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Cashflow Tips – Making Profit does not mean you have CASH! Know the difference!

Cashflow Tips – Making Profit does not mean you have CASH! Know the difference!

Making Profit does not mean you have CASH! Know the difference!

Many clients say there is a profit in their business, but wonder why they may not have cash in the bank. If you have cash sales, profit will usually correlate closely. That is you get paid immediately and bank it, and do not invoice waiting to be paid in 7,14, 30 days etc. And you pay your expenses with cash direct form the bank, the balance should be the cash Profit. But if you invoice clients for goods and services, the timing of when customers pay has an effect on the cash the business actually has. For example not everyone pays on time, but if they did you would have regular cash flow, and to start the first money coming in would only be delayed by the terms at the beginning eg 7 days, 30 days. Once those days of waiting have passed, the regular payments will mean regular flow of money to cover your expenses.

What happens if clients are late paying? Then the debtors asset account on your balance sheet will grow (that is where the invoice “waits” for payment) until the client pays.

As an example, in our previous post explaining Profit and Loss, see HERE we gave an example of Profit and Loss resulting in $15,000 profit.

Business - Profit & Loss

Consider now, that you were only paid half of the sales at the end of the period (which is more close to reality – eg most pay the next month or two…in 60 days)

Sales (invoices)                                                 $100,000

But only paid (actual cash)                                  $50,000

Which goes to bank (in assets)

Net Left                                                                $50,000

Which sits in debtors/receivables (in assets)

Note – PROFIT would be same in accounting terms,

but CASH Profit would be -$35,000 – see below

Business Cash Profit

That is – if you still had paid all your bills, you would have to find $35,000 to pay them – see next

Need help? Not sure? Call for FREE 30min advice / Strategy session today!

                Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – there’s 18 that the Tax Office see regularly – get them right!


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Business Tips – How not to give away Free Advice

 

Business Tips – How not to give away Free advice

How not to give away Free advice

Tony Featherstone is a specialist writer on small companies and entrepreneurs at Sydney Morning Herald and wrote an interesting article with ideas about how not to give away Free advice, on 8 May 2014.

A small business owner I know has a simple rule: The “clock” starts the minute a prospective client seeks his advice. There are no exploratory meetings or proposals provided to clients – just a flat fee for an introductory meeting. Every minute of this time is paid for, no matter how small the enquiry.

I’m sure many business owners wish they had a similar policy. Especially those who are “milked” by prospective clients who seek their advice under the pretence of possible work.

It usually goes like this: The pretend client calls asking for your views on an issue. After getting your ideas and contacts, he or she suggests you submit a proposal detailing a path of action. You spend hours or days on the proposal and the pretend client walks away with thousands of dollars of free ideas, intellectual property and advice. You have been milked, good and proper.

Knowing when you are being used – and how to avoid it – is critical in small business. If time is your most valuable asset, you cannot afford to give away ideas and advice for free.

Yes, it’s a fine line: you have to give some ideas to excite the client and get the work, but not so many that you unwittingly become free labour. I’ve learned the hard way that it pays to be more judicious in how you give time to potential clients – and to better vet those seeking your advice.

Here are seven signs your business is be being milked for free work:

1. The “size” card

Entrepreneurs’ number-one weapon for getting free advice. They tell you about their multi-million-dollar revenue and previous successes to excite you about their potential as a client. Then they do nothing with your proposal – other than steal the ideas. Beware any clients who try to sell the size of their business to you: Real clients know their enterprise speaks for itself.

2. The “I’d value your input” phone call 

Here, pretend clients play for your ego by commenting on a previous piece of work, or suggesting your ideas and opinions would add greatly to their project. Some even have the gall to say “I wanted to reach out to you” to get your views, as though they are doing you a favour.

3. The lunch

Remember that Seinfeld episode where one of Jerry’s antagonists argues that “soup is not a meal”? It’s a bit like that when a pretend client invites you to lunch, expecting all your best ideas and help in return. You wonder why you gave away two hours of free work for a $50 lunch, and now feel obligated to provide further help. Better to have a quick coffee with unknown prospective clients, or keep it to an initial phone call.

4. So-and-so recommended I call you

Another classic milking tactic. They drop a big name, flatter your ego and try to get as much free advice as they can. Half the time, the person who “recommended” you mentioned your name in passing, but the pretend client happily leverages off somebody else’s network and reputation to get time with you. My advice: Ask the client how he or she knows the person who recommended you.

5. Sounds great, can you put it in a proposal?

How many small business owners have wasted tens of thousands of dollars writing proposals that go nowhere? The potential client wants you to supply a plan, but positions the request as a “proposal”, knowing that’s much harder to charge for. Ask the client for a proposal specification before supplying your ideas, so that he or she does some work as well. Never submit an open-ended proposal where you supply a range of ideas about what could be done, and far too much unpaid work. Keep it short and specific.

6. Can I mention I spoke to you?

Another common trick of pretend clients. They email or cold call for advice, ask if you know anybody else who might help, and if they can mention they spoke to you. Sharing your network with trusted contacts, or helping genuine people, is worthy; giving away your network to pretend clients who are milking your business – and don’t have contacts of their own – is dumb. Keep your contacts close to your chest until you feel more comfortable with the prospective client.

7. Who needs details?

The classic give-away of pretend clients. They go blank when you ask them what sort of budget will be applied to the project. They have no process or timeframe for choosing the proposal. They take forever to reply to your proposal, claiming they have been too “busy”. They hint at money being available, but never want to talk about dollars when the free ideas are coming thick and fast from you.

SOURCE 8 May 2014.

Get a FREE 10 min strategy session, and FREE ongoing email or phone support for clients – No-one offers as much! Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia.


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Business Finance 101 – Managing the Cash Flow

 

Business Finance 101 – Managing the cash flow

Managing the cash flow

If and when you manage to make a profit in your business, part of good Business Finance 101 means now you have to follow it up with good cash flow management. This requires a good understanding and keeping a close eye on what drives the cash flow – both in AND out!

The key components of good cash flow management are:

  • Profitable income and increasing;
  • Continual management and minimisation of costs and business overheads;
  • Pricing for profit – if you’re able to increase prices, DO IT!;
  • Timely collection from customers – don’t be a bank for them;
  • Stock management – enough to sell but not too much to waste working capital;
  • Good job management – finishing timely and with the best quality possible;
  • Utilising all credit terms from suppliers and increasing where possible.

The very best way to handle cash flow management is to have a ‘Cash Flow Projection’. This is a spread-sheet that plots out what your expected income will be (taking into consideration the time customers are likely to take to pay) and what the expected outgoings will be. As well as income it includes any other funds coming into the business, such as loans, tax refunds etc. Outgoings will include items such as loan repayments, tax, dividends etc. These are just as important to take into account as their timing can have a big impact on cash flow.

Need help? Not sure? Call for FREE 30min advice / strategy session today! 0407 361 596 Aust

***BEFORE you BUY Ask us for a competitive software price BELOW retail – No obligation!

You also get FREE 30 min to assist in setting up your company in the software, and FREE ongoing email or phone support – No-one offers as much! Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right! Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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MYOB – Need Payroll Tax Tables for 2014-2015

MYOB – Need Payroll Tax Tables for 2014-2015

MYOB – Need Payroll Tax Tables for 2014-2015

You need the new payroll Tax Tables for 2014-2015 because either MYOB says you have out of date tax tables, or you know they are. (To find what you have, click Set Up then General Payroll Information. In about the middle is the table date at the start of that tax year). The problem is tax tables become out of date each year as tax rates and/or Medicare and HECS thresholds change. MYOB only supply new tax tables via full software annual subscription. The latest tax tables are not separately available. Users must upgrade to a new version or take out Cover under their support program to receive the latest ‘pay2myob.bin’ file (MYOB) to keep payroll compliant. (If you want to upgrade, email us – info@accountkeepingplus.com.au).

The special MYOB tax file has been specially formatted disallowing any manual edit, as the tax rates change from year to year. Additionally, each version is formatted specially, so you can’t use a tax file formatted for MYOB Version 19 with say Version 16.

With the Mac version (AccountEdge®) the tax table file is called MYOB Tax Tables or in v9 to 9.6 has a “.tax” extension. Everything else though is the same and all the comments here apply equally to the Mac version. Note third-party tax tables cannot be used in MYOB 2011 onwards – you MUST have subscription or upgrade. Contact to discuss your needs, no obligation 0407 361 596.

There is a Solution up to v19.9 – Third party updated tax tables available for $68.20 (see further for details) provide a substitute, have been tested and work with many prior versions. They are for those who want to continue to use their current versions of MYOB® without the need to upgrade. Note that there is nothing in your license agreement that prevents you using 3rd party tax tables.

Installation is simple. The tables are supplied with easy to follow instructions and instantly downloaded after payment in most instances, or will be emailed to you. You also receive a PDF copy of the applicable Aust Tax Office Weekly Tax Table for you to check the accuracy of the calculations. After-sales email support is available for any installation or setup issues you may encounter.

Note – NO changes are made to the software. The only changes made are to the tax rates in your company data file that the software calls upon to calculate PAYG Withholding in a pay, when processing payroll. The changes made are not permanent and can be reversed by reloading the tax tables from your current tax table file, simply moving a file in the software folder

These third-party tables are available, which Account Keeping Plus have tested in the software and against the ATO tables and work perfectly for us and several of our clients. To get more details and purchase for your MYOB – find out HERE.

Need help? Not sure? Call for FREE 30min advice / Strategy session today!

Call 0407 361 596 Aust and also get Free “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right! Email info@accountkeepingplus.com.au or call 0407 361 596 Australia