How to Save Money on Bookkeeping Fees
Many times people will use their business account for personal use. For a bookkeeper, having to wade through pages of bank statements figuring out what is personal and what is business is a very time consuming exercise, and you are paying for it. Your personal transactions are completely separate to your business transactions, so it is a good idea to keep them separate.
Manage the Pennies and the Dollars will Follow
Your business may be small, but it helps to think big. By thinking big I mean why not manage it with the same principles as a large business. A professionally run business would pay the owners or director’s a wage who would then use a personal account to transact personal transactions. A professional business would have a budget. They would not hope for the best and spend money when there seems to be some extra in the bank account. They would have a budget in place from the start of the financial year, with anticipated income, expenses and profit.
Small Business Formula
I am often observing small businesses that are successful or not. Often times it is quite evident in the restaurant industry. Recently a small cafe started up in Southport. It is a very basic model, with a nicely designed warm atmosphere, affordable, fast, healthy and delicious food. The cafe itself could barely fit ten people, but the takeaway food style set up is a formula that is working. The things I notice when entering a new cafe or restaurant are the following
- How does it make me feel. Does it have an attractively designed look that makes me enjoy being there?
- Are the staff efficient and friendly?
- Is the product they are selling (ie food) consistent and reliable. There is nothing worse than having a good meal one visit and a bad meal the next.
- Are the prices good value? It’s one thing to pay good money for an upmarket meal with a luxury atmosphere but quite another to pay top money where there are fluro lights and paper napkins.
I think the formula of a successful cafe or restaurant is something we can all take to our businesses. People are still spending but where and why? At the end of the day, with more ‘tightening of the belt’ going on, customers are after value for money and a great experience.
Keep an Eye on the Books
Many small businesses are still struggling or closing down. There are many vacant offices and shops all over the place and some business sectors where it is plain tough to make money. Many in the business community are still feeling the ripple effect of the GFC. It is a time when you need to keep a really good eye on your books and how your business is performing.
Some of the things you should be keeping an eye on are:
- Staff performance and costs in proportion to your sales
- How fast are your debtors paying you in proportion to your terms
- How much stock do you have and is what you are buying sitting on the shelf for a while
- Are you getting the best price for what you are buying
- Are your expenses too high
- Are you drawing too much money out of the business for personal use.
The other thing to keep an eye on is your debt levels. Banks are and have been getting tougher on lending. If you have high levels of debt and high interest payments, slower sales and cash flow will make your debts more difficult to repay – banks don’t like this and won’t easily lend more money if you are in trouble. This can ultimately be very detrimental to your business.
Whilst we have been lucky in our area to be free from the problems of natural disasters, having contingency plans in place seems like a good idea because you just don’t know what can happen.
Budget is Not a Dirty Word
Budget is often negatively associated with tight restrictions on how much a business or a person can spend, however a good budget can leave plenty of room for planned movement. By planning anticipated income, you can then plan for anticipated expenses such as cost of sales, telephone, rent, staff and owner’s wage, marketing, office furniture and profit. By planning you can generally get a good idea of how much you will earn, spend and have to pay in tax. By not dipping into your business account for personal expenses, there should be money left for the tax bill at the end of the year. A visit your accountant before 30 June is a great idea to plan for any tax issues that may arise. Depending on your plans for the following year, your accountant can usually give businesses some good advice on what to do to avoid any huge tax bills.
Preparing a Budget
The great thing about preparing a budget is you can generally be prepared for things that normally often surprise. It is important to plan and prepare. To plan a budget, start with how much you anticipate earning, this can generally be estimated on past yearsÕ income and planned marketing for the year. You can then calculate your cost of goods (not applicable to all businesses) which is generally a percentage of income, depending on what type of business you have and can generally be estimated from last year’s cost too. Whatever is left is what you can plan to spend on the business or keep as profit. Generally your previous year’s profit and loss report can give you a good idea of how much and what you are spending on the business and can also help you see where you could save money.
Things to Consider When Preparing a Budget
Some of the expenses to consider when budgeting are: income, cost of goods sold, wages/salaries, owner’s payments, contract labour, phone, electricity, insurance, postage, office supplies, rent, rates, marketing, advertising, accounting, bookkeeping, motor vehicle fuel, motor vehicle repairs, motor vehicle insurance, new office furniture or computers.
Bookmarx business services can help you plan and prepare a budget as well as help you manage your business finances.
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