WOMEN TAKING THE REINS OF FAMILY BUSINESS IN INCREASING NUMBERS

It may come as a surprise to know that the family business is one of the most common business models worldwide and even more surprising is the statistic that in Australia, family businesses account for 70% of all our businesses and employ half of our workforce. The sector is worth approximately $4.3 trillion and has its own peak body to provide support and information for its members.

It is also interesting to note that women make up just over one-third of all Australian business operators and the numbers of women who are running their family businesses are expected to equal males within the next few years. This acceleration away from male domination of family businesses is driven by the rapid take up of university education over the past few decades by females, and the support provided within the family business structure which is generally not available in private enterprise.

A typical example is the flexibility family businesses offer female leaders regarding child-rearing and personal family demands, which the corporate world is now recognising but is still slow to provide. Family businesses are also well ahead in their willingness and desire to trust and empower female leaders.

Reliable, authoritative studies have consistently found that women in management positions make fairer decisions, are more consultative, work to seek consensus before making decisions and are quick to adopt new governance practices. This applies equally across all business structures including family businesses.

There are unique dynamics involved in taking a leadership role in a family business. The two levels of relationship involved, being professional and family, become all the more complex when managers and team members are related to each other. Sometimes a female family member may become CEO unexpectedly following a sudden death in the family, but generally, the appointment comes as a result of sound business knowledge coupled with relevant experience.

Women in leadership positions would also be aware that generally speaking, women in the workplace are disadvantaged when it comes to accumulating sufficient superannuation to support them in retirement. The causes of this imbalance between male and female participants in the workforce are, as would be expected, are extended absences to bear and raise children, and later in life, further absences to provide care for elderly parents or relatives.

These accumulated absences can amount to many months if not years, interrupting careers with subsequent loss of income on which superannuation contributions are based. Women running family businesses are in an excellent position to establish self-managed superannuation funds (SMSFs) to ensure that all their employees, including family members and other women are members of funds that work towards ensuring comfortable financial circumstances in retirement.

These female leaders are also likely to recognise that to personally manage the day-to-day operations of their SMSFs would interfere with their ability to run their family businesses. To overcome this issue and provide assurance to the fund members that the fund is complying with all ATO reporting requirements, they are likely to engage companies such as SMSF Assure to handle all the administrative details on their behalf.

WHY CAPITAL GROWTH IS AN ESSENTIAL PART OF AN INVESTMENT STRATEGY

Residential real estate in Australian capital cities and large regional centres has been an attractive and relatively secure option for investors for many years. Steady and continuous economic growth for 29 consecutive years was reversed only by the pandemic. Tax incentives such as negative gearing opened up investment in real estate to people who might not otherwise get the opportunity.

There are two factors that need considering when investing in real estate. The first is the rental income that can be gained from sound property management and good tenants. The second is capital growth which occurs as the value of the property increases over time. Choosing one over the other is not a simple decision and often depends on individual circumstances.

Regular rental income is important to investors who are relying on the net income to assist with the mortgage repayments on their investment property. Any shortfall would usually be made up by the owners out of their own funds, so the longer the property remained without a paying tenant, the more difficult their financial position could become unless they had considerable alternative resources.

Capital growth is a long-term proposition as it is something that occurs largely due to market forces. Economic conditions, fluctuations in supply and demand, an increase or decrease in the population of a certain area and other demographic shifts are events which are out of the control of the investor. The only thing they can control is the condition of the investment property. Regular maintenance, improvements and renovations keep it in good condition, allowing it to increase in value.

Prudent investors enter the property market on the understanding that they are embarking on a long-term strategy. Historical data shows that the capital growth to be had by holding a property for as long a time frame as possible will far outweigh the value of the rental income over a corresponding period of time. However, for some investors, an immediate injection of rental income may be part of their own, albeit short-term, strategy.

Property investment is a popular wealth-creating strategy, not only among the general population but also for the trustees of SMSFs (self-managed superannuation funds). While they are also looking for rental returns, their focus is long-term as they build sound foundations on behalf of their fund members.

Fund trustees also carry the responsibility of the reporting requirements necessary to keep their funds compliant with ATO (Australian Taxation Office) requirements. This is in addition to managing the fund investment portfolio. However, many fund trustees are now turning to companies like SMSF Assure that specialise in managing the administration tasks on behalf of their clients, allowing the trustees to keep their focus on fund investments.

ATTENTION START-UPS! DOES THIS SOUND LIKE A PLAN?

If asked, most successful small business owners would agree that when they started out, they were at the bottom of a very steep learning curve. Many of them, if they had to do it all again, would do some things differently but at the same time, they appreciate the lessons they learnt through experience.

However, in many cases, the lessons learnt were expensive and involved losses the business otherwise may not have incurred. Unfortunately, many start-up businesses still follow the same learning curve and for some of them, the losses mean they do not survive. Would the results have been different if these businesses had been part of a mentoring program designed specifically for them?

Business mentoring programs are offered to existing clients by accounting companies to help them build better businesses through a long-term collaboration rather than just as a problem-solving measure. There are many benefits for the clients, but the greatest is to have access to someone in the role of an unbiased sounding board and who is unafraid to challenge thinking and decisions.

To have access to such a program would be invaluable for a start-up business and, like every good idea it should begin with a plan. The first part of the plan is to meet with the client to establish conventional agreements such as professional costs, frequency of consultations, service expectations and reporting methods.

The second part of the plan should be to check that basic management tools such as accounting records are in place. This ensures that the fledgling business is starting on solid foundations. Other tools such as marketing plans, cash flow projections and others may not yet be available but should be mentioned in the planning process to be followed up later.

Planning should continue along these lines while being flexible enough to be tailored specifically to different types of business, rather than being a rigid template. The plan should also have enough structure for timelines and targets to be established.

Once the plan is finalised and agreed by the client, the next step is to designate a qualified mentor who will provide support, guidance, objective feedback and further expertise when required. This is an important role, as the success of the program depends on the professional relationship between this mentor and the business owner. Trust and confidentiality are paramount here.

This structured approach to the initial planning process would also be useful for business owners who want to set up their own self-managed superannuation funds (SMSFs). This is a complex process set down by the Australian Taxation Office (ATO) with an annual reporting and auditing regime with financial penalties for breaches of the regulatory system.

For new business owners trying to get their product to the market, this would be an unnecessary distraction. However, companies such as SMSF Assure are specialists at managing the administration aspects of SMSFs for their clients. They ensure that all administration requirements are in place, leaving the business owners to work on establishing successful enterprises.

WHAT IS A FAIR PRICE FOR ACCOUNTING FEES?

Most large businesses and corporations have the financial means to employ qualified accountants as permanent staff members, but this is out of the financial reach of small businesses. For them, having a competent bookkeeper, either full or part time depending on the size of their business, is sufficient for most of the year. At tax time, or if they need more than basic financial advice, they meet with their external accountant.

Fees for these consultations can sometimes be difficult to quote upfront, especially if the work is more than a basic tax return. As the accountant begins the work it may become far more complex than was first thought, and if the business owner has agreed on an hourly rate, a couple of hours work can quickly increase from a few hundred dollars to several thousand.

Some accounting firms offer fixed price agreements, which provide their clients with some certainty regarding the fees, but this is usually a private arrangement that is not universally available. For the business owner, finding out if the fees they are being charged are fair and comparable to others doing the same work can be difficult.

There are several regulatory and professional bodies that can assist. Before choosing an accountant, regardless of fee arrangements, business owners should check credentials. Ensure the accountant is a member of a professional body such as Chartered Accountants Australia and New Zealand, Institute of Public Accountants or Certified Practising Accountants Australia.

Members must have an accredited tertiary qualification and comply with a set of professional standards. If a client feels their accountant has not complied with these standards, they can make a complaint to the relevant professional body. Business owners should also be aware that only registered tax agents can prepare and lodge tax returns. Accountants who are doing this work must also be registered with the Tax Practitioners Board.

As with most decisions, a good place to start is by seeking recommendations from other business owners, including asking them about the fees they are paying. In Australia, the accountancy profession is not regulated so there are no scheduled fees. The marketplace is the final arbitrator of accounting fees, which ensures they stay competitive.

This is also the case for companies offering their services to assist SMSF (self-managed superannuation fund) trustees to keep their funds compliant with regulatory requirements. Companies such as SMSF Assure provide administrators who understand the complexities of SMSF legislation and work with their clients to ensure that all documentation is in place and all lodging and other requirements are met.

A REGULAR, STRUCTURED ROUTINE KEEPS EVERYTHING IN ITS PLACE

The management of every business, whether it is a multi-national entity, an SME (small to medium enterprise), a micro-business or a sole trader, it must have up-to-date and accurate data about every aspect of their trading operations. In these volatile times, the health of a business can be compromised overnight, so managers must have access to relevant information so they can make operational corrections quickly.

In this mix is the financial data which is always critical to the health of any business. Mistakes and omissions in entering the data into the business systems will appear in the various management reports used to make decisions. One of the most important duties of a bookkeeper is to ensure this does not happen and good bookkeepers usually have a few regular habits to keep them focused.

Making it a habit to regularly check the status of the accounting software being used, then performing updates and backups will be an important task for most bookkeepers in small companies. Larger entities will most likely have in-house computer experts to keep the software up to date, but for the others, including contract bookkeepers, the habit of setting reminders for this important task is on top of the list.

Next, is the important habit of entering all daily transactions on the day they occur, or if that is not possible, within the week they occur. Sometimes it may seem more efficient to leave customer receipts, invoices and other source documents until there is a sufficient mass to occupy an afternoon putting them into the software. This is a dangerous practice, because if management requests a report unexpectedly, none of these transactions will be there.

Also, a recurring nightmare for accountants with small business clients who do not have a regular bookkeeper is to be handed a large box full of transaction documents and be asked to prepare a yearly tax return. Leaving all the data entry until this point in the financial year not only creates a huge workload but also, the owner has missed out on the benefit of reporting information that informs key decisions.

The third important habit is to keep the filing up to date. Some micro-businesses may still use a paper-based system, but the most efficient way to keep everything readily accessible is to upload the documents into the filing systems built into the software. This still requires setting up a system of folders for each financial year, appropriately named to suit the business.

It is also important to remember that there are certain documents that the ATO (Australian Taxation Office) requires businesses to keep for sometimes up to seven years, so this habit is essential to providing the correct documents in the event of a tax audit. Also remember that any filing system is useless if documents cannot be retrieved when they are needed.

Consistency is the thread that runs through this discussion about good habits. It is also something that business owners managing their own SMSFs (self-managed superannuation funds) struggle with. Administering an SMSF is time consuming, with many reporting deadlines and other statutory requirements set down by the ATO. Many business owners are now using companies such as SMSF Assure who are specialists in the administration of SMSFs, so they can concentrate on managing their businesses.