Monique Sharland CEO Business Accounting Network Introduction and - - PowerPoint PPT Presentation

Monique Sharland

CEO

Business Accounting Network Going Beyond Accounting, Taking Your Business Forward

Presenter: Monique Sharland CEO and founder Business Accounting Network Professional Accountant, SME Tax Law specialist and Franchising expert Professional body: SAIT

Introduction and Welcome

Disclaimer:

THE INFORMATION IN THIS WEBINAR IS FOR GENERAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. WE TAKE NO RESPONSIBILITY FOR ANY ACTIONS TAKEN OR NOT TAKEN ON THE BASIS OF THE INFORMATION IN THIS WEBINAR. Top Tip!: Only obtain advice from a reputable and knowledgeable registered Tax Practitioner and Accountant. Never listen to “free advice”, especially from unqualified friends and family – it’s all hearsay and may put your business at risk!

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Business owners who do not want to pay for advice, and those who do, do not use it.

• Always seeking out the cheapest methods to save

business expenses;

• If your business can’t afford it – there is a problem in

your business - time to invest in the professionals. Avoid!: spend a little extra and get quality work done …. and peace of mind so that you can do what you do best!

What you should be asking your accountant!

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Mistakes we see before you go into business:  Choosing the wrong structure to conduct business in, and  Not understanding the owners responsibilities (laws) that apply to the structure trading in, and  Not having the funds to pay for compliance.

Mistake: Companies not complying with the Companies Act = criminal offences

Understand the Structure you are Trading In

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Company Sole Proprietor Companies Act and Income Tax Act Income Tax Act only Accounting records (Co. Act) Minimal – documents/spreadsheet Annual financial statements to comply with Co. Act and Standards Income Statement and Statement of personal Assets and Liabilities IFRS for SME or historical/tax base Historical/tax base Company Register & Shareholder registers None Share certificates, resolutions, minutes None

Understand the Structure you are Trading In

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Company Sole Proprietor Annual financial statements – within 6 months of financial year end Income statement IT12 due December (non provisional) – E-Filing or end of January ( provisional tax payers) Perform “materiality assessment” and reporting None ISRS 4410 - compilation ISRS 4400 (basic agreed services) Working papers to support AFS None or minimal Accountant’s report Report of factual findings

Understand the Structure you are Trading In

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Company Sole Proprietor Independent review (if applicable) None ISCQ 1 – quality control ISQC 1 – minimal QC CIPC – Financial Accountability Statements (FAC) None Annual duties None CIPC – penalties non-compliance None CIPC – forced deregistration None

What you should be asking your accountant!

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Solution: before you go into business:  Talk through your plans and goals with an experienced accountant. They can help assess your current situation and future plans to choose the right business structure that best fits your needs.

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Mistakes we see while you are in business: But first, ask yourself this:

• Why are you in business?
• What are your goals?
• How is your business going to get you

there? This is one mistake that business owners make …. they don’t ask their accountant how they can achieve their goals.

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

How to Avoid this mistake: What you should be asking your accountant! Failing to plan is planning to fail! Every destination needs a road map. Help me with a financial plan to get to my dreams!

Mistake: Working in the dark!

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

How do you measure your plan? How are you measuring your current business performance? Can you make business financial decisions? Do you know how much tax you need to pay before your accountant tells you? Mistake: business owners who work in the dark (….. and who are very scary to do business with!)

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Avoid!: What you should be asking your accountant. Ask your accountant for monthly management accounts, also sometimes called financial reports – and let them discuss the results with you.

Let’s take a look at ……….. an Example of a Basic Set of Management Accounts

Mistake: Using the Business Like a Piggy Bank and

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Living the Champagne and Cigar Lifestyle

Avoid: By understanding your balance sheet!

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

 Liquidity  Solvency

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Assets Healthy Fixed Assets R 200 000 Shareholders Loan Account R 0 Current Assets R 450 000 R 650 000 Liabilities Retained Income (Equity) R 25 000 Shareholder’s Loan Account R 235 000 Current Liabilities R 390 000 R 650 000 No Liquidity R 200 000 R 75 000 R 375 000 R 650 000 R 75 000 R R 575 000 R 650 000 Insolvent R 200 000 R 75 000 R 375 000 R 650 000 R 0 R 0 R 650 000 R 650 000

Mistake:

Businesses pay more attention to getting sales or saving on expenses but not enough attention on getting more profitable!

If you sell something at a profit, does that mean you are profitable?

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Sept 2019 Sales R 100 000 Cost of Sales (salaries or products) R 40 000 Gross Profit R 60 000 Oct 2019 R 150 000 R 82 500 R 67 500 Nov 2019 R 200 000 R 130 000 R 70 000 Expenses (including owner’s salary) R 30 000 Net Profit R 30 000 R 40 000 R 27 500 R 50 000 R 20 000 Gross Profit R 60 000 Gross Profit Percentage 60 % R 67 500 45 % R 70 000 35 % Gross Profit Percentage 60 % Expenses R 30 000 Net Profit R 30 000 60 % R 50 000 R 70 000 60 % R 40 000 R 50 000

Avoid! Let your accountant advise:

 Know what gross margins you need to maintain;  Know what each customer’s cash flow percentage is – which customers are not profitable?  Know what products or services generate the highest ROI

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Mistake:

Not taking into account annual expenses and profit when costing products and services and Giving discounts away when not costed into selling price

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

How to avoid!

 Know your business’s breakeven by using ANNUAL

• verheads

 Add profit to provide a return of no less than CPI index plus 5 to 7%  When last did you review your selling prices and pricing strategy? Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Mistake:

Not knowing the difference between profit and cash flow! Business owners who use VAT and Income Tax as cash flow and trade into insolvency.

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

VAT

What is cash flow?:

Cash flow is the timing difference between:

• a. The date you pay for products (inventory) for resale or pay

salaries to income generating employees, and

• b. The date you receive money from your customer for those

products or services sold.

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

What is profit?:

Profit is the net of:

• a. Sales (even though you have not received payment yet), less
• b. Cost of sales (cost of products purchased for resale, even if you have not

yet paid for the products yet, or cost of salaries paid to employees for services rendered to generate sales), less

• c. Expenses or overheads (accounting fees, bank charges, rent, telephone,

electricity, salaries unrelated to sales, owners salary, etc) even though you have not paid for some of these expenses yet.

• d. = net profit or (loss)

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

How to Avoid the problem of profit or negative cash flow!:

 Management accounts will immediately identify what the REAL problem is.  Often, the problem is not cash flow!  Work with your accountant to identify the problem and develop a strategy to turn it around.  Work with a good business coach and your accountant together!

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Mistake:

You cannot grow a business to make money for yourself if the business’s investment in assets (customers and inventory) increases at a faster rate than the business’s net profit.

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

2017 2018 2019 1 Net Profit R 90 000 R 110 000 R 121 000 2 Total Assets (Accounts Receivable + Inventory) R 100 250 R 220 500 R 390 440 3 ROI 90% 50% 31% 4 Increase in Assets R 120 250 R 169 940 5 Net Profit R 90 000 R 110 000 6 Investment shortfall (R 32 250) (R 59 940) 7 Accumulated shortfall (R 32 250) (R 92 190)

You cannot grow a business to make money for yourself if the business’s investment in assets (customers and inventory) increases at a faster rate than the business’s net profit.

How to avoid!: Use your accountant’s full potential!

 Know this: Growth requires funding!  “Bootstrap” growth. Limit growth to profit less capital liability repayments;  Borrow money from family, friends, bank, investor;  Re-finance assets (if applicable to nature of business)  Factor debtors;  Win the lottery, marry rich, inherit from a rich relative   Use your accountant’s full potential and learn how to financially manage your business better!

Mistakes Accountants See Business Owners make …. and How to Avoid Them!

Existing Projected 1 Sales R 3 000 000 R 3 600 000 2 Inventory days 90 90 3 Customer receivable days 50 50 4 Creditor payment days 30 30 6 Owner financing R 904 110 R 1 084 931 Additional funding required R 180 821 Money found in your business PLUS 20% growth!

I want to grow my business by 20% in the next year. How much funding will I need?

Projected R 3 600 000 70 40 5 Total Cash Cycle Days 110 110 R 789 041 80 30 R 115 069

Happy Holidays From All of us at BAN

Questions?