How to grow your business using practical accounting
March 09, 2009 1AM
Accounting is one of the essential elements of any business. And implementing a few simple ideas can really help your business financially. Outlined below are Morris Accounting’s top 7 tips to use accounting to grow your business.
1. Set some financial goals
Ideally you will have a business plan that includes financial goals, such as expected growth, turnover, projected staffing increases, what your business strategy is (eg growth, acquisition, winding up the business etc). Your goals should be measurable over a period of time, for example, to increase turnover in the next 12 months. Ideally you will review these quarterly. If you are not sure where to start with setting some financial goals, then speak to Morris Accounting and we can help you out.
2. Review your record keeping systems
Make sure you have a simple but accurate way of keeping your financial records. For some people this might be in a shoebox, but I would recommend a simple filing system – either two-ring binders or manila files in a filing cabinet. Remember, having an accurate record keeping system will make life much easier at tax time – and probably save you bookkeeping and accountant fees! Your record keeping systems should include:
▪ keeping a record of all invoices and when they are paid
▪ keeping a record of all income and when it is received
▪ regular review of financial statements, including reconciliations of bank statements, and review of income and expenditure
3. Develop a budget – work out what business expenses you can claim
Developing a budget can help you decide what your financial goals are and help you achieve them. The easiest way to develop a budget is to write down a list of all your income and all your expenses. Consider splitting your expenses into two groups:
i. the must haves – such as rent/mortgage, electricity/gas bills, insurance, salaries, office and plant equipment, etc
ii. the nice to haves – updating office furniture, computer equipment, etc
Regularly review and monitor your costs. Look to see how you can cut costs, find better suppliers, negotiate better deals with suppliers, reduce unnecessary purchases etc.
Set cost control systems so that you have a process whereby you or someone in an executive position approves all purchases – or all purchases over a certain amount. Encourage your employees to validate all purchase requests.
There are a lot of easy to use budget planners on the web – type budget planner into Google, or go to the links section of www.morrisaccounting.com.au for a link to an easy to use budget planner. While these are for personal use they can easily be converted for a small business.
4. Be tax compliant
Micro businesses (defined by the Tax Office as those with turnover under $2m) pay 11% of the tax collected by the ATO and employ nearly 22% of all people employed in Australia, and are comprised of nearly 1 million sole traders, consultants and contractors, 700,000 companies and 420,000 partnerships – it should not therefore come as a surprise that these businesses fall under the tax office’s radar in terms of tax compliance!
You need to keep copies of all records for five years. This includes records of sales (including sale of the business) and purchases, payments to employees, and payments to other businesses.
Morris Accounting has developed systems and checklists to help our clients claim the maximum tax deductions possible, providing them with the best possible tax return. As well as lodging your annual tax returns, Morris Accounting also offers advice on salary sacrificing, establishing self-managed super funds, bookkeeping services, assistance with BAS and PAYG.
5. Don’t be scared to outsource!
If you are too busy to keep your books then hire a bookkeeper or accountant to help you. You will probably find it a lot cheaper than you think (many charge an hourly rate), not to mention the time if will free up for you to spend doing the more interesting things in your business. Services a bookkeeper or accountant can take over include paying salaries, coordinating and handling accounts receivable and payable, balancing ledgers and bank accounts and organizing financial information required for business plans, loan proposals, cash-flow statements, etc, etc, etc.
6. Protect yourself from fraud
Invoice fraud is one of the biggest types of fraud that small business is susceptible to, and small business owners juggling lots of demands can make easy targets for scammers.
According to the Queensland Office of Fair Trading (OFT) invoice fraud is common. This occurs when a business is sent a fake invoice requesting payment, usually for advertising in bogus directories or publications. The invoice looks legitimate and is often paid by businesses who don’t check they are genuine. To avoid being scammed, OFT recommends traders:
▪ do not approve purchases over the phone – get it in writing first
▪ request previous editions of any publications you are considering advertising in
▪ do not pay an invoice unless you have paper work to show you ordered the goods or services
▪ check the publication's circulation (Audit Bureau of Circulation at www.auditbureau.org.au)
▪ check for scam alerts at www.fairtrading.qld.gov.au or www.fido.asic.gov.au.
(Source: www.fairtrading.qld.gov.au)
7. Look at how you can leverage any profit
Once your business starts to make a profit you need to think about how you can turn this into more wealth. One of the best ways to create wealth is through leverage, which can offer great tax breaks in the accumulation of capital growth assets. By leveraging your existing cash balances or cash flow to hold as many capital appreciating assets as you are comfortable with, you will increase your wealth. One example is to consider purchasing a premises (rather than renting).
About Morris Accounting
Morris Accounting works with a large cross section of individual and business clients, based throughout Australia and around the world, on advisory issues such as tax minimization, wealth creation, business management, and business expansion planning. Morris Accounting also helps clients with business valuations, acquisitions and sales.
Contact us today to find out how we can help your business grow.
Phone: 07 3105 5926
Email: info@morrisaccounting.com.au
www.morrisaccounting.com.au