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James Solomons

Accounting, Business & Technology; Advocate, Entrepreneur & Educator

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The importance of your Accountant in an ‘Automated World’

Should I Sack My Accountant?

As featured on LifeHackerAU..http://www.lifehacker.com.au/2014/12/should-i-sack-my-accountant/

A lot of people ask me if accountants are going out of business.

As the head of accounting of a company that allows small business owners to easily do many of the things their accountant used to do, as well as being an accountant in public practice, it is a question I get asked frequently. A more pointed question however is “Do I see much of a future for accounting professionals in this automated world?”

Some people even ask me if they should sack their accountant once they’ve got Xero up and running in their business.

My answer is always the same – absolutely not! Thanks to the efficiencies created by cloud accounting the opportunity for accountants and their clients to work closer together has never been greater.

The role of the accountant is changing. Instead of just focusing on historical financial numbers (although these remain important for things like tax and keeping track of how a business is performing) many accountants also provide valuable advice about how to run and grow your business.

There are several milestones in the lifecycle of your business when you should get the input and advice of an accountant.

The first is when you start out. You should consult your accountant on the best business structure for you. The reasons for this are many. The right structure can save you tax each year as well as when you sell your business. It can also ensure that your business and personal assets are appropriately protected from creditors or if legal proceedings are brought against you. And it is important when taking into account what you might want to do with the business in the future whether that be selling it or passing it onto your children.

Your accountant should also review your business plan. We’re all a bit starry-eyed when we start a new enterprise, so having an impartial business advisory specialist cast their eye over your plan and the assumptions you make can save you a lot of time and money later on. They can draw on their experience to spot pitfalls you might have overlooked. For instance, they might think you’ve underestimated your costs or question how you’re going to meet your sales projections.

You should also ask your accountant for help before you apply for finance, make a major investment or put your business on the market.

But it’s not just milestones you need your accountant for. You should also ask them for advice on the day-to-day running and growing of your business.

Some accountants have set themselves up as ‘virtual CFOs’. They do the same sort of strategic and advisory work a chief financial officer would do in a larger company, but because it’s for only a few hours a week or a month it’s affordable for a small business.

The rise of cloud-based accounting software means your accountant can easily examine your business’ real time financial data from anywhere and at any time, not just at the end of the month or the quarter.

They use this information to advise you on how to improve your business.

Broadly, they can act as an advisor and sounding board for any financial and administrative issues.

More specifically, they can help you analyse your financial data and performance, and identify growth opportunities by providing insights on cash flow, pricing, inventory and other financial measures. Your accountant might, for example, notice that you have a lot of stock that’s selling too slowly and advise you on how you can better manage your inventory to free up the cash that’s tied up in stock.

You should also work with your accountant to set targets for your business. They can advise you on which KPIs you need to grow your business, and help you formulate a plan to hit them. And they can set up real-time cloud based reporting systems to track your performance against these KPIs and targets. This is invaluable to not only measure your success but also to highlight any areas of concern.

They can also look at your business processes to ensure you’re doing things as efficiently as possible. A lot of accountants have access to benchmarking data, which will help you compare your own profitability and efficiency with other businesses in your sector.

Finally, even if your tax affairs are very simple, it’s still a good idea to get your accountant’s advice. They’ll be up to date with the latest changes in the tax law and know about all the deductions available to you to help minimise your tax bill.

While your accountant can look over your finances remotely using your cloud software, it’s a good idea to have regular face-to-face meetings with them as well so you can go over any issues and problems in detail as well as brainstorm and explore new ideas to help your business grow.

You should think of your accountant as an important partner in your business. The more time you invest in the relationship, the more your accountant will learn about your business and the more valuable their advice.

Avoiding Payroll Mistakes…

My latest article via Kochies Business Builders..

https://au.smallbusiness.yahoo.com/a/-/25534188/preventing-common-payroll-mistakes/

Managing your business in tough times….

My latest blog on the EFS website

http://www.efsstrategic.com.au/managing-business-tough-times/

2015 cash flow forecast…have you done yours yet ?

My latest blog post on the EFS website

http://efsstrategic.com.au/prepared-2015-financial-year-cash-flow-forecast/ 

From Accountant to Business Advisor – Market your Firm in the Cloud

From Accountant to Business Advisor – Market your Firm in the Cloud.

A very interesting article from the WorkflowMax blog. Quite a detailed look at how the traditional accounting firm can and should make the move to become a “firm of the future” to avoid becoming stale and out of date.

It opens by challenging what the role of the accountant will be if and when automation takes away much of what a traditional accountant does. What is a traditional accountant you ask…..it is one who relies upon the compliance driven model to bring business to their door year after year. What will happen when business owners realise that many of the cloud accounting applications now coming onto the market will allow them to look after this compliance process themselves ?

As I have noted many times before in my articles, the traditional accountant must change and begin to build a true advisory business using the smart technology available and deliver it to these business owners in an efficient and effective manner. This is where they will be able to add value to their clients. This will allow them to use the business advisory skills they have acquired over the years and not simply be data entry clerks, filling out forms and basically being a middle man between businesses and the tax department. This will allow them to run a real business.

The article is actually a road map or action plan that many accounting firms could use to kick start their transformation.

Xero CEO Rod Drury on small business in 2014…my thoughts

Xero CEO Rod Drury cuts to the chase and notes that you run a business to make money so that you can go on holidays and buy beach houses and basically have a great lifestyle. This echoes my comments from my piece on running a smarter business using technology to help you quite simply “make more money”.

His advice on how to do this? Run your business like it is a real business. Set goals and everyday when working in and on your business only do those things that will help you directly or indirectly achieve those goals which will make you more money and give you that financial freedom you want. Its all about the opportunity cost of doing one thing versus another and so to limit the impacts of opportunity cost decisions he recommends you find what you are good at and be the best at it. Specialise and don’t try to be everything to everyone (this I know is Xero’s mantra and how they decide on what features to build and release)

Pretty simple advice, but highly effective. !

The Benefits of Credit Card Funding

By Odysseas Papadimitriou

Reposted from Mashable

Thinking of using your credit card to finance your startup? For some entrepreneurs, it’s the only way to get their new business off the ground. Still, it comes with plenty of risk.

The Benefits of Credit Card Funding

  • The ability to retain maximum equity:  People willing to take the risks associated with launching a startup generally believe that they have a potentially very lucrative idea on their hands. The further you can take your company without outside help, the more of your company you can keep for yourself and the less oversight you’ll have to deal with.
  • 0% offers:  The ubiquity of low interest rates has made it common practice for banks to offer extremely attractive packages. The ability to escape interest for more than a year on either upcoming purchases or funding expenses already incurred would certainly help your company’s bottom line. The best offer currently available is the No Balance Transfer Fee Slate Card from Chase, which offers 0% on purchases and balance transfers for 15 months and does not charge a balance transfer fee (most cards charge 3%).
  • Lack of collateral:  If you go to a bank and ask for a business loan or a business line of credit, they will want collateral.  If you want to bring on investors, they’ll want equity.  Credit cards, on the other hand, are unsecured.

The Cons of Credit Card Funding

  • No separation between business and personal:  When you use a credit card to fund a business venturethe distinction between your business and personal finances largely disappears.  This is important for three reasons: 
  1. It presents the possibility for personal credit score damage: Startups are inherently risky, and when you use a credit card to fund one, you are gambling with your personal credit score.
  2. You are personally at risk for a lawsuit: If credit card debt proves to be the downfall of your company, debt collectors will likely be able to come after both your company and your personal income/assets to recoup what you owe.
  3. Credit cards might be unattainable:The fact that business credit card underwriting has more to do with your personal credit standing than that of your business might help you get a better credit card, but it could also have the opposite effect.  Past personal credit problems could keep you from getting a credit card that will truly help you grow your business.
  • Potentially low limits: Because credit cards are unsecured, they generally provide lower spending limits than secured alternatives.  Sure, you could get up to tens of thousands of dollars to play with, but there is usually an invisible ceiling around the $50,000 mark.
  • Overextension:  The potential to spend more than you can afford to pay back is not a negative unique to credit cards.  Misuse of any small business funding vehicle can put you in the hole, which is why you should handle them with extreme care.
Ultimately, regardless of the funding method you decide upon, simply throwing money at a startup does not guarantee eventual success, Papadimitriou said. “Efficient use of this money as well as a lot of hard work and a little bit of luck are also essential,” he said.


Get ready For the Post-Christmas Cash Flow drought….7 ways to stay ahead!

The global financial crisis is squeezing credit and bank overdrafts and trade payments have been slowing. Therefore, small businesses should support themselves for an economic slowdown in the wake of chaos in international finance markets and a decrease in the value of the Australian dollar. They should be keeping a close watch on cash flow, considering the most appropriate finance options and improving administration processes. Here are some helpful tips to help your business survive and thrive in challenging market conditions!

1.       Get Organised – Keep summaries of all purchase and sales invoices and petty cash dockets. Importantly, keep your bank statements safe as they are a record of your payments and receipts.

2.       Always check the credit status of a new customer – Risks must not be underestimated in the eagerness of taking on new business. Credit checks can be done quickly and are relatively inexpensive.

3.       Chase overdue accounts regularly – take prompt action to follow up overdue accounts by telephone and check customers whether they have received invoices.

4.       Look for more flexible funding options – why not look into Debtor Finance or a line of credit.

5.       Review your suppliers – review the prices of all your suppliers are charging you. Are you too loyal to your suppliers for the wrong reasons? Think of the effect of 10% reduction in cost on your profits!

6.       Dusts off your business plan– try to reconstruct a winning business plan in 2012. Keep an electronic copy to make sure changes are easier to track.

7.       Call in a business consultant – A dedicated financial consultant can help you plan effectively and take advantage of opportunities on the horizon. If you would like more information on Business Consulting contact James Solomons on (02) 98683900 or james@elitefinance.com.au. 

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