Statistics reveal that about half of all small businesses fail within the first 2-5 years. The main cause of business failure is poor financial planning and management. Accurate bookkeeping is essential to know how your business is operating and to be able to make informed decisions which affect the success of your business.

Some of the common mistakes business owners make are:

1. Doing your own books – Some business owners think that doing their own bookkeeping is saving costs. However, is this as cost effective as you may think? If you don’t have the required basic accounting and tax knowledge, the cost to have your Accountant ‘fix’ the accounts later may in the long run cost you much more than employing a professional, qualified bookkeeper.

2. Not reconciling accounts – One of the key elements of proper bookkeeping is to ensure that your accounts are reconciled against Bank statements regularly. Some business owners fail to do this or not complete this exercise fully each month which can lead to a misunderstanding of your true cash flow position.

3. Incorrectly tracking expenses – Without formal knowledge of bookkeeping practices, it is likely that transactions may be coded to the wrong categories. Entering transactions to the correct category is vital for proper reporting and analysis of the business and GST purposes. A profit and loss report should also be reviewed on a monthly basis.

4. Incorrectly recording GST – Many businesses don’t report the correct amount of GST on the BAS due to incorrect data entry and unfamiliarity with GST law. Oversight of this can lead to significant fines and penalties.

5. Cash flow not effectively monitored– As part of the bookkeeping process and reconciling bank accounts, entering of supplier bills, customer invoices and payments should be regularly completed. This allows the business owner to be able to forecast their cash requirements. A professional, qualified bookkeeper can assist the business owner to manage the cash flow position and advise on further business growth.

6. Invoicing/Debt collection – Business owners are sometimes too busy to invoice customers regularly and follow up customers for payment which in turn affects cash flow, which in turn reduces funds coming into the business and could stifle growth opportunities. A professional, qualified bookkeeper can assist in this process and set up an effective debt collection system to improve cash flow.

7. Compliance obligations – Business owners are sometimes not aware of all the compliance obligations that they are required to meet. Using the services of a professional, qualified bookkeeper will give you peace of mind as they will keep your records up to date and lodge all forms on time, and avoid fines and penalties

And there are many more! If you need more time to focus on growing your business and make sure that your bookkeeping and financial obligations are being met, please contact Tony Lewis at Jaguar Bookkeeping on 08 8212 0217 or info@jaguargroup.com.au who will be happy to assist.

Cashflow is still a major issue for a lot of Australian businesses. Did you know that timeframes are being extended on paying invoices to an average of 53 days? This has a huge effect on business cashflow in being able to meet bill obligations, paying employees and keeping the business running. Cashflow is therefore the issue that influences business operations the most, and many businesses simply forget to manage their cashflow, and just look at the profit of the business. To properly manage your business cashflow, you need to analyse the components that affect the timing of the cash inflows and outflows.

Did you know that if your business implemented some of the following processes, it could greatly improve your cash flow? For example, if you were to increase the collection rate by 10 days (to 43 days), it could add up to an extra $30,000 of working capital to your business (based on annual turnover of $1 million).

Here are some tips to help you to take more control of your cashflow:

Customers

• Have Terms & Conditions in place and ensure approved customers know your trading terms
• Invoice promptly, and send out customer statements regularly (usually end of month)
• Manage your debtors, and follow up promptly if they exceed your payment terms
• Offer additional payment options to suit your business – Bpay, Paypal, Credit card etc.

Suppliers/Inventory

• Know your supplier terms and negotiate discounts for early payment, or longer trading terms
• Modify the quantity and/or timing of your purchases to coincide with higher cashflow periods, or to extend payment terms (i.e. purchase on 1st month rather than EOM)
• Monitor inventory, and keep only adequate levels for your immediate needs
• Make arrangements to cover periods of inadequate cashflow by scheduling major expenditure such as product launches, staff recruitment or major projects to coincide with strong cashflow periods

Sales + Review expenses/bills

• Check supplier bills to ensure accuracy, and take advantage of creditor payment terms
• Manage and review expenses to see what can be reduced or to get a better deal
• Increase sales and also consider which items are making a profit (this in turn affects cashflow)
• Review all of your prices. A small increase in price has an immediate effect on your bottom line.

Other – Finance, business growth

• Review your finances and loans, consolidate debt and/or see if you can get a better deal
• Consider leasing your main assets to spread the cost over a longer period of time
• Sell unwanted assets that aren’t required to run the business (and reduce storage costs)
• Prevent theft and also put into place internal control procedures – i.e. payment of bills, petty cash

By monitoring your cashflow regularly, you will be able to ascertain where any problem areas are, and help to anticipate changes in your business liquidity position. By keeping more informed, and taking action when required will also help to ensure the continued success of your business.

Cashflow projections and cashflow management are areas in which Jaguar specialises, so please feel free to contact us on 08 8212 0217 if you require any assistance or would like a Free Business Health Check.

Bookkeeping is the foundation for building your Empire.Don’t let your Empire crumble around you prevention in this case is definitely better than cure;

• Are you using a Bookkeeper who is registered with the Taxation Practitioners Board which allows them to be registered as a BAS agent?
• Have you asked your Bookkeeper to confirm their Insurance arrangements lately?
• Bookkeepers are now required to hold a Certificate IV in Bookkeeping or complete 1400 hours of relevant experience in the preceding years.
• Being a member of a Certified Bookkeeping Association or National Institute of Accountants provides your Bookkeeper with the information to be kept up to date.

With the introduction of the Goods & Services Tax Act everyone became an expert in Bookkeeping after a 1 or 2 day bookkeeping software course. Many of these Bookkeepers had not experienced any real business involvement except maybe working as a receptionist, administration assistant or clerk. As you can imagine over time this has taken its toll, with the need for the government to take action.

The Tax Agent Services Act has been amended to implement standards to regulate the bookkeeping industry. The new regulation aims to remove those unqualified persons/businesses who charge a fee for service and in many cases actually do harm to a business by exposing the entity and its Directors/Owners to tax, interest and severe penalties from the Australian Taxation Office where the accounts are not prepared correctly.

This legislation may leave a number of these unqualified bookkeepers operating illegally and be subject to civil penalties. Is your bookkeeper a contractor or employee? If they are a contractor then they need to comply.

JAGUAR BOOKKEEPING meets all the new regulations and offers much more than bookkeeping. The integrity of our business will leave you feeling confident and give you the time for the most important thing…..Profitably growing your Business!

Call us now (08) 8212 0217

Quote: Are you doing the same thing every day and expecting different results?

Article from http://www.accountingweb.co.uk.

The financial health of your customers can have a major impact on your own business finances. Without being secure in the knowledge that customers have access to the credit needed to pay you on time, you leave yourself open to your own credit difficulties. By constant assessment of the financial health of your clients, you can stay on top of their finances and so, your own.

However, if you begin to see the following 5 warning signs in your customer, it is time to tighten up your credit policy.

1. Change in Ownership

Ownership changes can be a key sign that a business is having financial issues; if a business is successful, why would the owners sell up? Be concerned if you call your customer and are referred to an unfamiliar person, or the business is using a different name. Name changes in particular signal credit problems and are generally a quick fix for companies struggling with their bills. As standard, check the job title of the person you are referring to and if you notice any lots of staff changes it might eb time to dig further into their credit history.

2. Deteriroration of Paying Habits

If your customers are frequest spenders, habits in their payment process will probably stand out. Delays in payment, changes to their payroll team as well as your constant at the company could indicate credit issues. This will be equally noticeable if you have implemented a process to track paying habits. Infrequent or new customer credit difficulties are harder to spot so increased vigilance is imperative.

3. Changes in Customer Orders

If a customer has placed the same order for years and suddenly decreases their order, it could be a signal that they are suffering financially. Prompt investigation may prove this to be no more than a change in needs but it could also be the first signal of credit problems. Initially, talk to your customer to find out why their order has changed before it becomes a problem.

4. Broken Promises

If your customer is making promises regarding deadlines and amounts they will be able to pass to you and when, generally their credit is in a particularly dire state. When promises are broken immediate action is required. Promises are typically made when things have already reached the “late” stage of payment, so be vigilant and act as soon as deadlines are missed.

5. Unresponsive customers

When your customer begins avoiding your calls or not returning your calls, it’s a major red flag. By this stage, your customer is likely to have passed the point of no return. Most likely they are reaching the crux of their financial problems and increasing attempts to contact them are unlikely to end fruitfully. Really, poor credit should have been picked up beyond this stage, but if you do find yourself with an unresponsive client, now is the time for legal action.

In summary, one unreturned call is no big deal, but broken promises or unannounced changes of ownership most certainly are. Stay in touch, watch for signs and when you see red flags, immediately implement firm measures to bring the account current. To stay out of trouble, be aware of your customers actions and keep an eye out for warning signs.

Article by James Thomson, http://www.smartcompany.com.au/tax/050022-tax-shock-when-it-comes-to-tax-record-keeping-the-shoebox-isn-t-dead.html

Australia’s SMEs might appear to have embraced the internet age and cloud computing, but it seems that when it comes to tax, at least one very analogue device is crucial.

A survey of 1,000 small business people conducted by Galaxy Research for American Express has found a staggering 39% of small businesses keep their tax receipts in a shoebox rather than lodging them electronically.

The smaller the business and the younger the entrepreneur, the more likely it is that the shoebox will be used – entrepreneurs aged 18-34 years were the most likely to be shoebox users (46%), while 49% of those with businesses turning over less than $50,000 use the cardboard filing system.

The survey suggests that the use of the shoebox is counterproductive. Not surprisingly, 83% of small business owners find tax reporting stressful, with the biggest concerns including keeping track of receipts and invoices (43%), worrying that they will make a mistake (41%) and ensuring they are claiming the appropriate business expenses (40%).

Petrol and stationery receipts are the most likely to get lost, the survey found.

Tax expert and author Adrian Rafferty, who owns the brand Mr Taxman, says the findings shocked him.

“It’s a joke. If you are serious about business, you’ve got to have your systems in place.”

“These guys are not doing themselves any favours. If they were a just a bit smarter and took advantage of systems and technology then they would be a lot better off.

“Imagine getting two hours a week back in terms of recording keep. Just imagine what you could do with two hours a week. Could you spend those two hours winning over more customers?”

Two-thirds of small business owners are directly involved in their tax reporting, with half doing it all themselves and half getting the assistance of a colleague or accountant.

External accountants and tax specialists are the most common providers of tax support, with just 9% of small businesses employing an in-house accountant.

Rafferty says small businesses that are struggling with their tax obligations need to take action.

“A lot of them are still afraid of technology and don’t realise how easy it is. Get your systems in place; utilise the resources that are out there. And get some help where you need it.”

The survey also found that just 13% of small business owners were completely up to date with the tax concessions available to small business; this increased to 21% when the business owner was in charge of their own tax affairs.

With a raft of new tax concessions starting on July 1 – including the instant writeoff for assets under $6,500; a new $5,000 writeoff for vehicle purchases; and new, higher depreciation rates – the low level of tax concession knowledge suggests some SMEs may miss out.

Rafferty also doubts many SMEs are across the new carry-back loss rules coming into place in the new financial year.

“Very few of these guys even know they can claim a $1,000 concession right now, let alone the new concessions coming through.”