Brisbane Bookkeepers & Taxation Blog

Everything Bookkeeping & Taxation in Brisbane!

What To Expect From Two Essential Financial Statements

As a business owner, you get to take a look at the financial statements every once in a while because it is part and parcel of managing your business finances. The financial statements have a lot to tell you including how your business is performing financially. You will also know why your business is making money or losing it. These statements also help your financial planners, bookkeepers and advisors analyse the figures. There are 2 key financial statements that are commonly used for your business: the Profit & Loss and Balance Sheet.

Profit & Loss

A Profit & Loss Report refers to a summary of your business expenses and income at a specific period of time. It provides you an idea of your business’ performance. The data you will usually find in a Profit & Loss Report include Cost of Goods Sold, Equals Gross Profit, Expenses, Operating Profit, Tax Payable and Net Profit.

Although they may seem easy to interpret, you need to develop specialized skills so you can determine what the figures say. Unfortunately, this essential financial statement is not often understood by some business owners. The Gross Profit Margin is the gross profit over sales and this is usually presented in percentage. This margin is essential for tracking so you can ensure that profitability is improved and maintained. The Gross Profit Margin also allows you to compare your figures with competitors.

If there is a decrease in Gross Profit Margin, it only means there is a rise in inventory cost, heavy discounting and many more. The Net Profit Margin can also be measured as a percentage and this is referred to as net profit over sales. If you notice any decrease in your Net Profit, it means you are paying more in your expenses.

It is necessary that a Profit & Loss Report is prepared on a monthly basis because this practice enables you to perform regular analysis of your expenses and income. You will also be able to know your key business drivers. As you master the skill of reading a Profit & Loss Report, start planning how your business can keep up with competitors.

Balance Sheet

A Balance Sheet is another important statement that business owners should not miss out on checking because it demonstrates the financial strength and net worth of your business. In a Balance Sheet, you will be able to see the assets, liabilities and equity or net worth.

The assets refer to the tangible and non-tangible items that your business owns. The liabilities are the amounts you owe to other parties. The difference when assets are subtracted from liabilities is referred to as equity or net worth. The Balance Sheet helps you identify the key performance indicators such as control of working capital, financial strength, return on equity and return on capital. A Balance Sheet may be harder to interpret than a Profit & Loss Report because of all the technical terms you can find in it. This is why you need to make sure that key areas are not missed such as the Current Assets and Current Liabilities. You should also pay close attention to the amounts on your Balance sheet as they can assist you in making a decision and cash-flow.

Are You Asking Too Much From Your Bookkeeper

hand 65834 1280When you are working in the business world, there will be expectations that you need to meet or set. While employees have a set of expectations from employers such as paying them regularly, employers also have some expectations from employees and your bookkeeper is no exception. One of the expectations of business owners from their bookkeeper is to provide accurate statements and in return the bookkeepers also expect to receive timely payments for their service.

As a business owner or employer, it is reasonable to expect from your bookkeeper to:

• Obtain more than just basic understanding of accounting and explain them in simple terms. When they are asked for a brief explanation of these terms, they should be able to provide answers in an understandable manner.

• Go into details. Dealing with numbers can make every bookkeeper more prone to mistakes and it is a good sign when your bookkeeper is detail oriented because this only means they pay more attention to the essential information of your statement.

• Be a self-starter. You will no longer have a feeling that you need to give your bookkeeper a constant reminder that you do exist.

• Have the ability to see the big picture. A bookkeeper should make realistic suggestions when it is necessary. Based on the available details, the bookkeeper must know how to recommend a course of action by simply putting all the puzzle pieces together.

• Have willingness to follow through. A bookkeeper should be able to meet deadlines and accomplish the goals you set.

• Provide information to the financial status of your business. The bookkeeper should be able to explain everything in layman’s term.

• Prepare a balance sheet, statement of profit and cash flow statement on a monthly basis. The bookkeeper must also stick to the deadline when it comes to providing these statements.

• Create a commitment and stick to it. If your bookkeeper just cannot handle deadlines, there is no point keeping them.

• Have an idea of the reasonable charge for the service rendered. If the bookkeeper has a broad understanding of their business, they will know how much the services cost.

• Gain a basic understanding of the bookkeeping industry and the type of business. This is going to be essential because business owners turn to bookkeepers to ask for some recommendations, advice or suggestions. Choose a bookkeeper that is connected with a company with substantial experience in various businesses especially in your industry.

• Have solid communication skills. Your bookkeeper should communicate through emails, phone calls and conversations clearly and concisely. They should also be polite.

• Be computer literate. Most bookkeeping tasks are performed using computers or software such as Reckon and MYOB.

While these are realistic expectations, there are times when they are not met because they seem unreasonable. For instance, if you expect your bookkeeper to email back within minutes, this is considered unreasonable as your bookkeeper may be working on a busy schedule.

If you expect your bookkeeper to agree with you most of the time, then you will not be able to hear any constructive feedback that will save or help your business. Your bookkeeper will not also drop any projects just to focus on your books. Building a strong connection with your bookkeeper is possible once you discuss your expectations.

Why Good Cash Flow Management Is Essential

ball 163345 1280

Managing your cash flow wisely is not just a business practice but a household practice as well.  There are plenty of reasons you should keep your cash flow in check especially if you are running a business. Most bankruptcy in businesses is due to poor financial management. Even if your products and services are making it big in the business industry, you still have to find a leverage that will ensure sustainability in your business. If your financial activity is in chaos, you may want to look at the benefits that a good cash flow management provides.

The major benefits of managing cash flow

In running a business, you don’t just maintain a cash flow, but a healthy cash flow. However, it takes good management skills for you to pull off a balancing act ensuring the money that comes in and goes out are proportion. When money is not coming in, you won’t be able to pay your employees or purchase essential supplies. You will also see loans and debts piling up because your business appears to be breaking the bank. A good cash flow management helps you fulfill your tax office obligations such as superannuation, GST and PAYG. 

Cash Flow vs. Profit

You might confuse cash flow for profit, but these two are never one and the same. They serve a different purpose and are not created equal. A business can be considered profitable, but may not be in a position that brings in money. The real income of your business will be determined once the Profit and Loss report has been turned in. If you have not really paid off your debts and loans yet, a steady cash flow is not yet in the picture.

Cash Flow Budget Preparation

Anticipating receipts, expenses and other income should be kept in mind as it is part of preparing a cash flow budget. You don’t just provide budget without preparing a cash flow projection. You can turn to bookkeeping software packages with features that allow you to produce graphs and reports easily. 

Note that a cash flow projection does not deliver 100% accuracy. This is just a prediction of your financial activity, but it allows you to track your cash efficiently.

How to improve cash flow

There are various ways you can improve cash flow such as cutting down on your expenses or reducing the number of contractors or employees you have. If you have items that are slow-moving, you can also avoid overstocking them. You can prevent falling behind payment schedule if you only take out a short-term loan. It helps you pay your debts and other obligations in a timely fashion. If you can’t pay your debts all at once, you can also stagger payments where possible.
As a business owner, you should be keen on checking your financial activity and cash flow is going to be an essential part of it. If you fail to keep track of your expenses and other financial activities, you might be surprised to discover in the end that more money is going out instead of coming in. Check financial reports regularly so you know where your business’ financial status is at.

Are You Stuck In A Routine Or A Deadly Sin?

clerk 18915 1280

Whether you have a busy day or you just want to get things done more quickly, multitasking is usually the route you are more likely to take. You believe that doing several tasks at once can save time, but what about the quality of your work? If there's one aspect that multitaskers often compromise, it is the quality of their work. Sure you save time doing things at the same time, but since each task only gets 50% of your attention, you give little time to ensuring that you deliver high quality results. Imagine working at the computer and talking on the phone at the same time. These tasks are both demanding and distracting.  You lose your focus even if you are a seasoned multitasker. 

What makes multitasking less efficient?

The chaos that a divided attention brings can be compared to money: it is quantifiable. If your attention is shifted to another task, you are only giving less than 100% of your attention to the first task. Even if you make an effort to finish earlier than usual, there is still one important aspect of the task that you might miss out. While you try your best to make the task error-free, the attention you give to the task will not give you any assurance. 

Even if you only perform one activity and thinking about another, it can also be considered multitasking. Note that your attention is still divided even when you are just thinking of another task. If you always find yourself doing two tasks at once, you need to consider introducing mindfulness into your life. Mindfulness is the opposite of multitasking. 

Unlike multitasking, mindfulness lets you pay full attention to what you are doing at the moment. For instance, if the phone rings and you are working at the computer, you leave your current task and answer the phone. If it is an important call, you are a hundred percent sure that you are getting the message right as you are not distracted. Once the call is over, you resume working and quality is not compromised. 

A complete attention to the task at hand ensures that errors are corrected and your job is kept to a satisfactory level. Mindfulness hit two birds with one stone: your work life and your personal life. More likely than not, multitaskers find it easier to be lost in thought or become absent-minded as there are so many things running in their head. Even at home, they still can't give their full attention to their family and quality time is already out of the picture.  

Mindfulness breaks the spell that binds multitaskers into the same routine. It puts things in proper perspective so it will be easy to carry out various tasks without the need to multitask. Not only do you promote efficiency but you also ensure that the job you accomplished is consistently satisfactory. 

When you integrate mindfulness into your daily routine, you will begin to notice a transformation in how you accomplish your tasks. You genuinely focus on the quality and take your work to a higher and more consistent level.  

 

Record Keeping in a Shoebox - You need Help!

Is your mind as cluttered up as the pile of receipts in your table? Do you find it hard to keep a record of your financial transactions due to juggling multiple tasks at the same time? For any business, a bookkeeper is essential because they help you keep things organized especially if it has something to do with dealing with numbers. You might be spending too much time trying to remember the transactions you made on a single day, but due to the tasks at hand, getting everything organized may be such a hard thing to do. If you have a fledgling business, you may consider keeping receipts very trivial. However, you will come to appreciate its importance in the long run. This is because the receipts serve as a way to track the progress of your business. It gives you a clue for tracking your progress. Without receipts, how would you go about preparing your financial statements?accounting 57284 640 

The role that a bookkeeper plays cannot be underestimated. If you used to set aside the importance of a bookkeeper in your business, these situations may just change your mind: 

• You need to look for receipts for a specific transaction.

For minor or major transactions, receipts serve as proof that the transactions have really been made. These receipts are kept for good reasons. In the future, you will need to prepare financial report which includes all of the financial endeavors you have pursued. Without the receipts, there is no proof that the transactions have taken place. However, if you have a bookkeeper, the receipts and other important files you will need for preparing a financial statement are intact. 

• You need to prepare your tax returns.

Preparing all the necessary documents for filing your tax returns is often easier said than done. It cannot be carried out by an extremely busy person with limited time at his disposal. It is either you miss out on completing the essential documents or you are going around in circles as you have a lot of things in mind. When you have a bookkeeper to do the job, everything you need for the process to be smooth sailing is going to be achievable. 

• You want a complete report of your deductible expenses.

It is easy to make a mental note of your expenses, provided you do not have any important matters to attend to. Unfortunately, a business owner has a lot of things to do aside from preparing financial statements. A bookkeeper will help ease your worries by ensuring that you back up your deductible expenses.

The time you spend for all of your back-end activities will be significantly reduced if you use a bookkeeper’s service. You can also save money without necessarily cutting corners and as a result, your purpose of keeping track of every cent is not defeated. Any technicalities involved in bookkeeping will be properly addressed. At the end of the day, your business goals are achieved and the quality of work is not compromised. Your business can also go the extra mile as you have already set your bookkeeping worries aside.

­ Questions? Give Andrew a call 0450 605 592

­