- Look at your financial statements each month. As a minimum, you need to view your Profit & Loss, Balance Sheet, Aged Receivables & Aged Payables reports.
- Check your bank account. If you don’t have any money in it and are constantly relying on credit, this is a good sign you have a Cash Flow problem that must be addressed quickly
- Tips to increase earnings:
- Brainstorm ways to increase sales without discounting or incurring costs
- Stop discounting
- Calculate how much Profit Margin you are making on everything you sell
- Work out where you can increase prices without having a negative impact on sales
- Collect all money owed to you
- Investigate ways to get paid immediately (COD terms)
- Tips to slow down spending:
- Re-negotiate better supplier terms
- Minimise unnecessary spending on Fixed Assets before you invest in plant and equipment, determine how much sales will have to increase before you pay off the item
- Order only as much inventory as you absolutely need. If you can get new shipments of stock in 3-5 days, there is no need to have 3 months worth of sales sitting on your shelves
- Cut unnecessary expenses
ARE YOU BREAKING EVEN?
Wouldn’t it be great to start the new financial year knowing exactly the level of sales you need to achieve in order to meet your fixed financial commitments?
Breakeven is one of the most simple and powerful calculations that you can use to achieve profitable growth, measure your performance. A company is said to “breakeven” for a period (usually a month) when its sales revenue catches up to its costs. Specifically, accountants talk about break-even as the point where ‘fixed costs’ (rent, salaries, etc.) are matched by ‘gross profit margin’ (sales revenue minus cost of goods sold).
Calculating your breakeven each month and knowing exactly which day of the month you breakeven, allows you to hit the sweet spot of your company and make informed, strategic decisions about how to achieve growth that is profitable for your bottom line.
Tips to Calculate Breakeven in Your Business:
- At a minimum, breakeven must be calculated monthly. Your key numbers (like gross profit margin and fixed costs) are changing all the time, which means that you’re break-even is also changing.
- Break the target down into bite size pieces – i.e. how much per hour or per salesperson each day. The target is only useful if you can track and measure it each day.
- If you are behind target at a given point, resist the urge to put items on sale to increase revenue. Discounting decreases your gross profit margin which makes it even harder to hit your breakeven target.
- Post the targets somewhere prominent and demonstrate to everyone that you are serious about measuring and reporting on profitability. It is not enough to [just] break-even and cover costs – you should set and strive for a breakeven plus profit target each month.
END OF FINANCIAL YEAR GUIDELINES (EOFY)
The end of financial year is an extremely busy and demanding time for employers and staff. Follow the EOFY guidelines to minimise unnecessary accounting fees. Check that your current bookkeeper has a checklist and that they are providing your accountant with a full set of reconciled accounts. We’ve prepared a quick checklist to help you close off the old year and get ready for the new financial year.
WHICH ACCOUNTING SOFTWARE TO REPLACE ATO E-Record?
The ATO announced that their E-Record system will not be available from July 2010.
So where does that leave small business owners?
Many of our bookkeeping clients do not have accounting software, they simply hand us the paperwork and we prepare the bookkeeping on their behalf. Companies like MYOB offer a basic software package starting at around $60 and there are other options of accounting software on the internet.
- You can browse through the range of MYOB software HERE
- Need MYOB Training? or Want to know if MYOB is the best for your business?
Before you rush into a new accounting software program, have a chat with us and we’ll offer some economic solutions for your business. We’ll help you determine which accounting software may be most suitable for your business, to replace ATO E-Record.
Whilst the staff at Harvey Norman and similar electrical stores sells software, they know little about accounting or bookkeeping and will endeavour to sell you the most expensive package they can!
ATO TIP FOR QUICKER ACTIVITY STATEMENT PROCESSING
When you lodge your next Activity Statement remember these two points in order to avoid delay with your refund:
- If you are reporting a zero amount – print ‘0’ – don’t use nil, zero or leave the field blank.
- Leave boxes blank that are not applicable to you – don’t use N/A or nil.
ATO CUTS RED TAPE FOR EMPLOYERS WITH LESS THAN 20 STAFF
The government is offering a free superannuation clearing house service to small businesses with less than 20 employees.
The Small Business Superannuation Clearing House (the Clearing house) is administered by Medicare Australia and lets employers pay their super contributions to a single location. For those of you who currently have employees belonging to different super funds this could potentially save you or your bookkeeper significant amount of time in preparing the monthly or quarterly super contributions.
The Clearing house is available from 1 July 2010.
For more information, visit www.medicareaustralia.gov.au/super or phone Medicare on 1300 660 048.
We hope you enjoyed the first edition of our bookkeeping & accounting tips and we look forward to sharing many more valuable tips with you in our next issue.