Cash Forecasts

What is it about cash?
There’s one thing for certain and anyone in business knows it. If you don’t understand the impact of a cash flow gap (the time between cash going out and cash coming in) you can turn a profitable job or project into a financial mess.

Nearly every business experiences this: the money flows out before it starts to flow in.

Make it easy
What most people don’t always know is how to find a solution to this pressing problem. One way to reduce the cash flow gap is give your customers easier ways to pay you on time.

Let’s get real here. If a customer’s only option is to write a cheque, address an envelope, find a stamp and post the letter – you’re really are putting a lot of obstacles in the way of getting the money you so badly want. Offer customers a range of payment options. These include BPAY, Credit Card and Postbillpay.

Electronic payment methods can streamline your banking. Giving your customers access to these payment methods means payments can credited directly to your bank account. In many cases these payments will be credited as cleared funds, which enhance your cash flow and removes the uncertainty of whether or not a cheque payment will be honoured.

What else can you do?
A sensible business does cash flow forecasts which make it easy to see when expenses occur and when income can be expected. This help to plan your need for cash.

The next thing to do is to keep updating your cash flow forecast to see whether you need to access additional cash – through sources such as a line of credit or a bank overdraft.

Why do cash gaps occur?
Well there are lots of reasons, but try these for starters:
o You buy stock before you sell any goods
o If you’re a manufacturer, you pay many of the costs of manufacturing a product before you can sell it
o If you’re just a one-man band, you still need pay the costs of your own labour (that is, pay yourself a wage) until you complete a job and get payment. If you have employees, then they won’t stay with you for long if you don’t have the money to pay them!

When you do your cash flow forecast include:
o Rent
o Gas, electricity and phone
o Insurance
o Office consumables (such as stationery, photocopying and postage costs)
o Couriers
o Advertising and printing
o Tax office payments (BAS, GST etc, when they fall due)
o Superannuation
o Credit card payments etc

Control the flow
Learning to control factors that affect your cash flow is the first step in reducing the potential cash shortage.

When developing a cash flow management strategy for your business, you need to take into account how your customers pay you. For example, are you paid in advance; when the sale occurs; or do you offer credit?

If you’re lucky enough to receive payment in advance, your cash flow gap should be minimal. However, if you regularly invoice for goods or services after you have provided them, you’ll have a greater cashflow gap.

The longer your customers take to pay you, the greater the impact on your cash flow.

Worst case scenario is that these debts that are taking too long to be paid turn into bad debts and become extremely hard to receive without employing a debt collection agency, this is why you need to stay on top of your debtors and keep your cash flowing making it easier to run your business and grow.

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When you’re on a good thing, stick to it

Do you find it hard to keep staff? Do you have staff you’d rather not keep? Motivating staff can help keep the ones you want, and possibly even help you get more out of the non-performers.

Knowing how to motivate people is important. When successful US businessman, Charles Schwab was asked why he earned such a huge salary, he commented, “Lots of people work here who know lots more about steel than I do. I can inspire people. I consider my ability to arouse enthusiasm among employees the greatest asset I possess”.

Now I’m not going to say that motivating people is an easy job. It’s tough and you have to keep at it constantly. Successful business owners always acknowledge the role that good people play in their operations.

Here are some relatively simple things you can do to keep your employees on their toes – it’s good for them because they can feel personally satisfied when they give their best (and they get rewarded) and in turn, top performers produce better results for your business.

It doesn’t matter how much you ask your staff to pull their socks up, if they’re not motivated, they won’t do it. Bob Hazell, a director of Advanced Training, in Oxfordshire, UK – which specialises in helping companies instil passion in the workplace – says that drive, attitude and confidence are three keys to motivation.

So how do I motivate my staff?
Hazell says that good managers learn what they need to do in order to motivate people. The essence of management is to actually ask yourself how you would like to be treated.

Most people agree that it would be lovely to receive a ‘thank you’ and a ‘well done’, every so often. Putting yourself in the shoes of your employees and treating them accordingly is the best way to motivate your employees and produce a positive vibe.

Drive alone won’t do the job. An optimistic attitude is essential to motivate staff. Attitudes often breed from negativity. In many businesses, there is one person, a ‘rotten apple’, who is pessimistic and seems to be able to bring out the worst in every situation.

How to improve staff retention:
1. Talk to your employees. Ask simple questions like ‘how are you’? It doesn’t take much to just be nice to people
As the owner of the business, you’re busy. But if an employee has an issue, then make sure that you take the time to listen

2. It’s funny, but from my own experience as an employer, there are so many times when a pay rise or a reward is not seen as important as the boss saying ‘thank you’ for a job well done.
Today’s workers need – and expect – to be thanked and if they’re not recognised, they’ll get on Seek and start looking for new jobs.

I’m not saying the people don’t like money and tangible rewards like a weekend away or a dinner for two. What I’m saying is that these tangible rewards aren’t always expected – but people do like to hear a thankyou’ for a job well done. Always make sure that you acknowledge a job well done.

The person who has done the job will be looking for praise and if you don’t give it to them they’ll start to look for it elsewhere

3. You’re the owner of the business and your priorities and stresses are often quite different to your employees. You might feel that you’re caring all the burden and stress but in reality that’s not the case.

Your staff could be at the coal face taking complaints or dealing with difficult customers. If they come to you for support or advice then show empathy

4. As your business grows and you take on more people, you will have to delegate some jobs that you could like or be attached to. But if you want to grow and prosper, then letting go is important. The best thing is when your staff member does a job previously done by you either equally as well or even better. Make a person feel important when thy achieve things in your business

5. Make sure that you acknowledge an employee’s strengths and always encourage them to play to those strengths. If you want to keep staff you are going to have to offer them opportunities to develop their skills.

Most people seek professional development and some small businesses worry that if they train people they will leave and the business has lost money. That’s true to a certain extent and you do run the risk of training them and they go elsewhere. But if you don’t train them and they stay, they could be under-skilled in their jobs and this will impact on your business

6. When a new person comes into your business make sure they are given specific instructions about all aspects of their job. These should be written into a specific manual, so while they are settling in, they feel comfortable because they can read what the job entails without constantly having to ask a colleague or their manager. This framework gives them the confidence to perform and helps them settle in a lot easier.

Remember it takes time for a new employees to know your standards and expectations. This isn’t to say that they can’t ask questions but having action plans about their specific tasks gives them a reference point to check that they’re not making mistakes

7. Your employees could have valuable ideas that could contribute to innovations in your organisation that could lead to bottom line improvements. Ask for input when decisions are being made. And reward them if one of their innovative ideas has benefits in your business.

Tips for getting the best from your employees

oMotivating employees is the only way to give them drive
oIf you’re a manager, put yourself in their shoes and find out how you’d like to be treated and treat them accordingly
o Please, thank you and well done can go a long way
o Put out a positive vibe
o Try to make the workplace enjoyable.

o Instil optimism within the organisational culture
o Don’t let one negative person affect the whole organisation
o Don’t accept a pessimistic attitude from any member of staff
o Make change a regular occurrence
o Make change a fun thing and have it anticipated by staff.

o Encourage your staff to better themselves
o Let your staff know that you believe in them and their ability
o Delegate jobs to staff, not just the bad jobs
o Boost their morale by taking the time to talk to them and show them how to do tasks.

Recognise that every employee in your business has the potential to lift their game and the ability to do this comes down to confidence. For staff to have a good attitude and to improve their skills, they must have confidence in themselves. Often a person will have a poor attitude because they’re not encouraged in the right areas.

Hazell says that confidence is what facilitates a healthy attitude and is something that can be developed. “Habits are formed over 39 days, or thereabouts so we’re told, and so if you do something naughty for 39 days, on the 40th day you will do it automatically. Therefore, it means consciously working on your attitude for 39 days and after that it will be easy. Once this is achieved, the biggest objective is to keep away from negativity and do your best to keep positive and self-assured,” he says.

It makes sense then to say that employees with this type of mindset are invaluable to your business. “They are people that when the boss is out and a decision needs to be made or something needs to be done, they actually take responsibility and say ‘I’ve got the confidence to run with this and take the rap if it doesn’t work out’.”

Hazell believes this type of confidence is beneficial, especially for small and medium businesses, “Where the business owners can’t look over the shoulders of their employees at all times”.

An employee will feel more confident when their manager has confidence in them. A lot of managers and business owners find it difficult to delegate because they don’t have complete belief in the ability of their staff.

“This type of approach won’t benefit anyone in the business or the business itself. When a staff member goes to an owner or manager and asks them how to do something, then the manager should take the time to show the employee what to do. If a manager does the task themselves, then they are blocking the employee from doing the job they have been paid to do, as well as stripping them of confidence,” adds Hazel.

If you don’t develop employees, they tend end up with jobs no-one else wants to do, which is de-motivating. So find ways to delegate work, and develop your employees while they’re doing a job, to ensure they’re happy.

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If not systems, then what?

I hear it all the time from people who want to grow their business. “I know I need to do some work ON my business, but I just don’t have the time – how can I find the time?”
And you know what? You don’t have the time. So the question is, what are you going to do about it? And if you don’t address this issue now, is anything ever going to change?
We all know we need systems and that they will improve our business, but when we’re working 70 hours a week, we’re thinking how am I ever going to find the time to design and then implement systems on top of this workload?

As a business owner your challenge is that it is your business and you are the only person who can make things change. The questions to ask yourself are: what are the ramifications of you not implementing the systems you know you need? And, what will be the benefits of those systems once implemented?

The problem is not that you are doing too much work – you are simply doing the wrong kind of work. Start by listing all of the things you do in a week and how much time you spend on them. Categorise them: client relations, office administration, administrative support, bookkeeping and so on. Ask yourself what you would pay someone to do each category of work. Chances are a lot of it will be between $12 and $20 per hour. Add up the hours. Consider what you value you put on your time as the owner of the business.

Now work out how much you are costing the business by spending so much time working in the lowest paid area of the business. It is only when you can get a picture of what you are costing the business that you can come to terms with what needs to be done.

Start working on the systems in those areas and then get someone in on a part-time basis to follow them, freeing up some of your valuable time. When you have that extra time, don’t just throw yourself into more of the same. Remember why you did it – and use the time wisely to develop some more systems that will free up more of your time, which you can then spend on activities that have significantly more value to the business. A business is going to take a very long time fulfilling its objective if the owner is its most expensive clerical worker.

A client of mine Glenn came to me recently with an interesting dilemma. He owns SprayIt Solutions ( if you ever need residential or commercial insulation go and say hello!) and he has a great salesperson working for him, who looks after the majority of his clients. However, Paul feels as though he is losing personal contact with them due to his stellar salesman. He is worried that if the salesman leaves, he could very easily take some of the clients with him. So how does Paul reconnect with clients without overstepping what his salesperson is doing?

My answer to Paul went along the following lines:
It would seem that the current client loyalty is with the salesperson rather than the business. Therefore, the task is twofold: build customer loyalty to the business (rather than you personally – because that will inhibit your growth) and get everything that happens in the sales area onto paper in the form of a system.
It’s not so much that you need to reconnect with the clients, more that you need to connect the clients with the business so that they associate the service they are receiving with the business name, not just the salesperson.

There are several ways in which you can reconnect and also value-add service:
o Set up a regular form of communication with clients, such as an electronic newsletter
o Institute a biannual or annual review of their portfolios at which you can be involved together with the salesperson
o Develop a status report on the property market, both locally and interstate, for the previous and coming six months and discuss their ramifications for market trends
o Offer seminars on the property market and/or similar topics.

In this way, you are letting them know who you are and affirming your credibility and that of your company, and giving them more reasons to stay with the business, not just the salesperson.
You may have a great sales person, but what happens when they leave? When you have great systems, you have a great business.

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Save time, save money

When it comes to matters of tax, most people don’t know what they don’t know! That’s why seeking out expert help is important.

The key to running a good business is finding experts, such as an accountant, business coach, bank manager or lawyer, who can add value.

When the end of the financial year approaches, the focus for most businesses is on how they can minimise their tax. But you should work with your accountant several times during the year not just at the end of the financial year. Quite often cashflow issues at this time can reduce your options for reducing your tax.

A trustworthy accountant who can work with you on developing strategies to take your business forward, is not easy to find. Many accountants are either busy tending to compliance or don’t have the skills to be a business adviser. Still, you shouldn’t give up the search.

The key thing to remember is to see your accountant well before 30 June – after that date there’s nothing that can be done to improve your tax situation for the previous year.

How to find an accountant
The best way to choose a trustworthy accountant is to ensure they are a member of professional association and/or come with a personal recommendation.
o Ask your friends, family and other contacts (but remember, what works for someone else isn’t necessarily going to be right for you)
o Tap into the referral networks of your lawyer, financial planner or bank manager
o Call or visit the websites of professional associations, such as CPA Australia or the National Institute of Accountants (NIA). The CPA Australia website has a ‘Find a CPA’ quick link (

Here are some general answers to accounting questions frequently asked by small business owners:

What payroll methods can I use to reduce my employees’ tax bill?
A salary sacrifice arrangement is also commonly referred to as salary packaging or total remuneration packaging. It’s an arrangement between an employer and an employee, where the employee agrees to give up part of their future entitlement to salary or wages in return for the employer providing them with benefits of a similar total value.

Many of my staff require vehicle for their work. What is a novated lease?
A novated lease is a three-way arrangement between the employee, the financier and the employer, where a vehicle is leased under a finance lease in the employee’s name and assigned to the employer by way of a novation agreement. The employer recovers this amount from the employee’s salary package. The lease, the FBT and the operating costs associated with running the vehicle are deducted from the employee’s gross salary, therefore reducing their income tax.

Can I reward my staff without increasing their tax bill through cash bonuses?
Yes, use other methods such as hampers or tickets to sporting or cultural events. If the benefits are less than $300 and are irregular, then generally they’re not subject to fringe benefits tax (FBT).

What tax deductions can be made for the home and serviced office? Can I claim part of my mortgage repayment?
It’s not recommended to claim part of your mortgage repayment, as it could become partially liable for capital gains tax (CGT) if you sell your home (your residential property is usually exempt from CGT). This may also apply to council rates and water bills.

You can claim utility bills by estimating the percentage of business use (based on the number of rooms utilised). You should make a reasonable estimate of the area used for the business, for example, one third of the property equals 33.33% of the bill.

All of your office furniture and serviced office fees will be tax deductible. For simplified tax system (STS) payers, all assets less than a certain value means a straight deduction. On other hand, for non-STS payers, all items need to be depreciated at a percentage, as per the Australian Tax Office (ATO) guidelines (visit for more exact details).

Therefore, it’s important that you engage a qualified accountant to ensure you receive the maximum tax deductions.

What records should I keep?
Keep all invoices to support a claim (for five years). If you lose receipts/tax invoices, make sure you have secondary evidence such as credit card statements, bank statements, a petty cash book or diary evidence. In the case of flood or fire, make a statutory declaration and keep the insurance claims documentation.

Can I claim entertainment expenses if I have a meeting at a café or restaurant?
If the meeting is arranged to discuss a business proposal and you simply have a cup of coffee and a biscuit, this cost would generally not be seen an entertainment cost, but a legitimate business cost.
It is recommended as a good business practice/policy to keep a diary with some notes from the meeting – for instance minutes of the meeting, who attended, reason for the meeting and so on.

If we travelled overseas for a business conference, can we claim the expenses? What if we included a side trip for personal reasons?
All travel expenses for business purposes are tax deductible. A side trip to Disneyland would be excluded from the calculation, as it’s non-deductible. Again, keep a diary to show what’s business and what’s personal and have a chat with your accountant if you’re not clear on this.

Are any courses we attend tax deductible or just ones related to the business?
Courses, seminars and any professional development (including business coaching) that is designed to bring in more revenue for the business is tax deductible.

Can I claim my dry cleaning?
This is very hard to claim, as the ATO’s view on this strictly classifies what is a uniform (it must have a logo or be registered with the ATO). A uniform is not a suit or shoes that you wear everyday, with the exception of protective shoes. The argument that you need to look presentable is not a valid one. If your income depends on your image eg a TV presenter it would be worth discussing this with your accountant.

What happens if I get audited?
You will be asked to provide all the documents to support your claims in the tax return. Your accountant is not responsible for the expenses that you claim, as the Australian tax system works as a self-assessment and whenever you sign the tax return, you’re signing a declaration that all expenses claimed in your tax return are correct as per your advice.

How can I legally reduce my tax bill?
o Use a qualified accountant who will claim the maximum deduction for you
o Talk to your accountant several times a year
o Keep a good record of all of your expenses (even the ones that you’re not sure about it), such as communication bills and consumables, postage, advertising/promotion, travel, motor vehicle (keep a log book for a minimum period of three months and renew every five years), bank fees, merchant fees, interest on business credit cards and loans and gifts for clients.

This information is provided as a general guide. You should seek your own detailed accounting advice to suit your individual business circumstances. Remember – that advice is tax deductible!

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