ESSENTIAL BUSINESS INFO

Posted on January 26, 2012 | Leave a comment

Many business owners operate completely in the dark, with no meaningful business information upon which to manage, let alone improve, their businesses. As trusted advisers (and with so much knowledge of our clients’ businesses) it’s our job as accountants to empower and enable business owners to get control of their businesses by giving them the tools to find out whether they’re making or losing money, growing or contracting and what they need to do to succeed.

So what sort of business information does a typical business owner need? These are the more common types which I normally recommend:

Information

Benefits

Easy or Difficult
Monthly or bi-monthly interim financials Can see whether you’re making money and can plan and react quicker to improve plus can minimise IRD interest Piece of cake but if you hold inventory you need the month end inventory figures
Perpetual Inventory Can keep a track of all your inventory and what cash you have invested in inventory plus identify old or slow moving stocks Difficult in manufacturing businesses where you use common items for different products but otherwise you just need good systems
Job Costing Can see whether you’re making money on individual jobs Not too bad if you’re keeping keep timesheets for labour costs and can record the allocation of inventory items to individual jobs (specific purchases for jobs are very easy to allocate) which means probably keeping perpetual inventory
Divisional Reporting Can see which parts of the business are losing or making you money OK if you can allocate overheads between divisions and can allocate inventory usage to individual divisions
Budgeting Can manage by exception, can identify over-spending and highlight sales shortfalls Easy if you have accounting software
Break-Even Point Analysis Probably the most important thing you should know about your business. Knowing whether you’re covering all your outgoings (including drawings and tax) is absolutely vital. Easy but you do need to know recent overhead levels and your latest gross profit margin which can slip when things get tough
Cashflow forecasting Can forecast cash crises and get peace of mind when expanding Easy. If you find it difficult to predict your sales work back up from overheads using your gross profit margin
Gross Profit Margin Analysis Can see just where you’re losing or making money If you keep inventory you probably need to maintain perpetual inventory or it’s too difficult
Key Performance Indicators Can focus on the key things in the business, those factors critical to success Easy if you have accounting software and good systems

What information do you have available in your business? Are you still just using the traditional measures of what cash you have in the bank and comparing turnover with that achieved in previous years? All this really useful information is easily available with good systemsand some decent accounting software, so come on, get up to date by contacting Nick on 0800 ASK NICK or email nick@abac.co.nz.

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JOINT VENTURE MARKETING

Posted on January 19, 2012 | 2 Comments

One of the most effective marketing techniques is Joint Venture marketing, whereby you find a non-competing business whose customers are the same type of people as your customers. You get this business to promote you or mail their customers promoting your product or service and then split the profits with the host business. It takes many years and many thousands of $ to build a customer base so why not take advantage of someone else’s hard work?

And the beauty of it is that it’s a win-win for both of you! Jay Abraham, the famous and successful US marketer, has a sound piece of advice when it comes to setting up “host” relationships: “Be generous with the host company when setting up the deal. If you can’t get the host company to pay for the mailing, offer to pay for it yourself. Or offer them 60% instead of 50%. Or offer them 100% until they double their money, and a lower percentage thereafter. Offer them whatever it takes to get them to do the joint venture with you. What do you care how much they make, since you’re investing so little up front and have so much to gain yourself”?

Over the years when I’ve explained this truly effective technique to clients I get many blank looks as they think it’s all too hard, despite the examples I produce from real businesses showing that in fact it’s like everything in life, it just takes a little effort and imagination. Now imagine how thrilled I was to see this pavement sign outside a local shop which I immediately captured with my mobile ‘phone:
Joint Venture MarketingIsn’t that fabulous? So simple, so low-cost and so straightforward and yet so effective! It costs the shoe shop nothing, not one cent, so they’re happy little bunnies. And neither, of course, does it really cost the pedicurist anything either, just their time. But the return for the pedicurist, if she does a good job, is huge taking into account the lifetime value of a typical customer – even at $50 per visit, monthly for even three years is $1,800! What a local and very simple example to explain joint-venture marketing to clients.

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EFFECTIVE BLOGGING

Posted on January 12, 2012 | Leave a comment

Blogging is one of the most effective yet free – yes FREE – ways of marketing yet few venture into this area. It can position you an expert in your field, build your profile and brand, and draw prospects to your website. Here are a few tips to get started:

  • If you don’t know what to write, don’t worry unduly, just pick on an area you know well, the sort of thing you’re probably discussing regularly with customers or staff. This could be the key frustrations customers suffer when dealing with suppliers in your industry, tips on how to get the best out of your product or service or how the customers can reduce costs or save time etc. Google is a great source of ideas and inspiration.

  • Blog regularly by getting into the habit. I’ve conditioned myself to blog in the same as I’ve conditioned myself to keep fit – if I don’t do it I start to worry and actually feel guilty! The more you do, the easier it becomes.

  • Keep them as short as possible. This isn’t easy and takes practice, but the less you write the easier it will be to read and keeping them short doesn’t mean you are short-changing your readers as writing concisely and to the point will be far more effective and informative.

  • Make your blogs as easy to read as possible without excessive technicalities or jargon as these will just confuse your readers. Youngsters are useful here as they will be able to pick out words they don’t understand. No children or nieces or nephews of 10 -14? Email them to me, I’ll get my younger two to read them through.

  • Write your blog as though you were speaking to a down-to-earth client or customer, not as you would have done whilst you were at school trying to please your English teacher. Not as far as text language maybe, but short easy-to-read sentences, bullets and “chunking”, breaking it down into small easily digestible parts.

  • Try and focus on areas of interest to your readers which may not be the same as yours. Initially, you may have to suck it and see, or look at other blog sites but when you’ve done a few blogs you’ll find that some topics or areas are much more popular than others, so write more on these.

Starting to blog is like going to the gym or for a run on a winter’s night – it’s a scary thought but once you get out there you enjoy it, so don’t delay or prevaricate, just do it! If you need help with your blogging contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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YEAR END COMPUTER DETOX

Posted on January 6, 2012 | 5 Comments

This is another article that was suggested to me and that I found worthy sharing with my readers. Happy New Year and see you all again next week with a new post from yours truly.
-Nick

–Comes January and everyone starts experiencing the after-effects of over-indulging. Your computer too feels the pain.  Perhaps it isn’t so much Christmas wine and chocolate but the result of viruses, document hoarding and other accumulative hangovers.  Detox your computer to get it working faster, safer and more efficiently.

  • Clean it.  Literally.  You’ll be amazed what appears when you tip that keyboard upside down (only use anti-static wipes or a soft brush.  NOT water!)
  • Remove clutter, delete unwanted documents off the desktop  and tidy up your folder structure
  • Remove any programs that are no longer required
  • Empty your recycle bin!
  • Check that all necessary updates have been installed
  • Is it time to look at upgrading to Microsoft Office 2010 or 365…?
  • Update your security passwords!
  • Double check your antivirus protection is up to date and won’t expire while you’re on holiday
  • Make sure your firewall is active
  • Perform a last minute virus scan – check out Spybot Search & Destroy
  • Perform a disk cleanup and disk defragmentation (set this to run overnight as it may take several hours)
  • Perform routine backups of all files and settings
  • Archive files offsite

Computer systems vary.   If you use an external IT provider to manage your computer requirements then liaise with them as to what they have planned and what you can carry out yourself.  And remember… your computer needs a holiday too – make sure to shut down and turn off before you leave the office!

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Posted in Business, Systems

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BOOK OUT YOUR BACH – AVOID THE TAX HEADACHE

Posted on December 29, 2011 | 4 Comments

Below is an interesting article that was suggested to me and that I am happy to publish instead of my usual weekly post. Happy Holiday to all!

– Recent years have seen a surge in popularity in the short-stay rental of holiday homes.  The internet has made it easier to list, book and review baches and cribs which are available when owners aren’t in residence.

Inland Revenue have recently issued a paper proposing new rules on mixed-use assets (including holiday homes) where there is a mixture of business and personal use, with revised criteria that should be adhered to when booking out the bach.  But until the rules are formally changed, the current policies still apply.

Firstly, it’s vital that your intentions are bona fide.  You must market the holiday home in a commercial manner such as setting up and using a website for the property, registering the property with a reputable holiday home website or listing the property for short stay rental with local real estate agencies.  These efforts cannot be seen to be ‘token’, you should be accepting offers from suitable renters.

Secondly, your own (plus family and friends’) use of the property must be diarised so you can determine the days in a year that the property was available for renting out.
If the property is owned by an individual or a family trust the expenses relating to the property including the utilities (power, rates, insurance), maintenance and interest on debt will be apportioned according to the number of days in a year the house was available for rent.

There are GST issues too.  Short stay accommodation is a taxable supply for GST purposes so if the annual rent you are receiving exceeds $60,000, the owning entity (individual, partnership, company or trust) is required to register for GST and return GST on the outputs (rent) and inputs (expenses and improvements) made and received.  This threshold may seem high but some do have more than one holiday home in the same entity! This threshold includes the market value of free or cheap use of the bach by persons associated to the owner.

The value of the property becomes a taxable supply when registration occurs and when the property is sold or the entity de-registered.  Both the income tax and GST issues can be quite tricky so we recommend consulting us to make sure all the tax bases are covered correctly.

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Posted in Accounting, Tax

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A WAKE-UP CALL FOR COMPANY DIRECTORS

Posted on December 21, 2011 | 2 Comments

It has not been a great 5 years for finance companies and their directors. The level of duty required by directors has been tested in recent court cases on both sides of the Tasman. The New Zealand cases of Feltex Carpets and Nathans Finance, together with the Healey (Centro) case in Australia, have helped put the spotlight on the role and responsibilities of directors – particularly in respect to reviewing and approving a company’s financial statements (and offer documents).

While the above court cases centre on high profile companies, they do hold valuable lessons for all businesses, big or small:

  • Although directors can rely on expert advice, they cannot abdicate their own fundamental responsibility to review and approve a company’s financial statements.
  • Directors must have sufficient knowledge of conventional accounting practices and must apply that knowledge based on information they received as directors.

Sections 131 to 138 of the Companies Act 1993 outline the key responsibilities of a director and it is a good idea to familiarise yourself with them. For example:

135 Reckless trading
A director of a company must not— (a) agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors; or (b) cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.

137 Director’s duty of care
A director of a company, when exercising powers or performing duties as a director, must exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances taking into account, but without limitation (a) the nature of the company; and (b) the nature of the decision; and (c) the position of the director and the nature of the responsibilities undertaken by him or her.

Sections 373 to 386F deal with offences and penalties and as in the news recently, include custodial prison sentences, good view of the harbour or otherwise!

So how does this apply to you?

As a director you have a responsibility to everyone that relies on your company’s financial statements. Therefore it is also your responsibility to fully understand what your financial statements mean and thus ensure the best possible return for everyone. There are many entrepreneurial Kiwi’s out there but when it comes to financial matters and accounts, they change the subject or just take a “she’ll be right” attitude. Take some time to understand these, get a decent accountant who’ll explain things to you and set up some regular reporting systems – in the long run, your business will be so much better for it!

If you need help with your finances, systems or reporting contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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Posted in Accounting, Business

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MISSION STATEMENTS

Posted on December 15, 2011 | 2 Comments

Does your business have a mission statement? A ‘mission statement’ is a brief statement of the purpose of a business or organisation. Sometimes the mission statement is used as an advertising slogan, but the intention of a genuine mission statement is to keep employees and customers aware of the organisation’s purpose. It can be restricted to goals and objectives, but can also include some or all of the following:

  • Purpose and values of the business

  • Which business the organisation wants to be in (products or services or market) or who are the organisation’s primary customers (stakeholders).

  • What are the responsibilities of the business towards these customers?

  • What are the main objectives that support the business in accomplishing its mission?

As an example, here is the mission statement of the Accountancy + Business Advice Centre:

Our goal is to help as many business owners as we can to improve their businesses, maximise their profit and get the lifestyle they want.

The best way to write your mission statement is to take it bit by bit and break it down into its component parts. Answering these questions will get you started:

  • What does you business do i.e. what is its function, what need does it fulfil?

  • For whom does your business perform that function i.e. who are the stakeholders in the business? (Think about customers, team, owners, suppliers & your social responsibilities)

  • For whom does your business perform that function i.e. who are the stakeholders in the business?

  • How do perform that function in a way that sets you apart from your competitors? (Think about your fundamental guiding principles).

If you need help to write your Mission Statement contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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BECAUSE OF THE CUSTOMER

Posted on December 8, 2011 | 2 Comments

I was searching through my extensive collection of business and marketing material the other day when I rediscovered this useful ditty about the importance of the customer:

Because of the Customer

Because the customer has a need we have a job to do
Because the customer has a choice we must be the better choice
Because the customer has sensibilities we must be considerate
Because the customer is unique we must be flexible
Because the customer has an urgency we must be quick
Because the customer has high expectations we must excel
Because the customer has influence we have the hope of more customers
Because of the customer we exist!

No idea who came up with this, and Google was no help, but isn’t it true?

Nowadays of course, great customer service is no longer enough, and we must look to add value in as many ways as possible, and work out ways to help our customers help their customers, but given the poor service that’s still so common in so many businesses (despite the recession) perhaps many more business owners & their teams should learn this off by heart!

If you need help with your customer care strategy contact Nick on 0800 ASK NICK or email nick@abac.co.nz. The first thing we’ll get you to complete is our 30 question Customer Care questionnaire and then work with you to discover your customer’s key frustrations. We then design a fully customised customer care strategy for your business, typically incorporating key aspects such as performance standards, focused staff training and customer advisory boards to ensure your business begins to display the characteristics observed in the most successful customer driven companies.

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RISK REVERSAL

Posted on December 1, 2011 | 1 Comment

When you’re asking a new customer or client to do business with you for the first time they are taking a big risk by placing their trust in you. Now of course, from your perspective they are not, but it’s necessary to put yourself in their shoes and see things from their point of view. Yes, they may be unhappy with their current supplier but often it’s a case of better the devil they know!

Now to increase the chances of getting that new customer or client on board you need to help them by reducing the risk as far as you are able to or by eliminating the risk by you taking it on the chin, by “reversing” the risk onto yourself. After all, you want the business, so why should the customer or client go out on a limb?

One risk-free way for you to achieve this is by third party endorsement as it always helps if someone else can reassure the prospective customer or client that you are reliable and can be trusted. The easiest way here is testimonials from named individuals, as anonymous testimonials can be fabricated. Another good way is some case studies that talk about specific results and clearly demonstrate how you’ve gone beyond the norm to help your customers and clients.

Now since it can also be difficult to prove the bona fides of case studies an even better (but riskier for you) way is to tee up some referees who are prepared to speak to the prospective customer or client and answer their questions about you, your reliability and how you’ve performed in practice. If you’re new in business this could be difficult but otherwise, there’s normally a customer or client or two that you’ve done that special favour for who’ll be prepared to help.

A potentially even riskier but very effective technique is to offer an unconditional money-back guarantee if the customer or client is unhappy with your product or service. This will only work if you’re good at what you do so take care or you could be in difficulty very soon! Yes, you may get the odd time waster with nothing better to do but on the whole I find this works well, both for me and for clients.

Feeling very brave? Some take this a step further, by offering an even larger cash refund if they get it wrong. That may be over the top for you, but if you need help coming up with your risk reversal strategy contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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ADDING VALUE MADE EASY

Posted on November 24, 2011 | 1 Comment

Before you get out there and start doing business you need to decide where your products or services sit in terms of your value proposition. Simply put, your have four main choices, low price low value, low price high value, high price low value or high price high value, as can be seen on the graph below:

Adding Value graph

Some examples will help. Low price low value – $2 Dollar Shop? High price low value – some firms of accountants who survive on their brand name alone! High price high value – luxury cars? Low price high value – those trying to buy market share as you wouldn’t normally survive very long!

Now often value is not actual value, it’s just a matter of creating a perception of value, which is often achieved by high fashion, being trendy, being in the right place at the right time or clever branding e.g. iPads (which is why Apple has $76 billion in cash!). Often, that’s tricky for smaller businesses with limited resources so what we need to do is to find a way to boost value without cutting our prices.

Value is defined as customer benefits less costs to the customer, and importantly costs are not just monetary, they also include effort, time, anxiety & emotional costs. Try hanging on the ‘phone to a call centre, or standing in a long queue, or having to return something that’s faulty or that you didn’t order, or receiving a huge bill you weren’t expecting. Aren’t all these costs? These days, we are time poor, increasingly stressed and less inclined to put up with poor service and we want things to be easy, so what we’re looking for are solution providers – we want someone who’s going to solve all our problems and to whom we can just delegate everything to.

So to increase value to your customers without cutting your prices you must reduce or eliminate all the other costs of doing business with you. This means seeing your business through the eyes of your customers and reviewing all your business processes to make these as efficient and as smooth as possible for your customers. Take for example the stationery supplier who comes to your premises to see what you need and then takes care of their own order, or the furniture supplier who not only delivers but assembles everything as well, or the domestic appliance supplier who takes your old appliance away AND all that annoying packaging. Providing superior value like that is now becoming the norm so just providing good customer service like in the old days is no longer enough!

If you need help to set your value proposition and/or increase customer value without cutting your prices contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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