Increase your business cashflow with direct debits
One of the most difficult things to deal with when you have a growing business is managing cashflow. It can be very frustrating to watch your business achieve continual profit growth and yet the only reward you receive is an increase in your debtors not an increase in your bank balance.
When I left the corporate world, where you would receive a regular paycheque every pay period, this was the hardest thing to adjust too. It is even more difficult when you have a large payroll and have a commitment to pay regular wages.
The majority of clients appreciate this and as long as you make your payment terms clear in your service agreement, they will pay on or around the due date. However you only need a couple of larger clients to go into 60 or 90 days overdue to place some real pressure on your own situation.
If your business has regular clients with repeat business, a way to alleviate this problem is by getting them to sign a direct debit authority which allow you to debit their bank account or credit card each month for the amount outstanding.
We manage this through a secure third party arrangement so that the client can contact the third party at any time to cancel the arrangement if they choose to terminate their relationship with you for any reason.
The fees are very reasonable - only 99c per transaction, and we have had no problems with new clients agreeing to the arrangement. We make sure we notify the client the day before we process the direct debit so that they can make sure there is cleard funds in the account.
This has been a fantastic way for us to get some regularity in our cashflow and allows us to concentrate on servicing our clients rather than chasing debtors.
When to close your end of month accounts
One of the issues we regularly encounter with business owners is the issue of when to close off the accounts at the end of a period. All business owners and managers are keen to see their monthly management reports as soon as they can after the end of the month to get an idea of how the company is performing and whether it is reaching it’s targets. Of course, the sooner the bookkeeper can finalise those reports, the more valuable the information is so that if there is any alarming information you can quickly do something about it.
This becomes an issue when you receive suppliers invoices relating to the previous month after you have printed off the management reports for that month. There is a happy medium here which must be met. If you close too early, you may be sacrificing accuracy for timeliness and if you close too late, your accounts will be more accurate however, historical information loses its value with time.
Some bookkeepers do not appreciate the importance of a “hard close” at the end of each month. They print out the monthly reports to give to the manager and then if any prior month invoices arrive late, they go and enter those in the previous month without re-running the management reports. This come come as a bit of a shock to the manager when he looks at his year to date profit and loss and finds that the result is different to what he had anticipated. This can cause even bigger problems if the BAS has been lodged on the previous accounts and then they are altered resulting in a BAS that does not correspond to your accounts.
We find a good benchmark for when to close off your monthly accounts is 7 days after the end of the month. Most invoices should be received by then and if they haven’t you can make an accrual to include those costs.
Outgrowing MYOB or Quickbooks
MYOB and Quickbooks have made incredible development over the last couple of years. This has enabled what was previously full time bookkeeping and accounting roles to be performed in a couple of days per week. This is great for most small and medium size businesses but let’s face it, once you reach a certain size there are some limitations which may require you to step up to the next level of software.
MYOB and Quickbooks are off-the-shelf packages which try to be all things to all businesses. On the whole they do a pretty good job of it and due to theit popularity, there is a whole industry of IT developers that have written add-on products to integrate with your file to provide more comprehensive features where the off-the-shelf software has shortcomings. These add-on products are authorised to integrate with the original files and address such areas as:
- Cashflow forecasting
- Detailed budgets by job
- More comprehensive inventory control (ie. serial number scanning)
- Mobility solutions to enable you to produce invoices remotely direct from your software
- Setup excel reports where the cells read directly from your data file
- Consolidation tools that read multiple company files and perform automatic integration
If you think your company has outgrown MYOB or Quickbooks you should first have a good look at all of the add-on products available. The next step up from these off-the-shelf packages often requires and initial investement of over $10,000 and substantial annual fees wheras most of the add-on packages available are usually less than $1,000.
Technology to help you break free from your desk!
I recently purchased a smart-phone. After hearing stories from friends and acquaintances with blackberries of how they wake up on a Saturday morning and reach over for their phone to check their emails before they get out of bed, I was trying to get along without one.
Like most business owners, I tend to live and breathe my business. I rely heavily on email communication, whether it’s an enquiry about bookkeeping services from a prospective client through our website or an MYOB or Quickbooks query from one of our bookkeepers. I always try to respond to emails within a couple of hours. With new client enquiries, if you leave it too long, they have often found one of our competitors in the meantime. With staff support, if you don’t sort out their issue that day, it may have to wait till the following week to resolve.
It was therefore with some reluctance that I bought a phone with live synchronisation to my email. I had visions of me needing to check my emails every 10 minutes of the day, every day including weekends. Fortunately, this has not been the case.
My new phone has actually given me some freedom from my desk. I previously had to quickly check my emails in the morning before I went out to any meetings. Then when I went out, I’d have to rush back to the office for another email update. Now I can travel straight to a meeting in the morning and check my emails on the way. If I have a late meeting, I don’t have to rush back to the office as I can check my emails when the meeting ends.
I’ve also found that you don’t need to check your phone every 10 minutes as you get alerts when a new email arrives, so you just check it when you get new mail.
If you’re a business owner and you want some freedom from your desk, I’d highly recommend getting yourself a phone that synchs with your email.
7 Ways a Professional Bookkeeper Will Save you $$$ (Part 2)
Here’s a few more specific ways a professional bookkeeper will save you money.
4.
If you employ a bookkeeper directly, you normally have to guarantee them a certain amount of work each week. There is no incentive for them to implement efficiencies to reduce the amount of hours required to perform the bookkeeping functions for your company as it will mean they will be robbing themselves of a job.
If a professional bookkeeper reduces the role from one to two days per week, they can allocate that staff member to another client so the client is saving money and the bookkeeper will make up those hours at another client.
5. Flexibility and Backup
Guess who has to pay the wages and the bills while everyone else is on Christmas Holidays? That’s right- it’s the bookkeeper. If you employ a bookkeeper directly, there’s never a good time for them to take a holiday as there are certain duties that may be confidential and you may not wish to share with your other staff.
A professional bookkeeping firm will ensure there is backup for that role and that there is a second person with knowledge of those crucial areas so that there is no gap over Christmas Holidays or when the bookkeeper wants a holiday.
6. Save Payroll Tax and other Employment Costs
When you compare the cost of employing a bookkeeper directly as opposed to outsourcing to a professional bookkeeper, make sure you include all the additional on-costs associated with employment when making your comparison.
On-costs include superannuation, annual leave, sick leave, public holidays, workers compensation insurance, payroll tax and recruitment. For a detailed example, see our Hidden Costs of Employment example. In the example you’ll see how these on-costs add up to an additional 42% of the base salary.
7. Stricter
The
If you use a professional bookkeeping company that is properly qualified, your
I hope this gives you some ideas of how using a professional bookkeeper can save your business money. If you have any queries please contact us though www.booksonsite.com.au
Tim Johnston
Internet Search Engine Marketing
Traditionally, the marketing manager and the accountant have never “got on”. This is because an accountant needs to see concrete evidence that money spent on marketing has resulted in a quantifiable increase in sales that can be measured.
If I spend $10,000 on putting a sign up on the side of a building, I want to see an increase in sales by “x” number of units to make sure I at least cover the cost of the advertisement.
Marketers will talk about qualitative benefits of marketing such as building brand awareness, however for most small and medium business owners, you need to see an immediate return on your investment.
This is why I love internet marketing. There are 2 main forms of internet search engine marketing, Pay Per Click (PPC) and Search Engine Optimisation (SEO). Both of these methods provide you with detailed reports allowing you to calculate exactly how much you have spent to get customers to your site and how many of these you convert to sales. They also allow you to target your ads geographically by making those ads only appear to people based in specified geographical areas.
Pay Per Click
These are the ads you see under the “sponsored search” area of your search results. The great thing about PPC marketing is that as long as you have a website, you can start seeing results immediately. The catch is that you have to pay every time someone clicks on your ad. The cost depends on the popularity of the term you want to be found for and the higher you bid, the higher you appear in the results.
Remember you can “cap” your daily budget so you can give it a try for a month and see if the increased sales cover the cost of your PPC account.
Search Engine Marketing
SEO is the “Holy Grail” of internet marketing. It involves a number of different techniques such as backlinks and site content that establish your website as a credible resource for people searching for different keywords within the different search engines.
The formula used by search engines such as Google and Yahoo to rank different websites are highly guarded trade secrets which differentiate them from each other. By definition, this makes it impossible for anyone to “promise” they can get you a front page “natural” ranking for a specific website.
The beauty of it is, that once you achieve a decent ranking, it doesn’t cost you anything to drive people to your site. Achieving that ranking does cost and does take time. Don’t even try to do it yourself, just get an SEO expert who knows what they’re doing.
Robert Mirabito from Click2It Digital Marketing and and has achieved great results for me and some of my clients and has been good enough to offer his services to moderate the Internet Marketing section of our forum.
I personally believe that companies have been slow to pick up on the effectiveness of internet marketing because (without sounding ageist) managers from the “baby boomer” generation are probably not quite as internet savvy and don’t appreciate it’s potential. As more management positions are taken over by Gen x’ers and y’s, I believe it will become harder and harder to get your website found naturally.
So, if you’re not convinced, have a dabble with SEO and if you see results, start investing in SEO. It’s worth the investment!
7 Ways a Professional Bookkeeper will save you $$$ (Part 1)
Some small and medium business (SME) owners try to do their own accounts or they may employee a bookkeeper directly. This can be fine if you are lucky enough to recruit a good bookkeeper directly, however unless you have an accounting background and a thorough understanding of the accounting software involved, it can be difficult to know what questions to ask at the interview process.
Even if you find someone who looks good on paper, unless you know what reports to ask for it can take months to pick up if they are performing or not. Over 50% of clients that come to us have had a bad experience trying to employ a bookkeeper directly. Usually within the first week we uncover things such as:
- Double payment of creditors invoices
- Under-billing of revenue
- Incorrect GST coding usually resulting in under-claiming GST Credits
- Miscalculation of superannuation and payroll tax of employees and contractors
These mistakes can be very costly and sometimes terminal for some businesses.
Here’s 7 ways a professional onsite bookkeeper will save you money:
1. Help you work “on your business, not in your business!”
I know, it’s an old chestnut from that fantastic book E-Myth and which forms the cornerstone to most business coaching strategies. It is the key to being able to grow any business and applies to bookkeeping as with any other part of your business.
If you employ a bookkeeper, you still have to monitor the quality of their work, when they work, when they take holidays, etc. By outsourcing all of your accounting and bookkeeping functions to a professional bookkeeper, all of your accounts duties become their responsibility and you can focus on growing your business, with the confidence that you are receiving accurate reports on your performance and meeting all statutory obligations.
2. An onsite bookkeeper gets to know your business
There are some bookkeeping services that offer to take care of your accounts from their office which could be based anywhere in Australia or as far away as India. This involves transferring source documents either electronically or physically back and forth from your office to theirs. While this can be fine for micro businesses, it can prove difficult once your business begins to grow.
Before you can provide meaningful management reports, you need to know how a business operates and what are it’s key performance indicators. The only way to achieve this effectively is to get to know the company and the people who work within the company. This can only be done by performing the bookkeeping functions at the clients premises.
3. There’s “bookkeepers” and then there’s “bookkeepers!”
There can be a huge difference in skill level of people that call themselves bookkeepers. Just as an apprentice “chippie” and his boss with 30 years construction experience may both call themselves “builders,” people representing themselves as bookkeepers can range from data entry clerks through to qualified management accountants.
A professional bookkeeping firm should be accredited in the accounting software used by your company and they should have qualified accountants to support their bookkeepers to enable them to provide a management accounting level of service.
In part 2 of this blog I’ll look at a couple of more specific ways a professional bookkeeper can save you $$$.
Welcome to my SME & Bookkeeping Blog
Welcome to the first post of my blog about SME’s (Small to Medium Sized Enterprises) and Bookkeeping!
I’ve started this blog because I have a passion for small and medium sized businesses. I know, it may sound a bit odd but hey, I am an accountant so it doesn’t take much.
My career as a CPA and the current owner of a national bookkeeping business with over 40 staff has enabled me to build a client base of some amazingly entrepreneurial business people.
With the help of my fantastic team of bookkeepers, I get to know all of our clients intimately. I hope this helps me to post timely and informative pieces on all kind of issues that matter to SME’s such as technology, the economy, recruiting, etc.. (and of course- bookkeeping).
My next blog will be about 6 Ways a Professional Onsite Bookkeeper will save you money! I admit, it’s a little self-promotional and not all blogs will be of that nature, but it’s probably a good way to summarise what we are about and to get the ball rolling.
In the meantime, if you have any questions, feel free to use our bookkeeping forum or you can view our more serious bookkeeping site.
Regards
Tim Johnston
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About
Welcome to FINOS, the BooksonSite Business Blog. Here we provide bookkeeping advice for small business owners.
Are you an SME with a turnover of between $500k-$15 million and are finding bookkeeping a bit too challenging?
We provide onsite bookkeeping services in Sydney, Melbourne and Brisbane backed by MYOB Certified CPA support. Click below to learn more, or call us on 1300 226 657.
