building your cash flow forecast2020 Notch Above Bookkeeping

Manage your business cash flow

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Cash flow is the amount of money that goes in and out of your business; that is, income and expenses.

Having enough cash at the right time will make it easier for your business to pay bills and other expenses and meet your tax, superannuation and employer obligations.

Paying regular attention to your record-keeping and reporting tasks will help you better manage your cash flow. Managing your cash flow allows you to plan for the future, for example, prepare for large expenses or expand your business.

Prepare a cash flow budget or projection

The best way to make sure you have enough cash available to meet your tax and other obligations is to do a cash flow budget or projection. This information will help you to:

  • see your likely cash position at any time
  • identify any fluctuations that may lead to potential cash shortages
  • plan for your tax payments
  • plan for any major expenses
  • provide lenders with additional information.

Accounting for income and expenses can help keep your business running smoothly – by giving you an overview of when you can expect money to come in and when it may go out and highlighting where you may need to direct your money.

There are three main things to consider when creating your cash flow budget:

1. Timing

  • A cash flow budget isn’t ‘set and forget’. You can choose to work out your budget on a monthly, quarterly or yearly basis, depending on what you need or works for you.
  • As your business grows or your situation changes, keep monitoring your budget to see how you’re tracking and update it if needed.
  • Watch out for things such as significant differences between your budgeted amounts and your actual results.

2. Costs

  • Try to include all of your fixed costs and expected variable costs, for example, rent, insurance, utilities, advertising, internet, wages, equipment and taxes such as pay as you go (PAYG) instalments and goods and services tax.

3. Income

  • If you’re just starting out, estimate your expected income and you can continue to update your cash flow budget to help you keep track of income versus expenses.
  • Once your business has been running for a while, you’ll be able to get a better idea of the business income you may be able to expect.
  • Being more conservative with this amount may help give you some flexibility if unexpected, more costly expenses come up.

Your budget results will help you with your business decisions.

Budget planning

Do you know how to create a budget for your business? A budget is simply an estimate of income and expenditure for a set period of time.

Creating a budget will help you plan the future of your business, most especially your profits.

The professionals at Notch Above Bookkeeping have the skills and expertise to help you set a realistic budget as well as advice on how to stick to it. Call our business bookkeepers Australia-wide on 1300 015 130.

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Further viewing

Source: ATO

Entrepreneur working on a project at home

4 Start Up Tips for Budding Entrepreneurs

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Entrepreneurs cautioned to keep a lid on costs when starting a business

In the wake of COVID-19, what were once employees are reconsidering how they’ll make their living in a new world.

Cue the surge of budding entrepreneurs!

Starting your own business can feel like you’re in a pressure cooker with newfound worry about when the next dollar will land in your bank account.

However there are some solid and proven steps that owners of business start-ups can take from Day 1 to keep your finances in check and make what should be an exciting process less daunting.

1. Side gig safety net

Picking up a side job could help reduce financial pressure and add some structure to the week.

It’s not uncommon for entrepreneurs who go from full-time employment to no structure find it overwhelming and they end up going back to a job.

If you can find a part-time job and leave your ego at the door – willing to do anything from brewing coffee, washing dishes or doing backroom work – be grateful that you can be fully present in your part-time job and, as a result, be fully present in your business.

2. Hire specialists

Apportioning income in a separate account to hire a bookkeeper is a smart move.

Make sure that you source professional advice from mentors as well as experts in their fields. When you’re starting out, you don’t know what you don’t know, so it pays to ask as many questions early on. Having professional help ensures that you don’t miss something important, especially when it comes to regulation and hitting deadlines on time, not after the fact!

And make sure that you do your tax annually, rather than letting it pile up for several years!

Recordkeeping is much easier with digital technology. Barely anyone hoards paper receipts for expenses anymore. Working with a professional bookkeeper can tick this box from the start of your engagement and keep you organised from the get-go.

3. Keep personal and business expenditure separate

Whether you deal with a bookkeeper or an accountant (or both) this is a golden rule!

The first step is to open up a separate bank account for your business. Doing so not only helps make that mental shift from thinking of your business as a fun hobby or a side project to a serious business, but you’ll be much more confident selling your products or services once your tax and systems are sorted.

Leaving the back end of your business in disarray subconsciously affects how you present to customers.

Entrepreneurs that know the advantages of organising their business into specified accounts can have multiple accounts covering tax and legal costs, operating expenses, savings to invest back into the business and payroll.

4. Keep a lid on costs

Another best practice piece of advice to new business owners is to keep overhead costs low and to use as many free resources as possible.

It’s out there if you know where to look: free software and as many free templates as you can practically use.

Starting as lean as possible could be a game-changer in the long run. Whereas launching yourself into $20,000 to $30,000 of debt puts you under pressure straight away, rather than having an opportunity to just enjoy working, getting out there and finding new customers.

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Specialising in Xero bookkeeping, Notch Above is a remote service bookkeeper and BAS Agent that offers Xero setup, as well as training and ongoing support. Notch Above can take care of all the bookkeeping tasks you would rather not do, like bank reconciliations, supplier payments, payroll services, debtor control and BAS returns. Contact us Australia-wide on 1300 015 130.

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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

cash flow

Tips for Maintaining and Managing Good Cash Flow

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Having adequate working capital at all times is important

Managing this capital carefully is critical.

Managing cash flow involves keeping a vigilant eye on revenue, cost structure, the quality of your business plan and your capital structure. This way, you can ensure your business remains cash flow positive at all times.

Best practice tips for cash flow management

Financial reporting

  • Have a properly structured balance sheet that has all the details, from inventory and debts to interest costs.
  • Know your business’ balance sheet back to front and understand the numbers. This is vital in managing cash flow and budgeting.
  • Review your P&L statements comprehensively at least quarterly and preferably monthly to identify trends and track progress against budgets and targets, whether or not times have been good.
  • Keep a close eye on margins to ensure costs aren’t creeping up.
  • Don’t just focus on your profit and loss statement to the exclusion of all else. Be aware that healthy profits can sometimes mask a developing cash flow crisis.

Cash flow management

  • A crucial part of managing cash flow for small business is knowing where every dollar and cent is being spent. Every dollar saved is a dollar straight on the bottom line, whereas a sale carries with it direct costs and overheads.
  • Construct a useful cash flow projection, which is your ‘best guess’ at the business’ cash inflows and outflows over a period of time. Review and adjust your projection regularly.
  • Work with your bookkeeper to learn how to manage cash flow in your business. Depending on your specific situation we may recommend doing cash flow budgeting on a weekly, monthly or quarterly basis and advise you on a range of issues including which invoices you should pay and who will pay you.
  • Update and review your business cash flow budget regularly, using conservative revenue and expense estimates. This will forewarn you about potential cash shortages. It will also help build your business’ credit track record.
  • Be aware that rapid growth can often result in a cash crunch.

Suppliers

  • Keep good records of supplier transactions. This will give you better leverage in negotiating more favourable terms and prices.
  • Regularly review your suppliers, such as your insurance or energy plan.
  • Get the payment cycle right for creditors and debtors.
  • Check all supplier invoices carefully for accuracy.
  • Spread the payments of invoices over the month when payments actually fall due rather than having one day per month designated to pay invoices.

Best practice

  • Keep your working capital and business bank account separate from your personal bank account.
  • Avoid giving family members credit cards on the business account.
  • Use purchase orders to reduce discretionary staff spending.
  • Draw a wage or salary for yourself rather than just drawing on the account for personal expenses as needed. This can be unmanageable, time-consuming and costly.
  • If your business has a floating interest rate loan, consider the benefits of locking in your loan’s interest rate for a defined period to avoid the impact of increased interest rates.
  • Consider the benefits of protecting your bottom line profitability and minimising the impact of additional interest costs bypassing any costs on to customers as they arise.

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

masked grocery shopper

Understand customer mindset to respond to buying patterns

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Volatile demand

Responding to fluctuating buying patterns all comes down to understanding customer mindset.

As the government restrictions to protect our health eventually ease, people will adapt to the changes at different speeds.

Those variations will, in turn, have big impacts on sales for small businesses.

For those supplying household basics, spikes of panic buying are still happening at times – and threaten to reemerge whenever lockdown restrictions return. In contrast, if you’re a small business owner helping people plan their international travel, things are likely to be quiet for some time to come.

When customers purchase can fluctuate and change at short notice, because planning horizons have shifted – all the more so while the risk of the crisis escalating again remains. Where once they might have scheduled a car service, beauty treatment or a B&B room weeks in advance, they now book only a few days out, due to shifting restrictions. For some businesses, like restaurants, it’s exactly the opposite, with limited spots being snapped up well in advance. It’s all part of the volatility of the times.

Experiencing recovery in different ways

As the recovery gathers pace, economic progress won’t always seem orderly, predictable or linear. In some small towns, for example, it may feel like not much has changed since before the pandemic. In cities, however, it may take longer for a new rhythm to become apparent, and this might change the forecasts you make for sales in different parts of the country.

On the international front, some countries aren’t likely to pass out of the pandemic crisis phase at the same rate as Australia, so supply shortages of foreign-sourced materials may continue even if our nation is thriving again.

Making your customers feel safe

You may notice in your own local community that people of different age groups choose to socially distance for longer than others. Older people, for example, may remain more cautious about gathering in large groups. If they’re a big part of your customer base, you might need to think about how to reach out to them.

Ultimately, we may hope that instances of panic buying and hoarding will disappear, but we can expect some levels of volatile and patchy demand to continue for small businesses for a while, as communities recover at different speeds.

That’s why it’s important to stay on top of what your customers need and how they’re changing their spending. Coping with volatility is much easier if you have up-to-date data and insights, and keep a close eye on changes you can see in your customers’ buying patterns.

Consider your customer

  • How will you monitor the volatility in your customer buying patterns and get access to more accurate demand data?
  • How can you create flexibility in your booking procedures to match the shorter horizons in customer forward planning?
  • If customer demand dips, can you try bundling some of your products with other complementary offerings, or find new referral partners and offer commissions?

Consider your business

  • How can you best respond to rapid rises in customer demand?
  • If customer demand falls, will you consider clearing stock, pivoting to new product lines, or diversifying your range to spread your risk?
  • If your production needs to fluctuate, could you reduce some fixed costs and make them variable?

Tips

  • Monitor customer demand changes frequently.
  • Minimise new overheads and examine ways to convert fixed costs to variable costs.
  • Develop plans to scale production up or down in quicker ways than you used to.
  • Shorten lead times for product development and production where you can.
  • Streamline order fulfilment in advance of customer demand surges to help get products out the door when sales shoot up.

Getting cash flow savvy

Cash flow management can seem somewhat elusive, and even impossible to forecast at the moment. But, with help from your bookkeeper, you need to make your best assumptions to work out on a weekly basis over the coming two or three months, how much cash is coming in, and how much cash will need to be paid out.

The Government’s stimulus has focused on assisting businesses with cash flow challenges get through the toughest times. But when JobKeeper and other stimuli end your business may require additional finance or significant changes to accommodate a reduced turnover and become cash flow positive. When you know you’ve got enough cash to keep going, you can then focus on longer-term plans.

Stay on top of your numbers with Xero’s short-term cash flow tool

If you’re using online accounting software like Xero, you’ll have access to features designed to provide the visibility and insights you need to manage your cash flow. Xero’s short- term cash flow tool visually projects your bank balance 30 days into the future, showing you the impact of existing bills and invoices if they’re paid on time. This not only provides clarity, but helps you work out which invoices you should follow up, and see how your cash flow will change if you pay a bill next week rather than this week.

Now more than ever, having financial visibility is key. The team at Notch Above Bookkeeping can be a helpful source of advice on your specific circumstances. Contact us on 1300 015 130.

Source: Xero

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#cloudbusinessbookkeeping

#xeroplatinumbookkeepers

cash flow

Know your boosts inside and out

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If you’ve received a cash flow boost, you may be wondering if the amounts you’ve received affect your income or deductions this tax time.

Here are the four essentials you need to know when lodging your tax return:

  1. You don’t pay tax on cash flow boost amounts as they’re non-assessable non-exempt income. You may still need to report the amounts in your tax return for other purposes. Read the relevant tax return instructions for your business structure for more information.
  2. You’re still entitled to a deduction for the payments made to your workers provided you have complied with the pay as you go (PAYG) withholding and reporting obligations for that payment.
  3. If you pass the cash flow boost on to others, there may be tax consequences for the recipient.
  4. If you claim the research and development tax offset, your claim isn’t affected by any cash flow boost you receive.

Remember, a registered tax agent can help you with your tax; please check with your accountant for further information on the tax consequences of the cash flow boost.

From builders to pharmacies, medical clinics to dental practices, Notch Above Bookkeeping has your business BAS covered. If you have questions in relation to eligibility and reporting requirements please call our team on 1300 015 130 for specific advice regarding your business.

Source: Know your boosts inside and out. (2020). Retrieved from https://www.ato.gov.au/Newsroom/smallbusiness/Employers/Know-your-boosts-inside-and-out/

Hands in Boxing Gloves

Business advice for a new financial year

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Another new financial year already!

It has gone quickly so we outline our top tips for business owners starting a new financial year and planning ahead.

Four months ago business owners weren’t necessarily comprehending the full impact of COVID-19 but the reality is that it’s really important to make sure you’ve got a plan in place and that you understand where what your goals and targets are, and how you’re going to get there.

Our advice is to simply start from the top – the 30,000 feet above sea-level view – and ask what your goals are for next 3-10 years:

  • What does that look like?
  • What do you want to achieve from a business point of view?
  • More importantly, where do you want to be from a personal point of view, and
  • How does your business deal fit into all of that?

Then break down your goals into smaller targets. Some business owners use the term ‘chunk’ to describe breaking their goals into smaller steps.

We also encourage you to take a step back and consider doing some market analysis

Understand what is going:

  • Do you know what your customers want now?
  • What will they want next, moving forward?
  • What worked well during COVID-19 lockdown?
  • Will you achieve your goals potentially faster with a new business model?

Define your actions and those smaller goals and then set in place what you to achieve them. Write each down with individual action items and then understand the time frames around as well as what is involved from a resource point of view.

Once you have your initial plan drafted, also consider the financial implications of your proposed actions. Look at your Profit & Loss, understand cash flow and determine if your plans are achievable from financial perspective. Ask yourself what the impact financially is with respect to your action items, then repeat the process until you’re comfortable that you have a plan in place that feels like it is a stretch, but is achievable. Then you can track and monitor performance against it.

With financial business modelling and forecasting, you need to understand what’s the best use of your time. Is it something you can confidently do yourself, or should you be asking your financial partners like Notch Above Bookkeeping or your accountants to do that?

Also keep your longer-term strategy in the back of your mind as you’re ticking off each chunky action item. In reality if you look at Mike Tyson’s trainer, he says everyone has got a plan to get punched in the face, so you have got to be nimble and flexible enough to be able to move quickly if required.

It rings true for business. You never know when something will get thrown at you and COVID-19 was the perfect example of that.

Prefer to watch this topic in video format? Click below or browse all of our video topics here.

Notch Above Bookkeeping is a team of Platinum Certified Xero bookkeepers and BAS Agents. Based in Brisbane we help small business clients right across Australia prepare their BAS returns and streamline their bookkeeping processes, payroll and accounting records. Call us to find out how on 1300 015 130 today.

Copyright 2020. @NotchAboveBAS and @SalisburyAccts

cash flow

COVID-19 Cash Flow Boost

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Boosting Cash Flow for Employers

Cash Flow Boost not to be offset against existing tax debt in some situations.

The Tax Office has announced that the cash flow boosts will be applied to reduce liabilities arising from the same activity statement but will not be offset against existing BAS debt but rather refunded to you. 

This is great news for businesses that do have an existing debt and will mean that the cash is in the hands of the business to assist during this uncertain time.

For this to happen, however, we do need to ensure the BAS for the March quarter is lodged AFTER 28 April rather than before.  If lodged before the refund will be offset against existing debt first.

For more information on the cash flow boost initiative, please see the tax office website here or get in touch with the team at Notch Above Bookkeeping on 1300 015 130.

Back to more coronavirus updates
Source: Boosting cash flow for employers (2020). Available at: https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/In-detail/Boosting-cash-flow-for-employers/?anchor=Accessingthecashflowboosts#Accessingthecashflowboosts (Accessed: 20 April 2020).

Economic Stimulus Package

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Coronavirus Economic Stimulus Package

The Government has announced a $17.6 billion economic plan to keep Australians in jobs, keep businesses in business and support households and the economy as the world deals with the significant challenges posed by the spread of the coronavirus.

The targeted stimulus package is focused on keeping Australians in jobs and helping small and medium-sized businesses to stay in business.

The package has four parts:

  1. Supporting business investment
  2. Providing cash flow assistance to help small and medium-sized business to stay in business and keep their employees in jobs
  3. Targeted support for the most severely affected sectors, regions and communities
  4. Household stimulus payments that will benefit the wider economy

Delivering support for business investment

  • $700 million to increase the instant asset write off threshold from $30,000 to $150,000 and expand access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. For example, assets that may be able to be immediately written off are a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business.
  • $3.2 billion to back business investment by providing a time-limited 15-month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct an additional 50 per cent of the asset cost in the year of purchase.

These measures start today and will support over 3.5 million businesses (over 99 per cent of businesses) employing more than 9.7 million employees or 3 in every 4 workers. The measures are designed to support business sticking with investment they had planned, and encouraging them to bring investment forward to support economic growth over the short term.

Cash flow assistance for businesses

  • $6.7 billion to Boost Cash Flow for Employers by up to $25,000 with a minimum payment of $2,000 for eligible small and medium-sized businesses. The payment will provide cash flow support to businesses with a turnover of less than $50 million that employ staff, between 1 January 2020 and 30 June 2020. The payment will be tax-free. This measure will benefit around 690,000 businesses employing around 7.8 million people. Businesses will receive payments of 50 per cent of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days.
  • $1.3 billion to support small businesses to support the jobs of around 120,000 apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

Stimulus payments to households to support growth

  • $4.8 billion to provide a one-off $750 stimulus payment to pensioners, social security, veteran and other income support recipients and eligible concession cardholders. Around half of those that will benefit are pensioners. The payment will be tax-free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. There will be one payment per eligible recipient. If a person qualifies for the one off payment in multiple ways, they will only receive one payment.

Payments will be from 31 March 2020 on a progressive basis, with over 90 per cent of payments expected to be made by mid-April.

Assistance for severely-affected regions

  • $1 billion to support those sectors, regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education. This will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks. It will also include additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism. Further plans and measures to support recovery will be designed and delivered in partnership with the affected industries and communities.

The Government is also offering administrative relief for certain tax obligations, including deferring tax payments up to four months. This is similar to relief provided following the bushfires for taxpayers affected by the coronavirus, on a case-by-case basis. In addition, the ATO will consider ways to enhance its presence in other significantly affected regions to make it easier for people to apply for relief, including considering further temporary shop fronts and face-to-face options.

The Government’s economic support package is proportionate, timely and scalable to respond to the economic challenges presented by the spread of the coronavirus.

Source: Economic Stimulus Package | Treasury Ministers (2020). Available at: https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/economic-stimulus-package (Accessed: 13 March 2020).