Welcome to the February 2013 edition of The Value Add. We hope that everyone has survived the recent wild weather without any major damage. If you were affected at all, please contact us as the Australian Taxation Office is providing special assistance with lodgements and payment to those affected by natural disasters. In this edition:
- Plans, not Resolutions; Accountability, not Accounting
- The Importance of Being Structured Developments at Value Beyond
Plans, not Resolutions; Accountability, not Accounting
Its February 2013. Where did the month of January go?!
With one month already completed, and the usual New Year’s resolutions already gathering dust for another year, it is a good time to review the performance of your business for the financial year to date and consider your plans for the remainder of the financial and calendar year.
One key aspect to reviewing and planning is to have your financial accounts completed and up to date as recently as possible. The preparation of your accounts is not the goal in itself – with those numbers you can get an accurate picture of the current performance of the business, as well as identify areas of weakness or opportunity.
Right now, do you know:
- Sales for the year to date?
- Profit for the year to date?
- Key indicators like debtors, stock?
- Top 10 customers by volume and value?
- Average sale per customer?
- Break even point?
The first step is to get accurate numbers. Then, it is a matter of interpreting the numbers to get the information you need to work out where you’ve been, and then determine where you’re going.
The Importance of Being Structured
Company, Trust, Partnership, Sole Trader. The choice of what legal structure to use to run your business and hold your investments can be quite daunting.
Of course, the decision is a very important one, and also a decision that is best made at the beginning of any new venture as the cost to change structures later can be prohibitive – potentially paying stamp duty, income tax and capital gains tax to continue doing the same thing in a different structure.
So how do you go about deciding what is the best structure?
It is a matter of weighing up the following factors:
- Purpose – why are you setting up a structure? What are you trying to achieve?
- Operation – how much money will be tied up in the business? Will the turnover and profit be high or low? How long do you intend running the operation?
- Growth – how will the business grow? What funding will be needed (internal and external)? How will the funding be obtained? Loans? Equity?
- Exit – how is an eventual sale to be made? Sell the business/assets? Sell the entity? 100% sale, or gradual sell-down through introducing additional equity partners?
At Value Beyond, we have developed a questionnaire and decision tool which we use to guide you through the various outcomes you are trying to achieve, while weighing up each of these to choose the most appropriate structure for you.
This consultation process combined with an in-depth explanation of how your chosen structure will work for you, means that you have the best chance of choosing the best structure to help you achieve success.
Developments at Value Beyond
Over the coming year, we will be developing a number of tools and options to help guide and educate you on your journey.
Together with the books How To Read Financial Statements and Where Did The Cash Go, we are looking to run a number of seminars and coaching sessions to help explain these and many other topics in more detail.
If you have any areas of business, tax or accounting that are a mystery to you or you would like to know more about, please contact us at info@valuebeyond.com.au and let us know so that we can be better at helping you.