finances

 

It is unimaginable for a business owner these days to attempt to operate without a sound understanding of P&L and Balance Sheet. Without this, we resort to running the business by feel, which is usually misguided and directed by emotional considerations. Understanding the numbers means effective accounting and financial analysis must be in place. But, traditional accounting is extremely complex for business owners. For this reason we have developed the ProfitNow! Methodology which allows you to use the most common approach small business owners understand; look at your bank balance(s) daily. This is easy to understand and takes just a couple of minutes each day to use effectively.

Budgeting & Forecasting

Budgets are the financial aspects of your business plan. They are the benchmarks for monthly performance. Without budgets we have no idea if we are tracking toward our annual goals. Forecasts are an extension of budgeting influenced by changing circumstances. Forecasts are also used to “what if” analyse possible changes of direction, new product additions to revenue, capital equipment acquisition impact on capacity, new hires etc. Without proficient tools to forecast we are making decisions on “gut-feel” rather than then numbers.

Cash Flow Management

Most companies that go bankrupt do so, not because they are unprofitable or revenues have sharply declined, but, rather, because cash flow was exhausted and they can’t raise funds to supplement the shortfall. Profit rich, cash poor collapses are rife. This encompasses sound management or Accounts Receivable, Accounts Payable, Debt (both cash and lease) and Prepayments.

Breakeven, Gross Profit Margin and EBIT %

Knowing what these need to be to maintain a successful growing business is vital to success. Breakeven is the intersection of the revenue chart with the sum of your fixed and variable costs. The point at which you just cover all your expenses. Beyond this point your profit is earned between your Gross Profit and your variable expenses. Confusing? Only if you don’t have a quality financial analysis tool to monitor the situation at your fingertips. Most businesses don’t.

Taxation

There are only two certainties in life. Death … and Taxation.

Understanding the taxation implications of your operations and each decision you make can’t be abdicated to your tax accountant who reviews the situation once a year. PAYG, GST and SGL are all obligations you have both as a business and personally as a director. If your business doesn’t pay them, or can’t, Mr Tax Man comes after you personally as the legislation makes each and every director severally responsible. You must have sound tax management in your business and ensure your cashflow can meet your obligations when they fall due.