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.

THE DIGITAL REVOLUTION AND THE DEMISE OF PAPER FILES

Anyone who worked in the clerical/administration field prior to the introduction of computers can attest to the mountains of documents that they and their colleagues created, mailed out or received, moved around, processed then filed for legal, taxation and reporting purposes, year after year. This was followed by the annual review of archived documents and the shredding and disposal of those that had reached their disposal date.

The digital revolution started slowly with promises of a paperless office, which many laughed about for some years while paper continued to accumulate alongside computer terminals. However, technology improved over time and we now have the appropriate software and online tools to not only reduce the volumes of paper but to also deliver information and documents instantly.

Accounting and other business software has allowed businesses to generate, send and receive work orders, invoices, payments, bank statements, time sheets, pay slips and many other standard business documents electronically. The technology also saves and files these documents, and provided this is done securely using accepted protocols, they can be retrieved quickly when needed.

These advancements have changed the face of the typical office and also the way we work in that space. For example, most businesses now use the electronic lodgement system provided by the ATO (Australian Taxation Office) to lodge tax and annual returns such as company tax returns, fringe benefits tax returns, SMSF (self-managed superannuation fund) annual returns and the fund income tax returns.

It is not just businesses that appreciate the efficiency of paperless technologies. Ordinary PAYG (Pay As You Go) taxpayers can complete and lodge paperless tax returns through myTax, available on the ATO website. Information from banks, employers, government agencies, health funds etc. needed to complete individual tax returns is automatically uploaded, leaving the taxpayer to provide deductions and anything additional. Tax refunds are usually paid into bank accounts within two weeks.

SMSFs (self-managed superannuation funds) are another group that would struggle to manage multiple administration and reporting requirements without the speed and convenience of paperless technology. For example, fund trustees are responsible for ensuring that proper and accurate tax and superannuation records are kept, some for 5 years and others for 10 years.

To keep large volumes of financial reports, tax returns, investment information, minutes of trustee meetings, registers of members, declarations, reports and other documents for up to 10 years is a logistical nightmare. The whole scenario becomes much more manageable if these records are paperless.

Assisting fund trustees to manage their administration and reporting responsibilities can also be outsourced. Superannuation and taxation laws are complex and constantly changing, so specialist companies such as SMSF Assure can be engaged by trustees to ensure that all their actions are in accordance with current legislation. They will scan all fund documentation into their electronic document management systems for record-keeping and audit purposes, as well as maintain all registers and records on behalf of the fund. None of this would be possible without paperless technology.

KEEP UP TO DATE WITH THE LATEST MANAGEMENT TOOLS

Every person who has turned their dream of running their own business into a reality is an entrepreneur. Most started small, trusted their business acumen, hired competent staff and most likely took advantage of the best financial management tools available at the time. Sound financial management is essential to business success and now, in our time of constantly evolving technology, there are all types of tools available to assist entrepreneurs and their staff.

Computerisation has revolutionised every aspect of our economic activity. Tasks that were once labour intensive, repetitive and slow to produce results are now completed in an instant, and the results of business and operational decisions are available for analysis almost immediately. The magic ingredient that allows this to happen is computer software and there is a program for every aspect of business activity.

Choosing which software is the best for financial management will depend on several factors including the size of the business and the types of products or services they provide, but as a general guide, there are three that many successful businesses use to process information and provide operational guidance to assist decision-making.

The first is Harmony PSA. This is suitable for companies with complex billing models and provides a consolidated system that supports the entire business cycle from lead generation to contract renewal. It is specifically suited to software and service businesses with all business functions automated on a single platform.

MYOB Advanced is the second choice. The original MYOB has been available for some years now and was a favourite of small business. MYOB Advanced is tailored for bigger businesses and includes accounting, inventory management, workflows, manufacturing, payroll and other functions. This software provides management with integrated data in real time for better decision-making, providing the opportunity for faster growth.

For the final pick, idu-Concept emerges as the ideal budgeting, forecasting and reporting system for mid to large-sized businesses. This versatile software is suitable for manufacturing, education, financial services and other sector businesses. The system also tracks spending and manages assets and equipment as well as other functions. It is also available as an outright purchase for installation on a company server for those organisations that prefer local control of their information.

Successful business owners should look at their operational software from time to time to make sure that what they are using is giving them the best value for money. What they should also be looking at is setting up their own SMSFs (self-managed superannuation funds).

Superannuation is one of the most effective and low-tax ways to plan for retirement, and most business owners have their own SMSFs instead of using retail or industry funds. Those who are too busy to look after the complex administration and reporting requirements of running an SMSF engage other companies such as SMSF Assure to look after these details for them, just like they hand over operational tasks to their own staff. Both approaches work well and give the busy entrepreneurs some leisure time to themselves.