A time to rebuild

Posted by 18/05/2020 News and advice No Comments

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A time to rebuild

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As the Covid 19 restrictions are beginning to lift via the federal Government’s 3 stage plan, it’s important for small business owners to start working on their own recovery plans.

Although the government has aided businesses via Job Keeper and other funding measures, in the end it is up to you as the business owner, to take the reins and steer your way through the next stage.

Here are some tasks for as you to look ahead and develop a plan to ensure you come out of the shutdown as strong as possible.

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Are you a sole trader?

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Setting up a business as a sole trader is without doubt the easiest way to get started in business.

Whether you are about to set up a business or you have already taken that step and are now operating, you may be happy using the sole trader setup. After all you only need a to register a business name and register for an ABN, online. All very easy.

But are you mindful of the risks?
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Working from home through Covid 19

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As businesses around the nation adapt to the situation around COVID-19, many employees are now working from home.

The ATO has released information for employees regarding claiming some expenses incurred when working from home.

It’s important that as an employer, you are aware of this information too, and can ensure that your staff members know what they can and cannot claim.

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Minimise the impact of Coronavirus on your business

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Like many businesses in Australia, you may be feeling impact of the coronavirus (nCOV). The best approach is to quickly seek professional help immediately and not take a wait and see approach.

While we don’t know for sure how long the coronavirus threat will last, we know it will have a lasting effect on many businesses. Many fixed costs for businesses, such as wages, rent, utilities, financing costs and statutory liabilities will remain, despite the the anticipated downturn in revenue.

The downturn in sales will have a huge impact on working capital, and those businesses without sufficient reserves may find themselves suffering cash-flow issues. Business operators should seek assistance immediately to try to minimise the impact.

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A different look at software

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In the previous two articles we talked about starting up a business. But once you get started, what’s the best way to get ahead?

Today I want to talk about hardware and software. And no, I’m not talking about computers and the systems that run them.

What I am focusing on is the actual business and its people.

Imagine every business is a machine. Whether you operate a manufacturing business or a service business, every business needs to operate at a ‘mechanical’ level. The nuts and bolts of the  business are the procedures, the products, the services, the systems, the equipment and the physical location to name a few.

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Thinking of buying a business?

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Getting started in business is a big leap and let’s face it, there’s a lot of risk involved.
As per the Australian Bureau of Statistics, more than 60 percent of small businesses stop their operation within the first three years of setting up.

There are two main ways of getting into a business.

  1. The complete startup, building from the ground up.
  2. Buying an existing business

In this article we are going to focus on buying an existing business.

The main advantages of buying an existing business are the enormously reduced start-up costs of time, money, and energy.

Cash flow is usually immediate due to existing stock or inventory and an established customer base. Having immediate cash flow and a previous track record will also make the business far more appealing to financiers and investors. An existing business will usually have established systems and a relatively stable work force.

As a new owner, you can focus on learning the details of the business and its operations so you can begin developing a strategy for future growth.
However, disadvantages can include that the business has outstanding contracts or has a poor public image inherited from the previous owner.

But you should also question why you want to start a business.

The question many people forget to ask themselves is this one:

What are your personal goals and will starting a business help you achieve them?

Other considerations include do you have the skill sets you need to start a business?

And are you physically and emotionally ready to deal with unusual work hours, financial pressures and time pressure?

You also need to identify the right business, one that suits your needs and interests, as well as one that has the potential to be successful.

After considering this and if you still believe you are ready to go into business, then its time to do your research and due diligence. You may need the help of business adviser and accountant to help you get this right as it’s a vital part of the process.

Here’s some questions to ask

Why is the business for sale?
Are there any risks associated with the business?
What kind of industry does the business operate in?
How many businesses are doing similar things?
Does the business have a competitive advantage?
Does the business have loyal customers?
What does your market want and what are they buying?
How is the competition in market changing?
You may also want to talk to existing customers, employees and neighbouring business owners to get a view on how the business is going.

Valuing the business

You should determine the current value of the business you’re looking to purchase and its potential future growth before committing to buying.

Regardless of the price the seller has put up, getting an independent appraisal is another vital step. Getting a professional valuation of all the assets and liabilities that belong to the business will help determine if it’s a true value.

To conduct due diligence, you’ll need to review these items:

Licences and permits – Are all the correct licences and permits required to run the business available and up to date?

Contracts and leases – Will the landlord agree to the transfer of the lease agreement or will you have to negotiate a new lease?

Agreements – Are there any outstanding agreements between the seller and suppliers?

Status of plant, equipment and fixtures – What kind of equipment and machinery does the business own? Are they in good working order and licensed?

Assets – What assets does the business have? Does it have any intellectual property?

Inventory – Is the inventory on-hand being included in the purchase? How is the inventory managed, stored and distributed currently? What is the current state of the inventory?

Liabilities – Does the business have any outstanding debts? What refunds and warranties still exist for the business? Are there debts owing on assets that are registered on the Personal Property Securities Register?

Financial due diligence
Make sure you examine the past three to five years of financials including:

– balance sheets
– profit and loss records
– records of accounts receivable and payable
– cash flow statements
– sales records
– tax returns
– business activity statements (BAS)

If you are considering buying an existing business, please give us a call so we can help you run an effective due diligence on the operation.

In our next article we look at the traps, pitfalls and advantages of starting a business from scratch.

Do you have backup?

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The catastrophic bushfires around Australia over the past months have highlighted the impact that disasters like this can have on businesses.

Quite apart from hard costs, such as the loss of plant, equipment, livestock and premises, there is also the potential loss of data and documents.

With the right level of insurance cover, much of the hard costs can be recovered. But if all your data including business records, client histories and tax related information is lost, then you have the added stress and expense of having to deal with this.

Disasters aside, data stored on paper or on a personal computer, phone or tablet can be lost, often without any warning.

Hardware failure, breakage, theft or even malware infection (such as ransomware) can also make recovering your data expensive or impossible. So, you must be able to backup and restore your data.

There are several ways you can back up your data.

These include using an external hard drive and offsite storage. Backup services with operating systems let you choose the location for backups, such as an external storage device or cloud service.

Some backup applications are also offered with external storage devices. If you would prefer to use one of these applications, consider reading online reviews of storage devices to determine which product will suit your needs.

Ideally, use encryption to protect your files on the external hard drive if the option is available, and store the drive in another physical location, possibly at home.

Storing copies of your files off-site provides added protection. That way, if some physical harm comes to your computer (say fire or theft) you will still have access to your important files.

Cloud backup services

A cloud backup service works more like a traditional backup, but rather than storing your files on an external drive, stores your files in the cloud. Once you’ve subscribed to the service and installed the application, these services will automatically backup the selected files to the cloud. Some of these services can also backup your entire computer.

Make sure the solution you choose uses encryption during transfer and storage, and ideally provides two-factor authentication for access.

Using cloud-based software systems.

There are many cloud-based software programs that completely remove the threat of lost data. Accounting systems such a Xero don’t store the data on your computer. Your files are stored on their own servers with secure backup systems of their own.

Other cloud-based systems include marketing and customer relations software and project management software.

From a business recording perspective, many of these systems are both easy to use and secure. They also make access easier and more efficient. You and you staff can use and work on the programs from any internet connected device anywhere in the world.

Whichever way you are storing vital information for your business, remember that having that data stored in a secure place, preferably offsite may save you an enormous amount of trouble and expense down the track.

Unfortunately, disasters can happen at any time, so hope for the best but prepare for the worst is a good motto to follow.

 

Trends to tap into this year

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Like it or not, digital will continue to lead the way in 2020. And it will affect your business in many ways.

This could be as simple as the software you use in your business, from bookkeeping to tracking workflow, from digital communications to management tools.

Competition for new customers will come down to who uses technology best to ensure they are happy.

Adapting to changing customer demands will be crucial for the success of any business. This includes knowing what your customers are demanding and where and how they are spending their money.

To help your business make the right decisions for the year ahead and beyond, have a look at these trends. They will most likely influence your business growth in the coming years.

E-Commerce Will Continue to Grow and Lead the Way
In the next four years, global e-commerce is expected to reach around $5 trillion, (as reported by Statista).
This trend is causing many retailers to move investments from brick-and-mortar storefronts to online stores.
Progressive new businesses are harnessing the power of online shopping without the need for physical locations, keeping costs down and flexibility up. They are also leveraging social media to generate hundreds of millions in sales. As more specialised retailers appear on the market, there seems to be no limit to what can be sold online.

Tapping into a More Aware Market
For many consumers, an eco-conscious lifestyle doesn’t stop at vegetarian diets and organic hygiene products. Lunya, a popular women’s-clothing maker, constructs its products from natural fabrics and fibres, and its sleepwear and intimates lines use Pima cotton for durability and comfort. Using natural materials lowers the carbon footprint of their business, as well as that of the individual consumer.

According to Small Business Trends, when it comes to attracting new consumers in an increasingly green market, “The answer may lie in supplying consumers with details - and authenticity.”

With this growing awareness and questioning of product sourcing and ingredients, you need to help the customer understand what making eco-friendly choices means for them and why you are making the choice as well.

The Youth Market is Growing
Older consumers may remember a time before the internet, but for younger generations, it's an essential part of everything they do.

And as they age and begin to earn more money and make up more of the consumer market, businesses who want to grow, must do their best to capture them by moving their marketing to a digital platform.

This means tapping into the mediums they use, including LinkedIn, Instagram, Twitter, Pinterest and Snapchat.

YouTube has also made digital marketing more accessible to this audience. According to a recent survey, “59 percent of Gen Z respondents said they use their YouTube app a lot more than they did a year prior,” showing that this market is just getting started.

Finding out how to communicate with this market is vital for your viability and growth.

Are you ready for next year?

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As we wind up the year, here’s something to reflect on about the past year.

What worked well for me?
What didn’t work for me?

If you have time, put your answers to the first question down on paper for a bigger picture at what’s working well for you in your business. For example, your sales might be increasing, and your customers are loyal and happy to use your services and products.

Next write down the things that just didn’t work for you during the past year. Maybe your bookkeeping was haphazard, causing you to lose money. Or maybe some of your suppliers have been putting up prices that you really don’t want to pass on.

Think about it for what it means to you and for your happiness and success.

As you start thinking about next year, reflect on your numbers. This means taking a hard look at the figures within your business.

How much income did you generate for the year?

Isolate your best and worse months so that you know what to expect next year.

What were your most profitable services and/or products?

What were you least profitable service and/or products?

How did your new customers find out about you? (Can you measure this to see what’s your most effective marketing?)

Did your sales grow this year?

Did you increase your profit this year?

Answering these questions should give you good sense of how your business is performing over a year. It also helps to go into a new year knowing what works best.

Out of this analysis you might have some clearer ideas of what to do next year.

For example, maybe you could ditch the least profitable services and products and discontinue them. And if your suppliers are screwing you down, make some hard decisions on whether to use them or their products next year

Remember, your business should serve you, not the other way around.

So, it’s important get clear about how much you personally would like to make in the coming year to support the lifestyle you want to be living.

Then you can start to figure out how that will break down in terms of how many clients you will need to book, or how many products you will need to sell.

If you want some help in figuring this out give us a call and book in some time next year.

That’s why we are here. Let us help you make your business more successful.

Finally, on behalf of our whole team, let me wish you a very happy Christmas break and an exceptional New Year.