Why You Shouldn't DIY Your Bookkeeping

Business owners shouldn’t DIY their own bookkeeping. Similarly, I’m not the best person to go and rewire my house for electricity or the wires. I’m probably going to end up killing myself if I was to do that, or harm my family, or the house would burn down at some stage.

So I want to encourage you, if you’re DIY in your bookkeeping – yes, we might have given you some guidance on that, or you might’ve done a course or something like that – but DIY is one of the worst things you can do as a business owner when it comes to bookkeeping. From an element of, “you’re not the best person to be doing it” and “you’re probably not a trained bookkeeper either” – that’s one element of it, and the other element of it is the opportunity cost.

So, we had a client who was a doctor. In an hour, he could easily earn $120 to $150 if he was seeing patients. He was doing his bookkeeping, which you can outsource for much less than that. If we look at opportunity costs, it would pay for itself if he was seeing clients instead of doing his bookkeeping, and it would probably be more accurate. So, it would save rework or more expensive bookkeeping or accounting fix ups.

So please keep in mind, do not DIY your bookkeeping. If this stands out to you to say, “Hey, I’m kind of doing that, if I was honest with myself,” then please consider doing something about it.

Learn the 5 steps on how to take Total Financial Control. Watch the full webinar replay at https://insp.red/TFCreplay

How To Know If Your Product Will Sell

It is totally okay for you to go out there with a product that you’re learning how to do – and the way to do it is really, really simple: it’s signal. Don’t put any more work into it. Don’t say: “I need to get the web page right” or, “I need to have the flyer and the brochure ready” or any of that. It’s a waste of time right now, and It’s the wrong strategy or the wrong step at the wrong time. What you want to do first is signalling/beta.

Think of the people that you think are going to be the ideal clients for your product. Whatever the messaging system you use in your business, for instance social media, the more public the forum is the better it is, wherever that pool of people, you need to put out a message – and it’s something really simple as:

“Who would be interested in…”

Or another way to say it,

“I’ve been asked how to do” whatever the financial product outcome is, and I’m going to assume that people have asked you this. “I’ve been asked, a lot of people ask me, how do they supersize their super, and we’ve got an amazing strategy that we’ve been using that gets a 120% return over 3 years. Would anyone else be interested in learning how to do this?” So you put it out.

Now, the reason I say a public forum is it’s a thing called social proof. If you have social proof, then there’s a whole stack of people who are looking at this and go, “Wow, this is cool. We love what Meg’s doing on this sucker here.”

And we go, “I want in.”

Then you go, “Great. What I’m doing is I’m going to be running a beta group.”

If they’re interested, then you go, “The second step is…” And then you would do more of a presentation: this is what it’s about, and this is what it looks like.

Start with a small number – let’s say somewhere around 10 is usually a good number to start with. Say, “I’m looking for 10, only 10 people. Now, part of the caveat on that is that we’re going to be building this together, so you’re going to help me to co-create this along the way.”

And that is how a whole stack of our members last year created a whole heap of spinoff products and made a heap of cash. And now are having businesses that they love a lot more than they ever did before.

Watch the full webinar replay at https://learning.benwalker.com/courses/how-to-navigate-2021

The Wrong Business Structure Will Eat Into Your Profits (Sharon Cliffe Podcast)

Sharon: When setting up your business, it’s so important to ensure that you’ve got the right business structure to set you up legally, so that you don’t come into any pitfalls and leave yourself open to any kind of legal issues. It’s also important to make sure that this is set up correctly from a tax and profit perspective. That’s probably something to really look at and speak to someone about (like yourself or one of your team) and make sure they’ve got that structure right.

Ben: That’s a good point, actually – tax is often a huge component. You’ve got to pay tax on profit, so the profit is not all yours. However the amount of tax you need to pay, varies depending on how your business is set up:

Sole trader: You might pay up to 47% in tax in Australia, which is almost half of your profit,

Company: Company tax rate as a business is sitting around 26% as a flat rate of tax,

Trust: If you’re structured as a trust, you get to choose who you give that profit to. It could be you, it could be to other family members who are on a lower tax bracket than you – so you might pay even less than the 26% company tax, so it does make a huge difference.

Over the years, we’ve saved our clients close to $12 million in tax, which is huge. But the biggest impact on that number has to do with the client’s business structure. So, yeah, getting your business structure right is extremely important.

Listen to the full episode of this interview at The @SharonCliffe Podcast at https://podcasts.apple.com/au/podcast/ben-walker-the-3-keys-to-wealth-creation/id1555815785?i=1000512309094

The 2 Ways To Treat Business Purchases

When we look at purchasing things in our business, there’s kind of two ways to treat them:

The first, is if you’re buying consumables, where you might use them in the work that you do -for Accountants, it’s a little bit tough. We might be consuming pens and stuff as we work – but let’s say in the context of building a house there’s all that equipment, all the timber, all that goes into building a property. So, for a builder, they can instantly claim that stuff as the cost of the goods sold, or in the case of paper and pens at Inspire, we claim that as expenses. So, they’re not assets. Once they’re used, they’re gone. So that’s one lens to look through.

The other one is if you buy a piece of equipment (and we often call that an asset that you’re going to be using over a long time to sort of make money off in your business) generally, we can’t write that off in a single year. In accounting land and tax land, we usually have to write that off over a number of years.

When COVID hit, they announced an interesting measure where it said that there’s a temporary full expensing of any asset that you’ve purchased, which I’ve never heard of in my working career. It basically says if your turnover is under $5 billion, then you can claim the full cost of an asset up to 100% of its cost. Now that includes things like (and I’ll do an asterisk on cars) but cars, equipment, machinery, printers, laptops – not necessarily the timber and steel I mentioned before that builds the house, but the equipment that you use to build the house. So there’s no limit now on the amount you can spend, and that was eligible from the 6th of October 2020, through to 30th of June, 2022. So we’ve got just over one full financial year to use this, almost like a concession, or temporary full expensing. So it’s pretty cool.

What Should You Track In A Logbook After Buying A Car?

My recommendation is you use some sort of app to track your logbook for ATO reporting purposes. Inspire’s app – which can be found on the app store (link in the bio) actually has a log book feature that can also track GPS and do kilometre tracking for you.

What you need to do is set up a start date for your 12 weeks, and just make sure you log your business trips and the kilometres associated with them, versus your personal. Then, what we look at is your business kilometres for the whole 12 weeks, and divide that by your total kilometres in that 12 weeks. That’s how we calculate your log book percentage so that we can claim all your depreciation, GST, and expenses to run it.

Need a second opinion? Book a zero-cost strategy call with an Inspire Accountant.

Are you properly protecting your personal assets?

Recently, on the Reimagining Healthcare podcast with @YianniSerpanos, I answered the question “When should somebody be thinking about asset protection when starting a business?”

There are a couple of things to consider. When you have a director of the business (the person running the business) we actually don’t like them holding any personal assets in their own name.

Let’s say the business is sued and they’re successful. Then they end up suing the person personally. We don’t want to have that family home lost or any other investments in their own name. As an example, that can all be structured through a spouse’s name or in company or trusts that are set up well for the family.

The second part is also making sure your estate planning incorporates all these things. Estate planning is more than just a will. You need to consider what happens with company assets, trust assets and what happens with the super.

In terms of a good time to have that all in place, you should absolutely have that in place before you go into business. And, you need to check that it still makes sense as you start setting up all the structures and running up a business as well.

It’s quite complex stuff. You need to be working with an accountant who understands all this. They don’t need to do the actual estate planning themselves, but they definitely need to understand and work with the lawyers on how it all works.

Listen to the full length of my episode on the Reimagining Healthcare podcast with @Yianni Serpanos

If you need to have a chat with an accountant book in a strategy call at https://inspire.business/chat/

2 Key Pieces of Advice For SME Businesses in this Challenging Time

1) Make sure you have a plan for cash flow If you don’t already have a budget or forecast, make sure you go and do that for the next 3 to 6 months.

We’ve been helping our clients with this through our “Emergency Assistance Meeting” ( https://calendly.com/inspireca/eam ) and we answer the question, “When are you going to run out of money?” We had a client a couple months ago and the answer to hers was September. So if nothing else changes, her sales have dropped, she’s in hospitality, but she’s still allowed to do takeaway – if she keeps as she is, then she’s going to run out of money in September. And knowing that for her, she has peace of mind that she’s fine for June and July. Then, it gets a bit hairy in August, September, but she might be able to organise some other things before then to help her extend that date even further.

2) Make sure you keep communicating with key people to do with your business.
Now, for me, that’s clients and team. So, have you communicated that you’re business as usual, or are you working from home and what does that mean for clients?

Now, as business owners, we’ve got this huge responsibility we feel for our family. This also extends to the families of the people that we employ – they’ve got their own stresses and challenges throughout this time as well. One of them could be fearing job security. So just like we’re talking about certainty around cash flow, work out what’s happening with your team.

Now, talking to your team is probably going to end in one of three or four ways –

Standing them down;
Making them redundant;
Firing them for whatever reason;or
You’re going to keep them on, it’s business as usual, and they’re not going to get pay cuts.

What you need to reinforce with them as early as possible is what’s happening to the business and how it’s going to affect them. Are they losing their job? Cool, then they can go and move on and deal with that. Is it business as usual? Cool. Take the relief off their shoulders so they can get on and be productive in what they’re doing.

Communicate early, communicate often. People are looking for connection and direction.

Watch the full video with @SimonBell on the Zen Business podcast – https://www.youtube.com/watch?v=IH_K3yzQ_Rs&t=706s

How To Cut Down Expenses In Your Business

Here are some things to be mindful of when reviewing your costs – do we really need to be spending this?

Software – make sure you’re paying for the right amount of licenses for that software. Especially when people leave, some people don’t off-board, including myself I’ve found.

Accounting Fees – (and all advisors) are you actually getting the value from it?

Business coaching – I can sometimes see $20,000, $30,000 on the P&L. Again, make sure you’re getting the value out of it.

Personally, I would want to be seeing something like a 10:1 ROI. Here’s some perspective. Some coaches are awesome and there’s a lot of sharks out there as well. But, there’s some coaches I’ve heard some feedback that without that coach there would be no business. To a degree, you can’t really put a price on that. So I wouldn’t be silly with how you calculate your 10:1 ratio but, I definitely think that they need to be earning their money charging that sort of figure.

Team members – I would leave this till last. You don’t want to necessarily just fire people or reduce people’s hours. That’s not going to go well, not only for that person but it sends the wrong energy around the business. If you’ve got an under-performer in the business or someone who’s just causing trouble, then as a leader in the business, you have to deal with that. So, if you need to do some rejigging of your team, absolutely do that. You need to look after your business first rather than any single team member who’s behaving badly.

Listen to the the full length of my episode on the Reimagining Healthcare podcast with Yianni Serpanos

If you need to have a chat with an accountant book in a strategy call at https://inspire.business/chat/

JobKeeper: The Distinction Between Business Participants & Employees

FAQ – “Can you please clarify, the employee versus business participant? I do collect a wage and exclude myself as an employee and have added myself as a business participant. Is this correct or incorrect?”

An employee has to be on your payroll before the 1st of March. This applies to the same eligibility criteria as any other employees.

As a business participant, the business had an ABN from the 12th of March. You run the business, you’re actively in the business, doing things for the business. You’re either a partner, a direct shareholder, a beneficiary of a trust or a sole trader.

The important distinction between employee and a business participant is that they can’t claim for both; It’s only one or the other. If you are already on the payroll and you are already paying yourself a wage, you have to keep paying yourself that $1500 per fortnight minimum to be eligible for reimbursement. If you’re a business participant, that’s not the case.

If you need help with JobKeeper or need to speak to an Accountant, book a strategy call with one of our accountants: https://inspire.business/chat

Critical Reasons to Stay On Top Of Your Bookkeeping

JobKeeper Reporting

By the 14th of each month (no longer the 7th), you’ll need to report your JobKeeper-related GST turnover, as well as making sure your payroll information is correct as you’ll be reporting that to the ATO.

Preparing BAS

When it’s BAS time, either monthly or quarterly depending on the lodgement cycle, your accountant will start nagging you a couple of days after the month. There’s some people who have already done it by the first or second of the month and there’s some who don’t get it done by the due date of the BAS.

Getting your Tax done annually

The worst thing when you do your bookkeeping is rushing it to meet deadlines. Because often, you get things wrong especially if you do it yourself. Do what you do well and outsource this sort of stuff. I’ve finally done that myself, even though I can do bookkeeping, but it’s so nice not having to worry about it and getting someone else to do it on a regular schedule.

There’s reasons why people are going to chase these numbers so it’s super important to have this done correctly and on time.