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Knowing your financials is vital for success in 2021

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The uncertainty of last year is in the rearview, but a bumpy road still lies ahead

More than ever, businesses need to understand and manage their finances to navigate the new terrain of 2021, not just to survive but thrive.

2020 lost some great companies, and the years to come will take more. So how can you begin protecting yourself and your investments when the landscape is still shifting below your feet?

Below are some essential tips to consider:

Know your tolerance for financial risk

According to Yelp.com’s Local Economic Impact Report, for more than 97,966 businesses, 2020 caught them off guard, causing them to close their doors permanently. Though traffic is picking up for some, there is no promise that revenue will get better for all businesses.

Are you ready to put it all on the line? If you are, there is success out there. If you’re not, you may need to consider a strategic pivot seriously.

OK, now that we have gotten that out of the way. Let’s move on to some positive action steps.

Build a budget

We know we can not predict what lies ahead. However, we can learn from the past, make educated assumptions, and create a budget for the possibility of a tumultuous 2021.

To help plan a tentative budget, here are a few questions you should ask:

  • What was revenue like in January and February of 2020?
  • How did it compare to profits in April of 2020?
  • What do you experience as the pandemic restrictions ease/tighten?
  • Do seasonal changes affect your revenue?
  • Do you have revenue streams that continue to grow?
  • Have you increased or decreased expenses during the pandemic?

No one knows what’s in store for business owners in 2021, but we do know that to survive 2021, business owners need to understand the financial basics for their business. Utilising powerful apps to build a budget will help you do just that.

Know your goals

For some businesses, making goals for 2021 might seem elusive, especially coming out of a year like 2020. However, by taking the time to define your goals, you will find the grit you need to stay in the fight.

Success isn’t by chance. Simply dreaming and hoping for growth in 2021 will not cut it.

  • Tips to setting achievable goals:
  • It’s still OK to dream big
  • Write your goals down
  • Set achievable milestones
  • Share your goals
  • Work on your goals daily
  • Be SMART (Specific, Measurable, Achievable, Relevant, Time-bound)

Actively analyse finances

By consistently running a balance sheet and updating your financial statements, you’ll always have your thumb on the pulse of your business. There are excellent apps available on the Xero App Marketplace to do just this. If you are uncomfortable building various reports, get help from a trusted advisor like an accountant or bookkeeper who will help you understand your economic landscape.

Understand your cash flow

Businesses are showing a steady improvement in their spending outlook as 2021 gets underway. As a business owner, you need to know where to spend your money and where to pull it back.

Though a business can look successful on paper, businesses fail at an alarming rate due to cash flow. It is essential to shorten the days between spend and collection from sales. The fewer days between the two means more cash on hand and less you will need to borrow. Developing a cash flow projection will ensure you have the money to pay vendors, staff, lenders, and yourself. Here are some apps that can help.

Separate business and personal

It’s more important to separate business from personal finances in 2021. Making the separation will ensure you treat your business like an independent entity while protecting your financial circumstances with a ‘corporate veil’. This type of protection makes the company accountable for any debts or legal responsibilities rather than holding the owner personally accountable.

Save for emergencies

For lots of companies, during economic downturns, they stop serving their current customers and start desperately looking for new customers. A better approach is to produce new products and services for customers who already know and love you. Your customers will let you know how to stay in business. Consider taking the necessary steps to listen to your customers by giving them a way to connect with you 24/7. Don’t stop there. Listen to them with the intent to act. Your customers are letting you know how you can serve them better.

Remember, other companies are looking for new customers, and if you are not tending to yours, your competition will.

Focus on the future, not the past

2020 was devastating for the world in many regards, but there is still a bright future ahead. We must learn from our past, but we mustn’t stay in our past. The future is in our imagination, so why not imagine a future of possibilities. When you set your goals, budget, or strategies, be realistic but still shoot for the stars.

Be agile

Be prepared for anything; you have got to be able to think on your toes. 2021 will not give you the time to cut through red tape. If you’re too slow to open the door when opportunity knocks, it will head over to your competitor’s open door.

Become more efficient by automating redundant tasks to free up management from routine, time-consuming tasks and allow them to engage in business strategies to increase profits and customer service.

Be adaptable

Success comes to those that can roll with the punches. Many businesses failed due to their inability to be adaptable. You should be able to pivot at a moment’s notice in good times or bad. This past year we saw restaurants close in droves while others seemed to thrive. The difference was the quick adjustment to delivery and curbside service.

Showcase your differentiation

In 2021 brand connections are becoming more critical for consumers. Customers are now looking for brands they can trust and support during these challenging times.

Companies need to step up and show they are willing to provide superior customer service, operational excellence, clear and transparent communication, and affordable products. Especially in times of struggle, people are looking for assurance that good is out there.

Now is the time to shine and show others you care.

Remember your ‘why’

Most important, you have got to remember why you went into business in the first place. Do you have clarity around the ‘why’ of your business? No? That’s ok, but it’s time to figure it out. It is not about making money; that is the result. Your why should be the purpose, cause, or belief behind the reason your organisation exists. Knowing why you are in business can help you make hard choices, stay focused on your goals, and take the necessary risks needed to succeed.

The landscape is uncertain for 2021, but there is reason to be optimistic. Businesses who stimulate growth with new products and services create jobs and infuse the economy with the money it needs to recover.

Notch Above Bookkeeping are Platinum Certified Xero bookkeepers and BAS Agents. We help small business owners across Australia (including medical specialists such as dentists, orthodontists, optometrists and anaesthetists) to prepare BAS returns and streamline their bookkeeping processes, payroll and accounting records using cloud technology.

Source: Xero

#remotebusinessbookkeepers #cloudbusinessbookkeeping #xeroplatinumbookkeepers

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Xero Verify Multi-Factor Authentication

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Why Xero is securing your account with Multi-Factor Authentication

As more people around the world embrace digital technologies, the number of cyber attacks continues to increase.

One of the most common types of cybercrime is phishing, designed to access your online accounts and steal your personal and business information.

As custodians of your data, Xero takes that responsibility very seriously. They don’t just tick the boxes when it comes to security – they go above and beyond to make sure Xero is the most trusted platform for small businesses.

To make sure your Xero account continues to be secure, Xero is making Multi-Factor Authentication (MFA) mandatory for all Xero customers globally in the year ahead.

A global change to protect your business

MFA is a log in verification process that goes beyond typing in your username and password. It gives you access to your account using something you know (your username and password) and something you have (your mobile device or computer).

Think of it like putting an additional bolt on the door. It’s a small but important thing that significantly reduces the risk of unauthorised access to your account, because it’s much harder to steal something you know and something you have.

In fact, research shows that MFA can prevent up to 80% of data breaches. The beauty of using your phone as an authentication method is that it’s always with you, which means you can still access your Xero account anywhere, at any time.

Introducing the new Xero Verify app

To give you fast, easy and secure access to your account using MFA, Xero has created their own authenticator app called Xero Verify. It’s built using the highest security standards and gives confidence that your account access is in safe hands.

When MFA became mandatory in Australia, Xero saw a significant drop in account takeovers. Xero expects it won’t be long before other governments take Australia’s lead. So like everything security at Xero, they’re staying ahead of the game and making it mandatory for all customers globally.

Xero Verify is now available free of charge in the Apple and Google app stores. It only takes a few minutes to set up and sends a push notification to your phone when you log in, so you can just tap and go. We know you’re busy, so Xero has made it beautifully fast and easy to use.

Notch Above Bookkeeping are Platinum Certified Xero bookkeepers and BAS Agents. We help small business owners across Australia (especially medical specialists such as dentists, orthodontists, optometrists and anaesthetists) to prepare BAS returns and streamline their bookkeeping processes, payroll and accounting records using cloud technology.

Source: Xero

#remotebusinessbookkeepers #cloudbusinessbookkeeping #xeroplatinumbookkeepers

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Top tips to get your books in shape for year-end

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Enjoying a stressless financial year-end

The financial year-end can be a stressful time for small businesses that don’t have their bookkeeping in order. But it doesn’t have to be.

Here’s what you need to get through it, including our tips on how to minimise the drama.

Helpful definitions

What is the Australian financial year? The Australian financial year (also the Australian tax year) runs from 1 July to 30 June. At midnight on 30 June, your business books are closed for the year and you report your financial situation to the government. They use this information to figure out how much tax you owe.

Profit and loss (P&L) statement In its simplest form, a P&L statement shows your income (or revenue) in one column, and your expenses (or costs) in another. Expenses are subtracted from income to show how profitable your business is.

Balance sheet A balance sheet summarises your assets and liabilities. Assets are things the business owns, like work tools, vehicles and cash in the bank. An invoice that you’ve sent but which hasn’t yet been paid is also an asset. Liabilities include debts and bills that you’ve received but haven’t yet paid.

How to have a better end of financial year

For the new financial year, try to set up systems that:

  • limit the amount of work you have to do at tax time
  • give you a running report of business performance (so you don’t have to wait till this time next year to find out how you’re doing)
  • create an automatic audit trail

Online accounting software automates data entry, so your books are always up to date. That’s great for the end of financial year and tax season, but it also means you can create a P&L statement or a balance sheet whenever you like – not just at tax time. And because you’ll have digital records of everything, there’s no need to fear an audit if one comes knocking at your door.

Other crucial things to consider

Some business owners find it useful to use this information like a checklist to keep on track and improve their systems:

  • Use only business bank accounts to pay business bills
  • Get online accounting software that retrieves transaction data straight from your bank
  • Stay on top of bank reconciliation so income and expenses are correctly classified
  • Lodge accurate and up-to-date BAS returns – if not attend to lodgement, arrange an ATO plan and consider how you can keep up to date in the new financial year
  • Ensure super guarantee (SG) contributions are accurate and up-to-date
  • Are your Single Touch Payroll lodgements up to date?
  • Reconcile your payroll and ensure this agrees to Single Touch Payroll lodgements and BAS returns lodged
  • Have your bookkeeper review your automatic bank rules and the GST codes assigned
    to the P&L and Balance Sheet items to ensure you are lodging accurate BAS
  • If your business carries stock, ensure you complete and end of year stocktake

Also, review your Balance Sheet and P&L to ensure you have completed the following items:

  • Bank accounts, petty cash, credit cards, loans and HP/Chattel Mortgages are reconciled
  • Compare your Accounts Receivables and Payables reports to amounts shown on the Balance Sheet to ensure no ‘out of balance’
  • GST and PAYG withholding accounts are reconciled to the June BAS
  • Wages and Superannuation in the P&L are reconciled to the Single Touch Payroll Lodgements
  • Amounts in suspense have been allocated to the appropriate ledger account or, if unsure, complete note in the memo to assist your bookkeeper to determine the correct treatment
  • Personal expenses have not been claimed as business expenses
  • Material differences to the prior year can be properly explained

No wonder business owners’ heads can be left spinning after reading all of that! But that’s where a safe pair of hands like a business bookkeeper can be worth their weight in gold, especially one that uses up to date technology so you and your advisers (and even the Tax Office) can review your business information in real time whenever they need to.

Notch Above Bookkeeping are Platinum Certified Xero bookkeepers and BAS Agents. We help small business owners across Australia to prepare BAS returns and streamline their bookkeeping processes, payroll and accounting records using cloud technology. Call us on 1300 015 130.

#remotebusinessbookkeepers #cloudbusinessbookkeeping #xeroplatinumbookkeepers

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Cut costs or continue spending?

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6 Ways of Increasing Business Profit During a Recession

With the economy in recession, many businesses have faced the challenge of re-evaluating how they operate.

One of the most difficult decisions is whether to cut costs or continue spending. But which of these activities could help increase your profits to build a more resilient business?

Here are six ways you can improve your profit margin despite tough economic times.

1. New marketing strategies

Reviewing your marketing activities can help you discover better ways to make sales and grow your market share. Focus on communicating a strong unique selling proposition (USP) that helps your business stand out from the crowd.

Marketing can be costly, but even during an economic downturn, every business can access a range of free or low-cost tools which can help build your brand awareness and deliver your message. For example, through content and social media marketing.

2. Flexible staffing

Even with support programs like JobKeeper, loss of revenue has forced some businesses to reduce their headcount. Another option is to keep staff employed at reduced or part-time hours, which allows the business to be more financially flexible while retaining important skills.

Alternatively, you may be able to train employees to take on a wider range of responsibilities. Conducting a skills assessment can help you to identify potential skills gaps. Engaging contractors and freelancers can also help to reduce costs as needed.

Wages and working conditions are sensitive topics which could make or break employee morale. Remember to communicate any changes clearly and try to include employees in the conversation when seeking solutions.

3. New revenue streams

Diversifying your customer base can be a smart business strategy during an economic downturn as it can help minimise the impact of losing other crucial clients. This could involve pivoting your business to serve more essential industries where consumer demand is likely to grow, such as health, education or remote working.

Adapting your existing offering to align with these new consumer needs can be an effective way of increasing profits and expanding your market.

3. Cost efficiencies

Reducing business costs should never have to involve cutting corners or reducing the quality of your overall offering, including customer service. Instead, you should seek out ways to cut unnecessary fat to the end of reducing financial risk and waste.

For example, you could try to negotiate more flexible terms with your suppliers in order to still meet customer commitments without things piling up in the warehouse before being sold. Fine-tuning your sales forecast can help you find a sweet spot between supply and demand that results in steadier cash flow.

Try also reviewing your businesses operating costs, such as your commercial energy plan or insurance cover.

5. Focus on the customer

Being responsive to customer needs is a critical business strategy during a sudden market slump. It can help to improve retention and sales volume while giving your brand some extra gloss. This can involve:

  • surprising customers with discounts and giveaways
  • running a loyalty program tied to incentives
  • listening to and acting on customer feedback
  • overdelivering on your promises.

Good after-sales support is a vital part of any customer retention strategy, as it shows you are invested in providing a positive end-to-end customer experience.

6. Partnerships

Teaming up with businesses offering complementary (or even similar) products or services could also help boost your profits. This practice is also called co-marketing. Combined efforts may enable you to offer greater value to customers while also expanding your audience reach.

A good example is a food delivery service such as Deliveroo, which offers contact-free delivery options to encourage people to support their local hospitality industry, thus boosting each other’s business.

At the end of the day, every good business strategy should have a positive impact on your bottom line. Examine every corner of your business carefully to unveil where you might be able to cut costs and expose higher profits.

Notch Above Bookkeeping are Platinum Certified Xero bookkeepers and BAS Agents. We help small business owners across Australia (especially medical specialists such as dentists, orthodontists, optometrists and anaesthetists) to prepare BAS returns and streamline their bookkeeping processes, payroll and accounting records using cloud technology.

Source: Business Australia

#remotebusinessbookkeepers #cloudbusinessbookkeeping #xeroplatinumbookkeepers