The latest in small business news, advice, quick tips & regulatory changes.
Subscribe today and WIN!
Manage Your Financials With EaseBy Karen L. Paiyo - Australian Small Business Counsellor
Many first time small business operators, (not to mention a few existing business owners) have, what I like to call, "Financial Phobia". This is a fear of anything relating to the management of their business finances. Just mention the words 'bookkeeping', 'accounting' or simply ask them to 'do their books' and the sufferers of this unnatural fear instantly freeze and are totally incapable of moving forward - an unfortunate situation for their business.
The financials are important for a number of reasons. The first is that they provide an important insight as to how your business is performing from a financial perspective. The second is that they provide a platform for informed decision making. So becoming adept at managing your books is vital.
One of the best guides I have seen on this subject is Learn Bookkeeping in 7 days: Don't Fear the Tax Man written by Rod Caldwell. Caldwell is, in his own words, "a Tax Accountant by profession and an educator by choice".
He has been lecturing in taxation and business at University and TAFE colleges for the last 10 years. He is also the proprietor of his own micro business, where for the last 20 years he has developed and sold accounting systems to independent primary schools. As a micro business owner he knows first-hand the problems we all face. As a tax accountant he is fortunate in that he also knows the solutions.
In this book he attempts to pass on that knowledge in the hope that it helps other small business owners. While most accounting tomes are written in such a way that they often put us to sleep long before anything useful is imparted, this one is an exception. It breaks down each of the core learning elements into seven days of learning, each concentrating on a different aspect of bookkeeping.
It is written in clear, concise and easy to understand manner and is jammed packed full of useful taxation tips and tricks for small business owners. I talked to Rod Caldwell and discussed bookkeeping and small business owner's financial fears.
KP: Many people start their business and immediately offload their bookkeeping and accounting functions to their accountant. Is there any reason why they can't be doing these themselves? And are there other compelling reasons why they should be?
Rod Caldwell: One of the major costs of running any small business is the fees charged by your accountant to do your end of year financial reporting and your Income Tax plus your bookkeeper's fees to keep the books and complete the quarterly Business Activity Statement (BAS). With the new requirement for Bookkeepers' to be qualified and registered, that cost is just going to escalate. Doing your books yourself, in a timely and efficient manner, as well as doing your own BAS will go a long way to minimising these costs.
KP: How does your book, Learn Bookkeeping in 7 Days, help a first time business owner looking to manage their own books?
Rod Caldwell: Learn Bookkeeping is only a start but it does give you a good understanding of the basics and the knowledge to know what's needed. It is meant to be a 'fire-side chat' approach to bookkeeping rather than an academic text on the subject. I have tried to put across complex issues in an easy to read text.
KP: What are the keys to successfully managing their business finances?
Rod Caldwell: You must do the books regularly. Everyone hates this task and tries to put it off but putting it off makes it even harder and the possibility of errors increases. Remember, errors take three times as long to fix compared to doing it right the first time round and, if you have to employ an accountant to fix up your mess, then your costs are gong to go through the roof.
KP: Many people 'fear' the financials aspect of business management. Can you explain why many people feel this way, and can you allay these fears in any way?
Rod Caldwell: It's just fear of the unknown and all those rumours of how hard it is. Once you get into a rhythm doing your own books is comparativelly easy. You may not know how to do anyone else's but you will know how to do your own.
KP: If a small business owner does their own bookkeeping and outsources the rest to an accountant, what is it they need to be asking for from their accountant? And how should they manage this function?
Rod Caldwell: This is the system that I always recommend to small business owners.
KP: The recent government budget announcement has a 2% company tax reduction and an instant write-off for assets upt to $5,000 (except for buildings) and simplified the depreciation for other assets commencing 1st July, 2012. How do you think this will benefit small business owners and what advice do you have for them for making the most of these changes ?
Rod Caldwell: Most small businesses use Family Trust arrangements based upon individual tax rates so the reduction in company tax will have little impact. In addition you have to be incorporated into a Pty Ltd company for this to have any effect and that is a costly exercise. Small businesses under $2m in turnover already have simplified depreciation and can write off assets costing less than $1,000. These changes are welcome but are not mind blowing.
ABOUT THE AUTHOR
Karen L. Paiyo is an Australian Small Business Counsellor, supporting and nurturing the spirit of entrepreneurship in the Asia Pacific Region. Karen empowers small business owners by transferring to them the skills and expertise needed to help them take their business ideas from creative concept to profitable reality, faster and with less risk. For more small business articles, news, tips and business advice, check out her website at http://www.karenpaiyo.com
Karen L. Paiyo is an Australian Small Business Counsellor, supporting and nurturing the spirit of entrepreneurship in the Asia Pacific Region. Karen empowers small business owners by transferring to them the skills and expertise needed to help them take their business ideas from creative concept to profitable reality, faster and with less risk.
For more small business articles, news, tips and business advice, check out her website at http://www.karenpaiyo.com