Empower Your Business

Accounting is Just the Beginning

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Simple Steps to Reduce Your Accountancy Fees

What accounting systems do you use now?

Any tips you would add?

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What extra work and fees are involved when operating as a Limited Company?

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Welcome to the first episode of Ask an Accountant. This is your chance to get direct answers to your accountancy, business & tax questions from business and tax expert Nick Roberts who founded the Accountancy + Business Advice Centre

This week’s question asks about if becoming a limited company was a good idea…

Press play to see the response

Would be great to get your feedback. Please comment below.

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How to Avoid the Biggest Mistakes in Business Mistake No. 7 – Not Having Business Goals

Business GoalsMany business owners drift like flotsam and jetsam on the tide, being reactive to circumstances and with no idea of where they want to get to – it’s like setting out on a journey without knowing your destination. They say the average small business owner spends more time planning their annual holidays than they do in the business.

Having an attainable goal in business can be more important to success than almost anything that you do. Millionaires say they look at their goals every day but billionaires write down their goals three times a day.

Writing your goals down is the best way to reach your goals. At Harvard University in the US a survey discovered that in one particular class 3% of the students had written goals.  10 years later it was found that the net wealth of the 3% was greater than that of the other 97% combined.

Your goals might revolve around growing and selling your business. Or maybe retiring on a comfortable income or early so you can travel the world whilst you’re still young and fit, but it doesn’t matter what they are, it’s more important that you have goals to strive for so that you’ll be more successful.

To ensure success here are 9 questions to ask yourself when you’re setting a goal or goals:

  1. Can you achieve tangible benefits by achieving the goal?

.   2.   Would you be excited if you achieved the goal?

  1. Have you a real desire to achieve the goal?
  1. Is the goal specific and clearly defined?
  1. Is the goal attainable?
  1. Is the goal relevant?
  1. Have you written the goal down?
  1. Will you be motivated to re-write or re-read the goal every day?
  1. Have you set a realistic deadline for the goal?

A good way of ensuring you attain your goal is to work backwards and plan out the exact steps and benchmarks required to achieve your goal. Otherwise, your goal may just seem just too hard to reach. I have some great, real examples of how successful business owners have worked backwards over a 5 year period working out exactly what they need to do to move from where they are now to where they need to be to reach their goals.

Often keeping it simple is the key – remember the KISS (keep it simple, stupid!) principle? For example, just selecting one key goal that everything else fits around, such as growing your business by 25% a year. If you keep control of the other things in your business like your gross profit margin and costs then your business will grow successfully.

If you want help to set goals in your business contact 0800 ASK NICK or email nick@abac.co.nz.

 

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Reviewing Your Business Progress

When was the last time you checked performance against your business plan?

The business plan needs to be under continual review to make sure you are successfully implementing each planned stage. It won’t be any use to you unless you use it.

By writing a business plan you’ve taken the time to plan in detail what your business goals and objectives are – it’s a living, working document, not something to be filed away and then dusted off for review in a couple of years’ time.

This concentrated thinking, discussion and debate is the key to the formulation of a workable and achievable business plan. And as long as actual performance is monitored against it, the plan should significantly assist in the long-term survival of the business.

Ideally you should review performance on a regular monthly basis, or at the very least on a quarterly basis. Ask the fundamental questions:

  • Where are we?
  • Are we heading in the right direction?
  • Will we achieve the goals and objectives of our business plan?
  • Should we review pricing structures?
  • What has been the effect of the consumer price index increase?
  • What has been the effect of price rises in our particular business?
  • Should we raise our prices?
  • Should the gross profit percentage be higher?
  • Have we got empathy with customers?

On an annual basis you need to compare actual financial performance to the budgets and cash flow forecast. Ask:

  • How did we perform?
  • What went wrong?
  • Have we learnt from the mistakes?
  • Did we exceed budget expectations anywhere? Why?
  • Can we capitalise on these improvements?

A valuable assessment is to compare your business figures to industry statistics (ask your accountant about obtaining this information).

You’ll also want to know: What is the general business climate in your area? Is it conducive to your type of business? Should you be expanding, drawing back or diversifying? What is the status of your investment in stock?

Don’t forget that the business review should also include an appraisal of what has been happening within your team. You need to look at:

  • Recruitment
  • Training and development
  • Meetings
  • Employment agreements
  • Wage/salary reviews

Use your business plan as a day-by-day, week-by-week, month-by-month reference point to compare where your business is against what you planned it to be. If there are any deviations, immediately investigate them and try to take corrective action.

If you need help with reviewing your progress contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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How to save tax AND sleep at night

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I once had a client in the UK who used to save tax by never paying any of his takings into the bank. He was a sort of cross between Arthur Daley and Del Boy—a loveable rogue—but I liked him a lot, as he was always cheerful and smiling, no matter what scrapes he got into. Eventually, however, he came to grief; his wife left him because she never had any money to pay their bills and the IRD bankrupted him when they caught up with him!

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How to Recognise a Proactive Accountant

Can you tell the difference between a reactive or proactive accountant? Let’s see if you can recognise your accountant here…

How Reactive Accountants Work With Their Clients

How Proactive Accountants Work With Their Clients

You call them when you have an issue

They call you and ‘check in’ on how you regularly

You visit them only when you have to

They ask to see you or visit you frequently

You only see or hear from them when something bad has happened

You hear from them frequently about all sorts of issues, ideas and opportunities

They do not have a regular communication program – it’s almost a surprise when they contact you

They have a structured communication program (that does not cost you anything)

They charge you by the hour for everything they do in 6 minute units so you’re too frightened to ask them anything

You know in advance what it’s going to cost you

They do not understand your business or situation and take little interest in you

They do understand your business or your situation and are very interested in your welfare

You receive surprise bills that you do not understand from the IRD

They have advised well in advance of the forthcoming tax bill and it is no surprise to you

They tell you what to do

They explain what to do and how to do it

They only offer you what you legally have to buy – tax returns and annual financials that add minimal value

They offer you a range of business improvement, systems and marketing services to help you get on

You do not have a very good relationship with them

They make an effort to enhance the relationship with you

They do not explain your work to you – they just mail it to you with no explanation

They sit with you and step you through what it all means, where the money went and help you interpret your situation

They virtually say ‘good luck, you’re on your own’

They offer you real help to plan and achieve your goals, financial and otherwise

Yes, there are plenty of old-fashioned reactive accountants out there and taking on the many new clients that I do enables me to see how they work and listen to what their ex-clients said about them! If you need help to find a proactive accountant contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

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When to Use a Good Accountant

I was at a networking event recently and when finding out I was an accountant, someone approached me and asked was it really necessary to use an accountant as we were so expensive. In addition to making the point that some of us are a lot less costly than others, I patiently explained the things that made us so valuable and how we could actually save and make our clients more than we cost and also used the analogy of me trying to fix a modern car without the tools, knowledge and experience but I could see it was falling on deaf ears so moved on to talk to another.

But what prompted me to write this post was an article on the NZ Business Mentors site from the Australian accountants head office in Auckland, setting out the top 5 times to use an accountant. Before I even read the article (which can be found here) I could guess the reasons that were going to be outlined:

  1. Starting a business. Definitely agree as there are so many things to cope with when setting up a business.
  2. Changes to legislation. This year’s GST increase resulted in more confusion than I’ve ever seen!
  3. Year-end. Yep, tax is so complicated mere mortals haven’t got a hope.
  4. Selling up. Again, like a start-up, there’s loads to do and you have to start many years beforehand.
  5. Re-financing. Using a good accountant will definitely increase your chances of success, especially in these times when banks are so cautious.

Now obviously there was only limited space in the article but what really surprised me was the absence of two vitally important reasons:

1. Regular reporting

Any accountant who does not encourage, assist with or actually prepare regular reports for his or her clients should be handed a loaded revolver. If you don’t know what’s going on in your business you:

  • Won’t receive early warning of impending problems
  • Cannot plan for your taxes
  • Cannot plan for your future
  • Cannot improve your business since what you can measure you can manage
  • Won’t know where you’re not doing as well as you should be

That, of course, is all on top of not knowing whom owes you money, what products or service lines are making or losing you money, what inventory is obsolete, how high your unbilled work-in-progress is or the productivity of your labour force etc etc.

2. Systems

Any good business needs good systems, and not just good financial systems. Using systems means saving time and money, doing things the same way each time, less errors, better sales and profit margins, and being able to deliver your core business products or service lines in a way which creates value for your customers and clients.

Now of course, it may well be that your accountant is too busy, not interested or just lacks the experience to help you, so if you need a good accountant and business mentor contact 0800 ASK NICK or get in touch by email.

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Is Your Accountant Right For You?

Survey after survey have shown that accountants are the most valuable and trusted source of business advice for business owners. Of course, that’s not a surprise, because unlike other business professionals, accountants have (or should have) an unrivaled understanding of how your business operates, know the local market and other local businesses in similar fields as well have access to up-to-date benchmarking information.

Why then do most business owners just see their accountant just once or twice a year to deal with their Annual Financials and Tax Returns? Is it because they don’t want to improve their businesses, don’t need good systems to ensure their businesses run efficiently, don’t need regular, up-to-date and meaningful business information and don’t need to plan to reach their business goals? Or do they just have the misfortune to have chosen the wrong accountant who hasn’t got the time and lacks the interest to help their clients?

If any of this sounds familiar, you it’s not too late to do something about it. Your business is vitally important – it’s the source of livelihood for you (and your family), your future, and in many cases, the difference between making a reasonable living and financial ruin. So why then do so many business owners stay with their accountants out of a sense of misguided loyalty?

Over the years I have seen so many examples of poor service and advice from accountants including:

  • Positively discouraging clients from getting their own systems and accounting software so that they can keep the bookkeeping and GST work themselves to maximise their fees.
  • Giving their clients financial reports which suit the accountant but which are of no use to the client e.g. cash-based periodic Profit and Loss Accounts excluding Accounts Receivable and Payable and Inventory.
  • Not providing the clients with any help to produce regular monthly or quarterly management accounts which are so important to business survival and success.
  • Leaving their clients high and dry with poor systems which don’t talk to each other or not helping them choose good systems in the first place.
  • Providing a very poor, impersonal service with very high, unjustified fee levels.
  • When the clients do have their own accounting software, not ensuring that the data on the software is up to date and accurate e.g. reflecting the opening balances from the Annual Financials so it can be used for producing some useful management reports.
  • Using raw recruits with no experience to learn on the job at the client’s expense.

I’m always surprised why experienced business owners who are otherwise so careful with their money put up with such mediocrity! In my next couple of posts I shall explore these issues further and cover what your accountant should be doing for you as well as how to choose the right accountant. In the meantime, if you need a good accountant call 0800 ASK NICK or get in touch by email.

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