The Difference Between Entrepreneurs Who Succeed and Those Who Fail

/in , /by

“Fail fast and learn faster if you want to succeed,” this will often come out of the mouths of many entrepreneurs. The lessons from those failures are what make business owners better and what improved their chances of succeeding in business.

What makes a business more likely to succeed or fail?

There was a survey conducted of over 2,000 small business owners in the US and UK to find out what success is and what motivates them. It is interesting to note that half of those who experience failure were more likely to succeed in the future.

Today’s entrepreneurs are taking on a fascinating journey. Business owners don’t need to succeed the first time to be successful. What you need to do is: start the journey and follow your dreams.

Here are the characteristics of successful entrepreneurs, according to the study:

1. Possess a progressive attitude and at ease with failure.

Small business owners who are successful tend to view failure in a positive light, pick up lessons from their errors, and are not afraid to try again. A business has more strength the second time around, according to the research.

2. Seek the help of a big community, including relatives, mentors and advisors, a financial advisor, and an accountant.

Working with advisors and mentors keeps you on the right path. According to a third of successful business owners, they have enlisted the support of mentors. In comparison, there were only 14% of participants who operated businesses that had to shut down.

3. Talent for accessing and managing finances.

Almost 60% of successful business owners, said they were able to manage their finances by investing in technology. In comparison, just 14% of respondents had to close shop.

4. Turning to technology to improve productivity in finances, marketing and customer service.

Entrepreneurs who had made it invest in business software to do the difficult tasks. 86% of the successful entrepreneurs who were surveyed reported they adopted technology to enhance productivity.

5. Believe strongly in the importance of personal time.

Business owners who have achieved great success have an excellent work / life balance and set aside time for their family. Nearly 60% of respondents reported that spending time with loved ones is important in making them effective as an owner of a business, and 53% reported that keeping their weekends available for family is important to them.

You need a business partner to expand your business and take it to the next level. Enlist the help of tax and financial specialists PJS Accountants. We offer a full range of services including accounting, taxation, business improvement, superannuation, business valuations, asset protection, succession planning, estate planning and bookkeeping. Contact PJS Accountants for enquiries.

Important Things I Hoped I Knew in Advance about Business

/in /by

It will serve you well to learn from other people who have been running a business much longer than you have and take to heart their advise. There are times when you would overlook some things that could have made a difference, so here are five things I hoped I found out earlier:

1. Change has to be dealt with but eventually enforced.

I have seen major adjustments in structure, direction, process and technology in both large and small enterprises. In each instance, management attempts to accommodate those who are scared of change and unwilling to adapt. What I’ve found out is that it is alright to deal with the process and support them. However, business owners should limit the flexibility in order to move forward.

This was exemplified by Sun Alliance UK during the 1990s when a policy to accept claims by fax was implemented. Employees feared that the incidence of fraud would soar and the business would fail. In turned out the business survived and was able to adapt to the new process. It is okay to accommodate the fear of change, but don’t allow it to limit your business.

2. Maintain balance.

The only ones who will care how much time you spend at the office is the family who miss you.

There was a time when I was more than willing to work on Saturday (the money was another incentive) to make a good impression and to volunteer to stay behind to work on time-critical tasks. I thought these actions were appreciated and could advance my career. But when you begin working for yourself, the desire to maintain longer work hours have to be harnessed to ensure you are able to deliver steadily the entire week. It is better for you to have a regular routine that you can follow instead of becoming of victim of fatigue just halfway through the week, month or year.  Client relationships will suffer, as will your long-term business, when clients feel that you are not giving them the proper attention. So leave work at the right time and make your family happy.

3. Small businesses can and should specialise.

“Putting food on the table is a generalist’s job, whilst building wealth and power is a specialist’s mission.”

At the beginning of running my business, I was paying more attention on increasing my client base so I never reject a potential client. I thought that was what was needed by a small, suburban business and it could not specialise like the businesses in CBD. I’ve discovered that if you are able to specialise in a particular field and secure that niche, then you could boost the value of your business and raise the quality of your service. You have no other alternative, in the “Google age,” but to step up and bring beyond average results. You will be rewarded if you are able to do this.

4. Give more importance to yourself, your staff and your service than to your customer.

It was hard, but I have learned to say “no.” My staff and I work hard, so I will choose clients who value my work and the role my employees play in providing our service.

5. “Life is 10 percent what happens to you and 90 percent how you react to it”.

Regardless of what happens in your personal or work life, it is your reaction in those situations that will shape the ultimate outcome. If you are able to spot life’s trials approaching, then you increase your chances of adjusting well and alleviating the damage. However, even a challenge that surprises you can be a chance for you to flourish or at best transform an adversity into an opportunity. I found that what holds us back in business is the fear of outcomes, not really the outcome itself, which we were able to deal with.

Running your own business can be challenging. Seek help and guidance from a business partner. PJS Accountants are the partners you need to expand your business and help it overcome any challenge or trial. We offer a full range of services including accounting, taxation, business improvement, superannuation, business valuations, asset protection, succession planning, estate planning and bookkeeping. Contact PJS Accountants for enquiries.

How to Strengthen your Business Bank Balance

/in , /by

Capital is the magic ingredient in helping to expand of your business.

“Cash flow” involves deferring outgoing expenses long enough to ensure your business has sufficient incoming revenue to pay for overhead costs and leave a small amount for profit. There are times discovering the right balance between “cash in” and “cash out” seems like rushing to find that famed pot of gold at the end of a rainbow – in other words, a challenge.

Profit will strengthen your capital, which you can spend to expand your business. It’s so easy in principle, but in reality a number of businesses have to deliver their services first for a time before they register any income.

So, follow these three tips to help strengthen your cash flow – to provide your business the cash and stability to expand:

1. Receive payment faster.

You have to fix it if you are not sending out invoices promptly. Think about this: each minute that passes by when an invoice is not being sent out to your customer your business is losing money. Get your invoice process in order to build up your business bank balance.

Send out invoices promptly and convert orders/quotes into invoices with a click of a button through online accounting software, or an integrated business management solution. Also, make it easy for you to see customers who owe you and the date it was owed with dashboards that display aged debts.

2. Minimise stock levels.

A business is losing money from stocks that remain in storage. Stocks are a necessary expense for businesses that are into selling products. However, it is hard to find the right spot between too little and too much stock. You need the right inventory system to hit this right spot.

You can improve your purchasing decisions with simple things such as establishing minimum/maximum inventory levels and instant re-ordering, being aware of what sales are incoming, knowing what trends or seasonality changes you need to watch out for or checking the newest exchange rates.

Visibility over stock is a major problem. You can automate your re-ordering and make sure stock is always available by switching to an integrated business solution. This will grant you access to money that you can invest back into the business.

3. Cut down on costs and overheads.

Bringing in more cash and spending less cash is the most straightforward way to strengthen your bank balance. A great way to check the improvement in your profit equation is by cutting down on operating costs and overheads.

Here are tips to reduce your overhead and operating costs:

  • Outsourcing: This is a good way to curb costs either while expanding or when you have to trim down some overheads. IT and administration work are two areas that can be outsourced.
  • Suppliers: Think about choosing one supplier if you are presently ordering stock from several suppliers. Fixed costs and higher volumes will be a great help to suppliers, while your business can gain from reduced costs and ease of managing relationships.
  • Budgeting and forecasting: Be aware of your bills and check your important figures regularly to allow you to identify trends, opportunities or risks. Be practical about expenditures, set aside the right resources to projects, track performance, reinforce decision making, spot problems before they arise, and reach your targets.
  • Systems: Utilising a business management solution frequently delivers calculated cost savings from improved transparency, trimmed down administration time, improved time billing, savings from stock management upgrades, etc.

You can improve your business bank balance in many ways. You can implement some directly, but others need the use of software or a process shift. Your skill in increasing your cash on hand to aid expansion is what single out your business from its competitors.

Do you need advice and guidance to improve your business and take it to the next level? PJS Accountants work to understand your business and its inner workings and how it can compete effectively in the present business environment. From this knowledge, we can come up with a custom plan to implement your business strategies and methodologies, boost profit and increase market shares. Visit one of our specialist advisors or contact PJS Accountants.

4 Tips to Prevent Fraud in Small Businesses

/in /by

Access to capital is one of the major troubles faced by small businesses. Thus, illegal activities such as fraud or theft can harm a small business in an instant.

Here’s a true to life experience involving Ken, an owner of a construction crane rental business. He was passionate about cranes, but was not too confident with numbers. So, the office is being managed just by him and a bookkeeper.

For roughly 15 years, Ken had his bookkeeper handle all of his business’s finances, including bills, bank reconciliations, payroll and corporate credit card. It was only after she left when it was found out that she had been committing fraud, causing the company to lose money amounting well into the $100,000 range.

It was discovered by the accounting company that the bookkeeper hired by Ken was withholding taxes from employees’ wages but was not remitting the payments to the government, and she was using Ken’s credit card for personal use. The accounting firm was able to put Ken’s business back on track financially, but it still ended up losing a considerable amount of money.

Small businesses can learn some important lessons from Ken’s experience to help strengthen their financial security.

1. Don’t let a single person handle all your finances.

Business owners must pay attention to receipts and expenditures that go in and out of your bank account regularly. It may be hard for you to find the time, or you may not find it easy to understand what certain taxes and payments are all about. So, hire a third-party accountant to go over your books on a regular basis. You can find progressive accountants that charge fixed fees at reasonable rates. With Ken’s company, had an accountant came in earlier and went over the bookkeeper’s work, the financial losses could have been minimised. If the expense for hiring an accountant were a worry, he would have ultimately recovered that money many times over.

2. Utilise a good payroll system.

Payroll is daunting and complex. But you can choose from many payroll solutions to make the process easier. Some are less expensive than others. Ken’s business became vulnerable when he let his bookkeeper to manually compute tax filings and wages.

3. Build a great team around you.

Ken believes he could run the business all by himself. He turned out to be wrong, so he paid dearly for that wrong assumption. The most resilient business owners are those who surround themselves with a great team of advisors, mentors and confidants who know how to be accountable for their actions. Your success as a business owner is guaranteed with this improved visibility, combined with your team’s diverse and unbiased viewpoint.

4. Safeguarding the weakness whilst maintaining the strengths.

Though they may differ on several points, professional investors will concur that it is crucial to establish a strategy that safeguards your weakness risks. Small business owners are investors in their business and strive to secure new clients, profits and sales. When that capital is recorded in your business, hold on to it. Have adequate insurance, inventory checks and other safeguarding measures in place so that there is cash on hand in the business becomes a victim of fraud, theft, catastrophic events or natural disasters.

If you are looking for a partner to help you run your business and protect your business from fraud, consider working with PJS Accountants. We offer a full range of services, including tax planning and compliance, accounting and SMSF services, estate planning, succession planning, and bookkeeping. For enquiries, contact PJS Accountants.

A Guide to a Successful Business Planning

/in /by

Are you one of those people who spend more time planning their holiday than they do their business?

Employers often pay more attention on matters such as running a tight ship, instead of focusing on finding and investing on the right resources to expand the business. It’s acceptable, and likely helpful in the short term, but it’s not good in the long term. Business owners become too busy that they neglect to plan.

The result is that business owners don’t have the time anymore to conduct regular or management meetings, and it is often that you will find a small or medium sized company that is dedicated to holding yearly planning meetings for the coming year.

Follow these four simple steps for planning sessions in your business:

1. Establish profit growth potential.

As part of letting a client participate in a planning session and setting and bolstering targets, showcase the profit growth potential in the company by evaluating what-if situations based on adjusting the major drivers of profit, revenue and cash. It is important that your accountant participate in this activity.

2. Deliberate various financial situations.

There are three scenarios you can discuss: Low Growth, Medium Growth and High Growth. The financial consultant and business owner should work together to establish the scenario that the owner is most at ease (the scenario should be both attainable and stretching), and then focus on that scenario.

3. Deliberate major points that is pertinent to the chosen scenario.

Before the planning meeting, the financial consultant should ask the business owner a series of questions that would make the owner think about their performance in various parts of the business. During the planning session, discuss the answers and focus specifically to matters that have to be dealt with to make sure the chosen financial scenario has the greatest probability of being realised.

4. Create an action plan.

A ream of flipchart paper is your most essential tool in the planning session. This item will be continuously utilised the entire day. Every idea that is brought up should be captured on the flipchart paper. By the conclusion of the session, you should all the papers plastered on the wall. Throughout the day, you can turn to past issues and recap what you thought was crucial. An action plan will emerge out of this.

Relevance is the key to an effective action plan. You should be able to see an obvious connection between the things on the action plan and the realisation of the objectives that have been established. Long and waffly are trumped by short and concise always.

As you look at the soundness of a proposed item on your action plan, you should think about the reason why a particular action item has been proposed. What further benefits are there for implementing it? What particular goal does the action plan is designed for?

It is recommended that only a few items be entered on the action plan because it has been proven that implementation is greater and much more focused.

Using the flipchart paper on the walls as your guide, create a clear action plan at the end of your planning session. Here are tips on how to do it:

  • Look at the first flipchart paper. (Don’t forget to number your flipchart papers so that it would be easy to summarise then.) Don’t spend too long recapping the discussion that you had that resulted in the items on the flipchart paper.
  • Check each item. Cross off all duplicates. If a number of items can be grouped together, categorise them as one item on your action plan.
  • Go to the second item and repeat the steps. Go through all the pieces of flipchart paper from 1 to last.
  • Jot down the three major projects that you have promised to put into action in the next 90 days. Put a lot of thought into these projects.

Make sure your projects can hold out against the following questions by double checking each of them:

  • With regards to your chosen financial scenario, which part of the business is this designed for? (For instance, improving margins, expanding the number of customers, improving average transaction price, and more)
  • State the reason why the project is crucial. (Identify the crucial success element that needs attention.)
  • Who will be responsible for implementing the project?
  • What is the date of implementation?
  • What targets will be reached upon implementation of the project?
  • How will the project’s progress and results be measured?

When you follow these steps, it is important to go back to the plan every 90 days to make sure the projects are being put into action and that you are making headway in your chosen financial scenario and that proper accountability has been assigned to guarantee project delivery. Take note that your hands-on accountant can make a vital contribution in this process.

Avoid expending too much attention on what your business does. Being the owner, it is essential for you to take yourself out of the workings of your business at least every quarter and focus on mapping out the future of your business and your personal situation.

Contact PJS Accountants to help you plan growth and development of your business. We provide a full range of services including accounting, taxation, business improvement, superannuation, business valuations, asset protection, succession planning and bookkeeping. We have spent more than 30 years dealing with local businesses in Capalaba, Cleveland and the Redlands. Our team is always available to take your call and assist you in whatever business needs.

What Do Accountants Do and When Do you Hire One?

/in , /by

Accountants are not just simply number crunchers; they can also provide critical information to help employers manage and oversee various areas of their business, as well as the financial aspect.

What are the tasks and responsibilities of Compliance Accountants, Financial Accountants, Taxation Accountants, Strategic Accountants and Management Accountants? Do they have similar jobs? Which of these types of accountants do I need?

Nowadays, you will find several specialised areas of accountants and accountants that provide a wide range of services. It is no longer just compliance, customers want more and nothing is wrong with that.

So, what things should I consider when choosing the right accountant for me and my business?

Well, choosing an accountant is like choosing a doctor; you must be comfortable with the person you would be dealing with. And the same as the case with doctors, you sometimes have this desire to seek another opinion, and that’s alright.

Meet with your prospective accountant and ask some important questions. What are the services they offer; are they personalised? Are they offering great value for your money? Do they specialise in a particular area?

Take a look at what your business needs and what you want in terms of accounting solutions. Some clients are content with no-frills packages, others would only go for an accountant that offers all the works.

Contact PJS Accountants to determine what you and your business needs. We offer a full range of services including accounting, taxation, business improvement, superannuation, business valuations, asset protection, succession planning and bookkeeping. We have over 30 years’ experience with local businesses in Capalaba, Cleveland and the Redlands. Our team will be at your disposal, ready for your call to assist you to stay in charge of all aspects of your business.

Leadership: How to Get the Best out of your People – Part 4

/in /by

The last article tackled the three major leadership behaviours namely: competence, emotional maturity and leading change.

A very big Australian company where I worked for 10 years got new experienced General Manager on board. Sadly, he doesn’t have emotional maturity and is incapable of drawing in the hearts and minds of the staff concerning change. As a result, many employees, including myself, bugged out quite fast. It shows the value of being effective in not just some of the key leadership behaviours but in all 12 of them, as it is essential to maintain to retain key employees.

10. Sharing the Pathway

In the dark is where seeds germinate, but sunlight is vital for crops to grow and yield. It is the same for employees. Keeping them in the dark won’t allow you to get the best out of them. Feeling wanted and connected is innate in people, because they want to know how their everyday tasks and contributions are helping in making the future better. They feel connected this way, and lack of this connection will discourage them to come to work with a genuine desire in helping the business flourish.

The General Manager who was replaced by the new one mentioned above utilised a very basic but very effective approach to involve the 240 people under him. He would conduct several “pathway” presentations across the country every quarter. The “pathway” comprises a three-year diagrammatic path towards a bright future, and other key goals such as revenue, profit, market share, return on net assets, and employee numbers. Down the path you will find diagrammatic representations of major strategies; new factories, new listings for current products, new product launches, new marketing drives, adjustments to the sales channel structure, major employee events, and recommended new vendors. In addition, the company results for the earlier quarter would be shared by the old General Manager.

At the end of one of his meetings, we would step out thinking about novel strategies to beat the competition! That’s how motivating it was. “Be number one but always act like you’re number two” was his call to action at the conclusion of every meeting.

It’s your decision how much information you want to share with your people, but it is important that you share.

11. People Development

“It’s better to train your people and have then eventually leave, than not train them and have them stay,” a wise man once said. Or, these wise words from Richard Branson, “train your people well enough so they can leave, treat them well enough so they don’t want to.”

Have you heard of Abraham Maslow’s 1954 theory of “Hierarchy of Needs?” If you have, you know that self-actualisation is at the topmost level, followed by esteem. Maslow was a psychologist who lived in the 1900s and who spent his life studying positive human characteristics and the lives of great individuals. The need to reach one’s full potential is self-actualisation. The need to feel a sense of accomplishment is esteem.

We don’t know these two needs are on the list of some of the people we come across on the streets. But we do know that they sit high for the kind of team member we wish to work for us. What it means is that investing in the growth of your model employees is important because these people want to learn and expand their skills and knowledge. They want to feel a sense of achievement and accomplishment. If you fail to provide them opportunities for growth, these people are likely to leave your team at some point.

You are responsible, as their leader, to promote the growth of your people. It is easy to ignore this, but don’t forget that they represent your competitive edge. There’s no reason for you not to invest in sustainability.

There are many ways to develop your people. Some of these include efficiency training, product training, performance feedback and coaching, leadership training and mentoring, and competency or skill training. Identify the development they need by identifying gaps in your business.

For employees in a managerial position, provide them with leadership training. Model employees depart due to a lack of relationship with their team leader or manager.

Succession planning for vital roles is the other critical element of people development. You can see this happening in a business where things are getting along smoothly, then someone in an important job suddenly leaves and everything goes chaotic because no one is ready to assume the vacated position. Leaders must think ahead; assign individuals for critical role succession and support their growth. If you can’t do this due to your business size or structure, put in effect a really effective hiring process.

This is probably not new to you: “Your people are your greatest assets.” It is true.

12. Moral Courage

For some people, “moral courage” may be a way of being or personality trait, instead of a behaviour. But it has been include as a key leadership behaviours because it is vital for leaders to display this in all things they do. This has been put last because it is the behaviour that strengthen all the other behaviours.

Leaders have to be strong and on occasion, assertive, and courage is needed for this. Leaders have to make difficult and on occasion, very unpopular decisions, and courage is needed for this. Leaders have to convey unambiguous expectations and make people responsible, and courage is needed for this. Leaders have to build the right culture and possess great emotional maturity, and courage is needed for this. Leaders have to establish a direction and push for change and action, and courage is needed for this. Do you get the picture now?

You fail as a leader when you don’t possess moral courage. Being morally courageous means you will do what you think is right while keeping your values, without thinking of the consequences for yourself. When you possess moral courage, you will look towards the future with a strong determination to succeed. When you have moral courage, you will be calm in the face of pressure, allowing you to look through the smoke, thus allowing you to keep your attention on your core business.

Trust in your ability and be strong.

To conclude this four part leadership article, don’t forget that effective leadership mainly involves having confidence and trusting yourself to be and act as a good leader. Just like many things in our life, it takes practice and dedication to be good at whatever you do. Don’t expect to succeed overnight. You will become a better leader by striving to possess the 12 leadership behaviours and having a way to regularly self-evaluate your leadership.

In today’s economic climate, running a business can be difficult. Competition has become fiercer and finding the right staff and managers is not as easy as it seems. Businesses also have to deal with compliance of various government and regulatory requirements. PJS Accountants can assist you in dealing with accounting compliance and strategic planning challenges. We have has over 30 years’ experience with local businesses in Capalaba, Cleveland and the Redlands. Our team will be at your disposal, ready for your call to assist you to stay in charge of all aspects of your business. Contact PJS Accountants for enquiries on how we can help you improve your business.

How to Generate More Gross Profit from your Business

/in , /by

A business will not be able to generate the amount of operating profit it needs if it fails to generate sufficient gross profit. Fixed expenses can be reduced, but this move has its limit. After that, the business’ ability to earn revenue will be impaired, thus weakening its ability to generate the needed amount of gross profit.

So, it appears that gross profit is highly important, at least in the P & L. And, it is also the determining factor in how much operating profit a business can earn.

We now live in a world where can gain access to an infinite amount of information, and for businesses, this means competition is fiercer than ever. Businesses are feeling the pressure to keep gross profit margin (%) at a certain level or increase it. There are several factors that impact gross profit and/or GP margin: labour issues and material issues.

1. Materials

Failure to pass on materials cost increases

This can be due to adverse changes in the freight or FX rate for imported materials or increases from local or global suppliers. Make sure you are passing on these increases to your customers. It’s not easy to do, but look for and apply price increase for those goods or services where you can. Or you can look for other suppliers with trading contracts that fit your business, including lower prices for materials of the same quality.

Product Mix

All businesses need to check their financial statements at least every month. Doing will allow you to detect the rise and fall of GP margin from one month to another. The fluctuations could be the result of the assortment of services or goods the business has sold for a particular month. A motor body builder, for instance, may have more job orders in the month that have a huge amount of third party parts like toolboxes and cranes. These jobs will tend to be of higher value but have lower GP margin. In addition, frequently the price of a higher value job will have to be set steeper to boost the probability of winning it.

Fix your lowest possible GP margin for the job that you believe will play a part in generating the total gross profit dollars needed for that particular month, and make sure not go lower than that set margin.

Pilfering of Materials

It may not be pleasant to find out that one of your employees is stealing stock, but the reality is it happens. Put into effect measures to counteract it such as setting up and implementing good systems, recruitment procedures, CCTV and culture development programs.

Insufficient materials inward system

Some businesses have experienced paying large sums of money to merchants for materials that suppliers fail to deliver. This is one of the fastest ways a business loses money, but the easiest to resolve. Assign an individual with a keen eye for detail to oversee the materials in, and implement an effective system for physically verifying materials that come in against the merchant’s delivery docket and invoice for each delivery.

Failing to allocate materials that are utilised

It occurs often in manufacturing companies where work orders are quoted that comprise a fixed amount of materials, and then additional materials are utilised for the job but not put in the job card. The most common reason for this is employee errors that need additional materials to fix the mistake, and they don’t notify somebody. Another reason is materials being overlooked in the initial cost estimate. It will benefit you to put in place effective systems for correct quoting, excellent hiring procedures to ensure only quality workers are hired, and great employee training and mentoring programs.

Significant wastage of materials

There are several reasons why this can occur, including materials that are obsolete, damaged or outdated and thus cannot be used or sold. Moreover, it can happen when material wastage is not taken into account adequately when costs are estimated. Make sure to implement effective purchasing and warehouse procedures to lessen the probability of having unsaleable or unusable materials, and evaluate your cutting and quoting systems.

Stocktake or valuation process is inaccurate

During the preparation of management reports or financial statements, the closing inventory balance is affected by the cost of sales (and gross profit). If you overstate the closing inventory balance, you’d end up with an overstated gross profit as well. And if you understate inventory, then you’d have an understated gross profit. A business with no process to oversee stock control and valuation on a regular basis cannot rely on the correctness of the management reports.

Incorrect work in progress or progress claims accounting

When preparing its management accounts at each month’s end, a project or manufacturing business has to take into account the effect of progress claims, work in progress (WIP) and customer deposits. The fundamental idea is to balance income and expenditures associated with each other in identical periods. Depending on the requirements, compute the WIP and eliminate it from the P&L pending the completion of the job or keep the WIP on the P&L and accrue the income associated with the job. Doing this task also involves factoring in the effect of deposits and progress claims to make sure income is inputted in the right period.

2. Labour

Computing labour costs in WIP

Computing WIP is complex. It is easy to compute the outlay of materials for WIP, but labour outlay is not as simple. The labour cost for WIP should comprise: payroll tax, work cover, superannuation, allowances, overtime and base salary.

Significant rework or warranty work

Labour outlay related to rework and warranty work can become an opportunity cost for business when it entangles labour that could be better utilised in other gross profit and revenue generating assignments. To minimise rework and some warranty jobs, effective systems, hiring, training and mentoring are needed. In addition, commence evaluating your warranty policies and have a more extensive inspection of what’s happening in quality, if you are seeing a significant degree of warranty work.

Mistakes in Bookkeeping

There are a few ways this could happen. First, a simple data entry typo into MYOB that bloat the cost of sales amounts, or more uncommon is paying a supplier invoice for materials twice. Make sure you hire a competent bookkeeper, and that your accounting documents are checked by your accountant each month.

Fraud

Like the discussion on theft, employers also hope that their staff are honest and follow the core values of the company. However, fraud can happen. A common type of fraud that directly hits gross profit is a “billing scheme.” This is comprised of three parts: setting up a fake entity to take payments, making a fake invoice or falsifying a genuine invoice to be presented for payment, and manipulating the payments process to allow the false invoice to be approved and paid. Ask the help of your accountant in putting in place effective systems to prevent fraud as it can really damage the business when it does happen.

Low pricing

This is commonly the biggest cause of low GP margin and happens due to several factors: incorrect cost estimate or low charge out due to the inaccuracy of the labour rate and materials costs. There is also discounting pricing to garner a significant amount of jobs, frequently by sales representatives in companies that has insignificant policy and tracking of pricing. Competition among businesses is becoming fiercer every day. If you are engaged in a battle for competitive pricing, you must realise it is only for a short term. If you are envisioning long term, you have to evaluate your business model, and fast.

Worker productivity

Productivity means the volume of output compared to the volume of input. Worker productivity can decline due to factory lay-out, low worker skill level and experience, and overall distractions like excessive socialising during work hours. This will raise the variable cost compared to revenue, thus lowering the GP. This can also be caused by the failure of keeping the work (sales) up to them because frequently a business can’t trim down its skilled variable labour element to equal work demand. It can also happen if excessive overtime is permitted. Strive to cut waste throughout the organisation by carrying out lean principles, creating training programs and instituting a culture of high productivity. One way that employers can monitor worker productivity monthly is revenue divided by the number of variable labour hours.

Minimal labour rate charge out

When computing for a quote, make sure that the hourly labour rate charge actually reflects the existing variable labour cost condition. Costs must be reviewed regularly to make sure salaries, work cover, superannuation, payroll tax, average overtime, all award allowances, all kinds of leave, non-productive time, and an allowance for write off, like over-runs and warranty, are accurate.

Summary

A lot of well established, historically and financially stable organisations are being caught unaware by how fast change is happening in the new global business environment. The media plays this out every day. If you don’t see it within your company, you have to establish a culture of change and innovation.

An important question to ask yourself as you move into the planning stage for 2016 is: What instant changes should I do to make sure my business is still sustainable and prospering in five years?

PJS Accountants offers expertise in helping improve your business and take it to the next level. We work to understand your business and its inner workings and how it can compete effectively in the present business environment. From this knowledge, we can come up with a custom plan to implement your business strategies and methodologies, boost profit and increase market shares. Visit one of our specialist advisors or contact PJS Accountants.

Guide to Setting Up a Business in Australia

/in , /by

Setting up a business in any part of the world is a major decision. You need to research and plan carefully before you launch your business. In Australia, you have to learn all statutory requirements before applying for a business registration. You have to factor in certain things before starting a new business.

Do Research

You can save time, money and stress by doing research. Seeking assistance from a financial planner or business advisor is always recommended. Conducting a feasibility study is also beneficial. Moreover, be honest when you ask yourself whether this is just a hobby or a genuine business. This will help you draw up your goals in terms of revenue, deductions and losses.

Choose the Right Business Structure

It is also essential to choose the business structure. Choose the one that best fit your needs. You save time and money if you choose right. Every structure has its own pros and cons that you will have to study and learn as it will help you determine the right licenses to run your business. There are four major types of structures:

  • Sole trader – a single person operating the business on their own
  • Partnership – a group of individuals or entities collectively operating a business, not as a company
  • Trust – an entity that oversees property or income on behalf of others
  • Company – a legal entity distinct from its shareowners

Tax Obligations

Whichever structure you pick, there are important things you need to accomplish. You must properly handle invoices, payments and other paperwork and obviously you have to fulfil your tax obligations. You must also learn the laws and obligations as an employer before hiring people.

Individuals are required to file a tax return annually. Your return states your income for the year and the amount of tax you paid. In Australian, individuals in the labour force are required to file a tax return if they fall in any of the following cases:

  • tax was taken out from any payment you received for the financial year;
  • you reside in Australia and your taxable income exceeded the tax-free limit; and
  • you are an expatriate with an income of over $1.

Tax returns are filed from July 1 to October 31 for the past income year. If a registered tax agent prepared and filed your tax return on your behalf, you can file later than October 31 but your tax agent has to make this arrangement before October 31.

BAS & GST

For Australian businesses, a BAS (Business Activity Statement) is used to report and a pay multiple tax obligations, including fringe benefits, PAYG (pay as you go) instalments, PAYG withholding and GST. A BAS is also used by individuals who are required to pay PAYG instalments every quarter.

To assist in reporting against identified obligations, a BAS is tailored to each individual or company. Businesses make a self-assessment of their indirect taxes. The tax return can be filed and the amount paid electronically by person or by mail. File on time so you don’t incur fines and interest.

For businesses, they can file their activity statements using a paper form or online. Filing online is faster, and most of those who file quarterly receive an additional couple weeks to file (terms and conditions are applicable). An activity statement is used to report and pay the GST (Goods and Services Tax) that a business has accumulated and apply to get GST credits. A good number of companies report and pay GST quarterly and have an annual or monthly option.

GST is a 10% tax levied on most goods and services. It is imposed mostly on transactions in the manufacturing process, but is returned to all businesses in the manufacturing chain except the final consumer. Typically, businesses will add a GST in the products and services, and reimburse the GST collected from the sale of their goods and services.

Businesses and other enterprises, and specifically those with a GST turnover of $75,000 or higher, must register for GST (the cap for non-profit organisations is $150,000 or higher). Taxi drivers are required to register whatever their turnover is.

For registered businesses, GST is applicable to all goods and services you sell in Australia except if they are input-taxed or GST-free. GST is included in the price if the goods or service is taxable. Some education courses, most basic foods, and some medical, health and care products and services are GST free. All GST-registered businesses must provide tax invoices to their customers, collect GST and remit it to the ATO with your BAS.

Does your business need tax advice or guidance? Contact PJS Accountants. We offer skills and knowledge in managing your tax affairs with a full range of compliance, corporate and individual tax services. We service large companies, SMEs, family businesses and individuals. The ever-changing tax laws and requirements could put your businesses at risk. Avoid this risk by engaging the services of experts.

How to Find the Right Accountant

/in , /by

Searching for the right accountant for your business is not as simple as it may seem. Here are some tips to help you find the right accountant:

1. Check their credentials

Don’t hesitate to do this. You can use LinkedIn to verify your accountant’s qualification or find out if they are members of professional associations like the Institute of Chartered Accountants.

By looking at your accountant’s qualifications, you learn of their expertise and you gain peace of mind knowing the right people are taking care of your business’ accounting needs. Doing this also gives you the chance to gauge whether they are the right fit for your business.

2. Make the right enquiries

Choose the accountant who will strive to know your business’ particular needs.

First, ask technical questions while evaluating the accountant, so you can assess their answers and accordingly to help you in determining whether they are suited for your business.

Second, find out their past experience working for related businesses. Accountants work with various businesses throughout a broad range of industries, but some accountants will be more knowledgeable and proficient with certain types of business and be more capable than others to help you.

The accountant you need may be one who is experienced in Self-Managed Super Funds, or one who is an expert in the Building and Construction industry. Making the right enquiries will take you a step closer towards finding the accountant that fits your business.

3. Proactive

Being proactive is an important ingredient in making your business successful, and it is the same case for your accountant.

Reliable accountants take a proactive approach to business, allowing them to always be three steps ahead. Aside from being a great asset for your business, a proactive accountant frees up your time to pay attention to other parts of your business expansion and ultimately provides you more time to reach your business targets.

Here’s how to know if your accountant is proactive:

First, ask technical questions and evaluate their answers. Second, check out client testimonials. This is a good way to gain insight on what their past and existing clients are saying about them.

4. Evaluate their rates

Find out upfront the rates for the services they will be providing to you. It is important to note that exorbitant fees don’t always mean quality. Some accountants charge a fixed rate. Surprise bills are the last thing you want or need. It is essential to set the right budget for your business, and feeling content with the accountant you’ve chosen can depend on the degree of transparency around rates for services provided.

Thus when searching for an accounting company, don’t forget to: find out their credentials and memberships; make the right enquiries; take a proactive approach; and ask about their rates so you won’t be surprised by hidden charges.

These tips can help in your search for the right accountant for your business and make your more prepared in picking the accountant that fits you and your business.

If you are looking for a partner to help you run your business, then you’d be satisfied working with PJS Accountants. We offer a full range of services, including tax planning and compliance, accounting and SMSF services, and bookkeeping. For enquiries, contact PJS Accountants.