, even though I didn’t necessarily mention we want X amount of experience, the people who did apply had several years of experience and they had qualifications and they had degrees and they had the relevant knowledge and skill set.
I feel that when you’re a small business and you’re introducing other team members or employees into your business, it’s really important not to forget about hiring based on shared values. Because of the longevity of that person staying with your business, growing with your business, being on board. Obviously, there are good times and there are bad times. There are sometimes tough times in small businesses and you’re gonna need your team members to be flexible and committed to more than just the paycheck. Hiring someone just based on skills and experience isn’t necessarily going to get you someone who is loyal to you and your business.
by Diana Todd | Monday, October 29, 2018 | GST
The biggest question is ‘when do I have to register for GST?’. The textbook answer to that question is you must register when your business reaches sales of $75,000 in the course of 12 consecutive months, 12 rolling months. So this doesn’t necessarily mean a calendar year or a financial year, but 12 months in a row of trading. If you are projected or about to have reached $75,000 in sales you must register for GST. You must for GST. Sales are sales directly to customers. So that’s not including expenses or after expenses. It’s not profit. It’s turnover, customer invoices.
Now, to go into this a little bit deeper the next level of question I get is “Okay. I understand I have to register when I hit 75, but in my business should I register earlier?” The answer to that question depends on your business. Once you do register for GST, this means that every quarter you’re going to have to lodge business activity statements or bass returns with an Australian taxation office.
If you are a small business that hasn’t invested in accounting software yet to help you calculate your GST for your bass return, then this could become a burden. So in that situation, you might not want to register for GST yet if you don’t have to. Another situation where you might want to wait to register is if you feel like your sales aren’t going to reach 75,000.
If you are fitting out a store and you have a lot of start-up expenses that are going to have GST on them, then it may be worth registering early before you hit 75,000. That way you can claim back any GST paid on your start-up costs. If you have to fit out a restaurant or a café or a salon, this could definitely help you. Claiming back 10% of your fit out costs or your start-up costs is just one benefit to registering.
Another benefit to registering is that because you’re going to have to lodge your activity statement every quarter, you’re going to be forced to look at your numbers at least four times a year.
Businesses who want to grow in scale definitely need to look at their numbers so they can make decisions based on facts. What do I mean by that? It’s really common for business owners to know the balance that’s in their bank account at any given time. But what a lot of business owners who don’t look at their numbers very often don’t know is how much cash comes in and how much cash goes out during the month. Also, where does that cash come in from? And where does it go out to? How much of your cash is spent on operating expenses, overheads, direct sales or product costs? Unless you’re sitting down and looking at your numbers, these are normal questions that you might not know the answer to. And so registering for GST early is an opportunity for you to get closer to understanding the financial health of your business
