Business Values

What are your business’s values? Do you know? Have you articulated them to anyone?

Any business book you read these days will ask if you know what your business’s core values are. It’s a bit of a step on from mission or vision statements, although these things are still talked about.

A business’s core values are defined as the philosophies or principles that guide its internal conduct as well as its relationship with its customers and other stakeholders. They are the guiding principles that help to define how the business and its employees will behave.

I find all this airy fairy talk a bit hard to follow. Much of what people say are core values are just basic must haves to me. For example, to say we act with honesty and integrity. Of course we do; that’s to be expected. Read More »



An Insider’s Guide to Awesome Administrators

Good administrators, the ones who get things done before you have to ask, the ones who are meticulous and detailed yet friendly and fun, are as rare as hens’ teeth.  But if you find one… your business will skyrocket, as they are a very crucial part.

Not only are they the first face clients see when they come in the door, they are also behind the smooth running of any office environment.

As the practice manager of our office, I lead our administration team and I love my job!  We make the most of having a very strong admin team in our office, so our accountants can get on with what they do best – strategic planning, budgets and cash flow forecasts, and, of course, accounts! We take care making sure our office is clean and tidy. We enjoying making cups of tea and coffee for our clients and having a chat as they come in the door. We make sure our annual work is in so our accountants don’t need to worry about getting the work in but can focus on getting high quality work out the door to our clients. And we take pride in the relationships we get to build with our clients. Read More »



Why Billing is the New Black

Here’s a fun factoid for you… billing your customers for the work you’ve done gets you paid!  AND, when you get paid, you can pay your bills!  And eat!

One of the most important things about running an SME is to get your invoices out- as quickly after the job is done as possible. Simply put, people won’t pay you if you don’t bill them. Invoice fast and often.

I know, I’m hearing you say that it’s the last thing you feel like doing after spending all your time on the job; you’re just too busy and it becomes a chore for the end of the month or a wet day.  But that sort of business practice is what gets you a gigantic debtors list and believe me, chasing that up is a far worse chore! Read More »



Is your business really sustainable?

Is your business sustainable? And I don’t mean are you eco-friendly and “green”; I mean, would your business carry on if you weren’t there, working in it day after day?

So, you’re the owner of a business.  You might have started it from nothing or you could have bought it from someone else.  But often we are really self-employed, maybe with a few staff to help us out. The customers are our customers, they only want to see us and they believe we do all their work ourselves. Our staff rely on us to feed them tasks you end up doing nearly everything yourself, picking up all the bits that the staff didn’t get to. Or maybe you have to correct their work and, rather than coaching them to develop their skills, you just do it yourself because it’s quicker and easier.  You think you’re the only one that can get it right. This is the proverbial working IN the business rather than ON it. Read More »



Why systems and processes save lives

Do you feel you are juggling all the parts of the business you own all at the same time?  You are trying to handle it all and be everything to everybody.  You neglect to take time out for yourself; there is little or no time for family and friends; and there is little or no time for a holiday

Think about your role in the business objectively and ask, “How can I improve my business without working harder?”  How could you do more but in less time?  Ask yourself, “Without me, what would happen to this business?”  What could you do with that business so you have time for family and friends and that trip you have always dreamed about?

Let’s take another moment to consider why you went into this business in the first place.  Probably to give you the ability to earn more income, to take time off when you would like, or because you did not want to work for someone else.  Are you actually achieving the goals that you set out to achieve when you went into this business? Have you considered your role in the business as a job?

Starting with the end in mind and working backwards will net you some good answers to work with.  Imagine what the end goal really looks like, then work backwards to identify the steps it took to get there.  This is where planning for the business comes to the forefront.

Breaking the cycle we are currently operating in through the use of systematisation is key.  Systems that would allow for someone to undertake your role if you were not there.

Read More »



Succession planning for dummies

Why is advance succession planning so important?

An ageing population combined with the dynamic of younger generations who seem less motivated to acquire a business tests long held assumptions that our businesses will be our future superannuation.

SMEs need to focus on extracting the capital value of their business and with an increasing number of those businesses expected to come onto the market in the next few years we can expect the polarisation between the good and the bad to grow.

Good businesses will continue to sell and command a high price, whereas poor performing businesses will at best come under greater price pressure and at worst be unsaleable.

The ideal timetable for an effective succession plan is three to five years from initial plan through to final succession. In a perfect world we’d recommend a minimum of two years to prepare and in a sense groom the business for sale.

Read More »



The Profit & Loss Equation

Picture1

We all know that for any business to make an income it has to make Sales.

Many business owners closely monitor the sales, compare them to previous months, previous years and, if they can get hold of the information, other businesses.

But this isn’t the only thing to monitor. You have to make sure that out of those sales proceeds you can pay all of the costs of the business and have some left over for the business to make a profit.

And as the above picture shows the amount left over can end up being only a small percentage of the sale value.

Firstly you deduct Direct costs, the costs that if you didn’t sell that product or service you wouldn’t have to pay. This leaves your Gross profit. This is a much better value to monitor closely.

And you need to do so product by product, or service by service.

You may have an overall Gross Profit but it’s hiding the fact that you sell product A at a good margin, but product B at a loss. Reducing your overall gross profit. And it may even be that Product B is a higher dollar amount so you concentrate on pushing these sales, but there is very little point in selling something for less than it cost you to get to the point of sale.

The only time a business can justify this if it’s doing it intentionally as a loss leader. A marketing ploy to get customers to come in and buy other things as well.

Then, the total Gross Profit must be enough to cover all your overheads. The costs that would continue even if you didn’t sell those particular products or services e.g. your occupation costs.

Anything left after that is your profit.

You can also turn this around the other way, from the profit you want to make, or even break-even point, you can add your overheads and margins and calculate how much sales you need to make to achieve this.

 



Xero Tips and Tricks

This month we are talking about getting the most out of your Xero.

In Peta’s last blog she went over a few of the common areas people make mistakes in Xero. This time I want to give you some tips so you can use Xero as efficiently as possible.

Here at BW we all use Xero on a daily basis so across the whole team we have all picked up little tips and tricks here and there to make using Xero that much easier.

Here is a list of some of our top tips in Xero: Read More »



How to get the best from your Xero

Last month I talked about using your management accounts to tell the story of what’s happening in your business. And how important it is that those management accounts are timely and accurate.

And it’s that accuracy that’s also vital to help us in preparing your year-end Financial Statements. The more we have to change in your accounts the more time it takes us and the bigger the cost to you.

More and more of our clients process their own accounts. And systems like Xero do make this seem super easy. They make out it’s quick, simple and what’s more – fun. But at our end, we’re finding it’s a mixed bag as to the accuracy of the accounts we are given. And banks are often saying the same thing. Read More »



Interpreting your accounts – Part 2

In my last blog I talked about the benefit of understanding your accounts and having them prepared regularly.

Now I am going to explain this in more detail.

Following are two of the most common misunderstandings of business. Reviewing your management accounts regularly can help your business by understanding these two areas.

1. Profit is not Cash

It’s not uncommon for us to be going over annual accounts with a client, telling them the profit and they say “I don’t believe we made that profit – if we did, where is it? It’s certainly not in the bank.” Read More »



Understanding the story your accounts are telling you

Your Accounts tell the story of what’s happening in your business. They are the financial results of events that occurred and decisions you made. By knowing what that story is saying you can react to events more quickly and make better decisions.

The Profit and Loss Statement or Statement of Financial Performance is a summary of trading for a period of time, usually a year. It shows the sales that you made, and deducts off them the cost of those sales and your overheads to work out if you made a surplus from those sales.

The sales in your accounts are recognised at the time the sale is made; when you invoice it – not when you’ve got the cash in the bank for them. The costs offset against those sales are also recognised when they are incurred, not when you pay for them. This is the essence of accrual accounting.

The Balance Sheet or Statement of Financial Position is like taking a financial photograph on a certain day. It lists what you own – your assets and what you owe – your liabilities. The difference is the equity in the business.

We have an e-book on our website that explains in more detail what each part of the accounts mean.

The benefit of regular accurate management accounts

But really, how useful are the end of year accounts we prepare for you? Obviously they have to be done to correctly calculate the amount of tax you owe, and comply with the Companies Act, but in terms of helping you make useful business decisions they are often just too late. They are a summary of financial events up to the last balance date. If another six months have passed you can’t exactly react quickly to address any problems.

This is why having regular accurate management accounts prepared is vital for any business.

Very often a business owner gets the books done, just because they need to be done for the GST return to be filed. But they should be so much more than that. By reviewing those accounts and watching a few Key Performance Indicators you can understand what’s going on now and make decisions about what to do about it now.

And better yet – knowing how the business is going on a regular basis helps you plan for the future.

What story are your accounts telling you about your business? Do you review your accounts to find out? Do you even have regular accurate accounts prepared? We can help you with all of this. It’s what we love doing.



Health and Safety Reform – Are you prepared for the changes?

Following on from the blog I wrote in the middle of last year, the Health and Safety Reform bill has just passed through Parliament and will come into effect on 4 April 2016.

You will have all heard the outcry from opposition politicians about high risk industries such as worm farms and mini golf while sheep and dairy farming are considered low risk. This has distracted attention a bit from the real purpose and impact of the new laws and how they will affect you.

Basically the implementation of the new regime will see more onus placed on people at every level of responsibility (in particular senior managers and company directors) who are required to understand and proactively manage health and safety in their workplace. There are now stronger penalties and wider enforcement tools for non-compliance.

I have gone through the Act and various articles including this summary from NZ Law Society on the implications and have tried to simplify them into a summary of the areas that everyone in business will need to be aware of.

This is not the complete Act so for further information about the legislation please go to Worksafe.


Who does the law apply to?

The new act widens the definitions of workplace and now applies to everyone who meets the new definition of a ‘Person Conducting a Business or Undertaking’ or a “PCBU”

Read More »



Marketing tools and technology

As I said in an earlier blog every business needs to do some form of marketing, no matter how small you are.

Once you’ve fully understood who you are, what your product or service is and who your target market is, you have to find a way to talk to them. My blogs are an example of this.

In this day and age this involves tools and technology. The array of these is overwhelming – just try googling it.

Plan

So, start with a plan. What are you going to say, who to and what media will you use to say it?

We used a consultant to help us come up with some structure around what we are saying (for example, this month is about marketing). Having a structure makes it a lot easier to make it happen and now I don’t spend hours sitting around trying to dream up what to say. Read More »



Running a great business

I spent a few days last month getting together with a group of colleagues who meet twice a year to work “on” our business’s. We’ve been getting together for 5 years now so we know each other very well. As one of them said “Its a bit like getting undressed together!”

Many Chartered Accountants call themselves “Accountants and business advisors”. To be honest, many of them have never really run a business themselves, or they have run a pretty sloppy one so I’m not really sure quite how they can advise their clients on how to.

I’ve been an owner of BW for over 20 years, and have many clients running small and medium businesses so I’ve gathered a bit of knowledge over the years.

Here are a few simple tips to running your business from me:
Read More »



Marketing in a small business

We, as accountants, used to be in the fortunate situation where we were a necessary evil for all businesses. We had an annual relationship with our clients where we did the scary stuff they didn’t want to do themselves. Times have changed, and the way we do business has changed. So I’ve had to learn a lot about marketing in recent years. What it is, and what it isn’t. It’s no longer just a letter head, a business card and an ad in the yellow pages.  We’ve done some courses and even employed a part time marketer for a while to get us on the right track.  It seems it’s now a great website, social media, public relations and many other things that you have to keep up with on an ongoing basis.

But as one of the courses we did said “there’s no point shouting out to the whole stadium when you’re only wanting to speak to a few of the people there.” So you have to know who your target client is and what you want to do for them. To know that you have to really understand who you are, what your brand is. And of course, what your product is.

I found the following great tips in the Dummies guide to marketing that sums it up:

Making Marketing Work in Your Small Business

You don’t need to be a rocket scientist to be a good marketer. But neither is there a silver bullet or one-size-fits-all solution. Every small business is different — the marketing plan and tactics for a mortgage broker are entirely different from those of a computer reseller. However, the process of building a plan, sticking to it and applying the time and resources it needs is the common secret to success in marketing. Read More »



Technology in Business

We use technology to help our businesses in many different ways, including:

  • Communications
  • Marketing and customer engagement
  • HR and payroll
  • Accounts
  • Record keeping

The most useful purpose though is to help create efficiencies – to streamline procedures and increase productivity. To help make sure your product or service is delivered in the most consistent, cost effective and efficient way.

I often say to clients that you need to get a computerised system that helps your business do what you do. For example, with us, it’s a work flow and a time and cost system, for a retailer it’s a stock and point of sale system.

That system needs to get to the point of you being able to produce an invoice. Then we tack on an accounting system. Gone are the days when the accounting system was the main focus, which then had a stock or time and cost system tacked on. It’s completely reversed. Read More »



Budgets and Forecasts

Following on from my last blog which was on planning this one talks about budgets and forecasting.

So, you have a great strategic plan, you have goals and targets, but can you turn this into a viable business proposition? Will it make a profit? And even if it will, when will the money hit the bank?

We know that not everyone “gets” accounts! But they’re the way of recording the financial impact of what’s going on in the business; they measure the results of what actually happens.

Putting the two together, a budget is the financial version of a plan. It’s a prediction of what you think the numbers will be as a result of how you expect the business to operate. For example: if you’re going to introduce a new line of sales, what impact do you think it will have? What income will it bring in? What will it cost you to bring it to market? Will you have to employ more people to bring it to market? Will you need to pay more overheads? Read More »



Best Practice for Accounts Receivable

Have you resolved this year to improve the cash flow in your business? In the resources section of our website there’s a paper on dealing with cash flow problems.

One of the main areas where cash can be tied up in your business is in your Debtor’s Ledger.

Accounts Receivable or Debtors are the amounts that you have invoiced your customers but they haven’t paid yet. Often this is one of the largest assets in your business and yet, your biggest need for working capital. After all you have to pay wages every week or two. You have your own bills to pay so waiting for your customers to pay you can put severe pressure on a business.

Best Practice for debtor management includes:

Get the preliminaries right before making the sale

  • Set your price
    Establish the cost of your product/service up front so there are no surprises or excuses. Give quotes & estimates where needed.
  • Establish your Terms of Trade
    Terms of trade help establish your legal relationship with your customer. Before selling to them you should provide them with a copy of your terms of trade. A lawyer can help you establish appropriate terms of trade for your business, or we can provide some sample terms, or review yours.
  • Credit Assessment
    Only sell to people who can afford your product/service and intend to pay you. Where you can, check your customer’s credit rating and payment history with other creditors. Read More »


What happens if the IRD come knocking on your door?

It came to our attention recently that teams of IRD staff have arrived unannounced at the business premises of some mechanics and motor repairers in the Porirua/ Plimmerton region.

These teams are made up of members of the investigation team (who’s role includes identifying gaps in cash collection and reporting), and the community compliance team (who’s focus is more on assisting businesses with understanding their obligations).

This raises a couple of issues:

  1. Is this legitimate – are they allowed to do this?
  2. What are your rights, what can you do about it?
  3. What are their powers?

Yes, they can do this. They do have to carry ID and warrants. But if they arrive on your doorstep, other than ensuring they are wearing the appropriate ID, all you can do is co-operate, and call your accountant to ensure you understand what they are trying to achieve.

Having robust, transparent systems and good records will ensure they leave quickly.

The IRD have stated that they want to visit small businesses more.  These teams will continue to “target” specific industries and identify areas that they think need addressing. They will collate their findings and issue a report. We will pass on any useful information we get from it.



Could your business survive a month without you?

Could you take a month off from your business, as I did recently, and expect everything to be up to date when you get back? So many business owners tell me that they can’t take time off from the business without it, in the worst case, falling apart, and in the best case them coming back to a massive pile of things to catch up on.

How healthy is that, for the owner or the business?

There’s also the business risk. What happens if you get hit by the proverbial bus? How many peoples’ livelihoods are in jeopardy because the business couldn’t carry on without you?

Nobody in a business should be able to hold the whole place to ransom like this.

Some of the steps required to make the business sustainable include:

  • Good processes and systems
  • Having a great team that all know what their roles are and how to do them, including the owner
  • Team members trained to cover each others tasks
  • A good data base system or customer relation system, so all the team have access to information about your customers and can help them out
  • Others having access to your emails, to keep on top of them

Then when you go away, even though you will be missed, the place won’t fall apart without you.

I came back from a month away to a clear desk and an inbox of about 12 emails. My team did a great job keeping everything up to date