HMcR Blog

Keith Hospital to receive funding from SA Government

Mon, 21 May 2012 02:55:00 GMT

Back in June 2011 we reported that the Keith Hospital was to provide a business plan to SA Health Minister John Hill. The future of the hospital was uncertain due to the withdrawal of a subsidy by the SA Government.

Now, the State Government is to provide a one-off $350,000 grant. The Keith Hospital board was presented with two options - the grant or for the facility to become a government hospital. The grant will be used to establish a GP practice with two doctors and a practice nurse.

Even though the grant has been taken, John Hill has said that "the offer for the State Government to take over the hospital remains on the table throughout the term of this Government". After 12 months the outcomes of the grant will be reviewed.

The hospital has found it difficult to attract doctors due to the uncertainty of the hospital's future. Hopefully the grant will assist to make the positions more attractive.

The hospital has fundraising events and accepts donations. For more information on how you can help to ensure the survival of the hospital check out their website: http://www.keithhospital.com.au/pages/events/calendar.php

Written By Elouise Barker
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Will you choose to plan or fail?

Wed, 16 May 2012 23:19:00 GMT

With the end of financial year fast approaching now is the perfect time to consider the strategic planning for your business for the coming year.

Many businesses fail to plan which in our opinion is a plan to fail. A business without a strategic plan is like a bus driver trying to get from point A to point B without a route.

Businesses without a strategic plan often have unfulfilled potential, fail to achieve financial success, have team members heading in different directions and often leave their owners feeling unclear or unsatisfied.

Our best clients revisit their plans at least once each year in a structured process that reviews and updates a number of critical ingredients in their businesses including

1) Their core business values and beliefs (what they should and shouldn’t do)

2) Their business purpose (why they do what they do)

3) Their financial targets over both a 3-5 year time frame and a 1 year time frame

4) Their geographic market

5) The specific competencies of their business

6) Their people

7) Their strengths, weaknesses, opportunities and threats

8) Critical processes and actions

Whilst the process is challenging the outcomes are clear and concise and are formulated in a simple to understand document that applies across all levels of the organisation.

The process and plan provides a roadmap for success for their business. It provides a framework in which all business decisions are made and which all team members conduct themselves. The plan will help to solve issues such as growth plans, employee engagement and retention, new markets, financial targets and so on.

A clear plan is critical to ensure that everyone in your business is aligned and heading toward the same common goal.

Contact your advisor if you are interested in this valuable service for the coming year.

Written By Andrew Mattner
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Would you like to save yourself some hard earned cash?

Wed, 09 May 2012 07:04:00 GMT

Means testing for private health insurance rebate is introduced from July 1st 2012.

If you are a higher income earner you can get ahead of the game by pre paying your private health expense before June 30, saving yourself up to $1,000 for your trouble.

Under the planned changes, individuals earning more than $83,000 and families on more than $166,000 will be hit by the new progressive means test.

The 30 per cent rebate will drop to 20 per cent for individuals earning between $83,000 and $96,000, and families earning between $166,000 to $192,000 a year.

It will fall to 10 per cent for individuals on between $96,000 to $129,000, and families on $192,000 to $258,000.

So call your health insurance provider to take advantage of the current rebate by prepaying for next year.

Written by Kristen Buik
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Will you ever take a holiday?

Wed, 09 May 2012 01:29:00 GMT

A client recently asked me what I was doing over Easter and I told them I was helping my friend house sit 10 minutes from the city. They replied ‘well a change is as good as a holiday’. I asked the client what they were doing over Easter, which brought a response I have heard often - ‘catching up on things at the office, there is too much to do’.

Do you feel like you’ll never have a change, let alone a holiday? Is it absolutely impossible to get one? The emerging trends of business sitting, house sitting and house swapping may prove helpful.

Business sitting

Business sitters offer their services so you can comfortably leave your business for a period. They may have experience in your specific industry so would provide a tailored service. Otherwise, they can provide general administrative tasks, or for more specific tasks, you can delegate responsibilities and train them before you leave. If you would prefer someone you know, delegating more responsibility to current employees would assist you in getting the break you deserve. It can also give the employee a sense of achievement and improve your relationship with them.

House sitting

If you have pets, gardens, or a pool that need to be looked after, or would feel more comfortable knowing that the house isn't vacant, a house sitter may be the answer. Friends or family could assist or house sitting websites list potential house sitters and their details.

House swapping

If you would like to save money on accommodation costs as well, house swapping may assist. House swapping is exchanging your home with someone else for an amount of time. It can involve swapping a house, holiday house, houseboat or motor-home. Australian house swapping website listings include Australian swappers as well as International. You could swap with a retired couple in Byron Bay, live in a house in the French Alps or a beach front villa in Bali.

Are you ready to take the steps toward the holiday you deserve?

If you would like further information on how to leave your business for a period with minimal stress, give one of the team at Hattam McCarthy Reeves a call.

Useful websites

http://www.auswidebusinessminders.com.au/

http://www.aussiehousesitters.com.au/

http://www.aussiehouseswap.com.au/

Written by Elouise Barker

Hattam McCarthy Reeves

Chartered Accountants and Business Advisers

KI Spirits added to the list of award winning clients

Fri, 27 Apr 2012 00:58:00 GMT

Congratulations to Jon and Sarah Lark of KI Spirits for their recent success in the San Francisco World Spirits competition. Their Anisette and Zenerino both scored Silver Medals, a great reward for their passion and patience.

Their Anisette is made from handpicked wild fennel on the shores of Kangaroo Island’s Pelican Lagoon. The Zenzerino, a little know Italian cousin to limoncello is a ginger based blend of spice and citrus.

KI Spirits is a business poised for greater things and we are looking forward to working with them to achieve their goals.

Written by Geoff Hattam
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

ASIC introduces new National Business Names Register

Thu, 26 Apr 2012 00:52:00 GMT

On the 28th May 2012 it is planned for ASIC to take over the management of Business Names registration currently maintained by individual states.

The legislation is expected to pass through state parliaments in the next month to ensure the prompt start of the new service.

In South Australia the Business Names Register has been maintained by Consumer and Business Services previously known as the Office of Consumer and Business Affairs. Their services remain unchanged until the 13th May. After this date some of the services will change. For more information please refer to their website at www.cbs.sa.gov.au/NBNR.

Starting a new business?

If you need to register a business name prior to the commencement of the new services with ASIC, you will have to go through state channels. Where possible you will be better off waiting for the new system.

Key Changes

You no longer need to register the same business name in multiple states – the one name will be recognized nationally. When registering a new business name you will be required to provide an ABN.

Benefits of the new system:

Fee structure

Tthe national system allows you to choose a registration period as short as one year for a cost of only $30. You can also pay for 3 years at a cost of $70. This is considerably cheaper as the fee structure in South Australia is currently $159 for 3 years.

Easier

Registrations and renewals are done through an online portal using a smart form. New names are checked automatically for availability and suitability and on acceptance can be paid at the same time.

Changes

There are no charges for changes to name holder details and these are done through the online portal, updated in real time

Electronic Record

You receive electronic confirmation of all your transactions

Same name in more than one state

Where you have registered the same business name in multiple states, you can let your duplicate names expire until the last one comes due and pay the renewal on the last one due

Multiple Names

You will be able to align access through one login and registration dates for multiple business names or companies

Renewals

If your South Australian Business Name is coming due for renewal prior to the 28th May 2012 you will receive your renewal notice in the next couple of weeks. These renewals must be paid under SA legislation through Consumer and Business Service. Service SA offices receive payment for these renewals. It is important you pay this renewal to ensure it transitions over to the National Business Names Register.

If your renewal date falls after the 28th May, your Business Name will be automatically updated to the new National Business Names Register and all inquiries for these will be directed to ASIC. Those falling within the first couple of months of the new system may find a delay in receiving the renewal notice. Do not worry. There will be a phasing in period with ASIC and a grace period for payment of renewal.

Online Information

There will be more information available on line such as Business Name contact details.

Further information can be accessed via paid extracts online.

Personal information will be protected by ASIC privacy provisions.

The services will continue to be enhanced throughout 2012/2013 combining all ASIC registers on one single platform with additional services available such as joint ASIC/ABR registration for new business and updated functionality to manage maintenance of your records through the one simple online portal.

SUPPORT

Website www.asic.gov.au/business-names

Telephone 1300 300 630

Online expert online@asic.gov.au

Written by Sarah Allen
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Is tax planning worth the effort?

Mon, 23 Apr 2012 00:31:00 GMT

Don’t you just hate the conversation you have with your accountant when your financial statements and tax returns are completed and they let you know that you have a tax bill higher than you expected - And you have to pay it in 2 weeks?

Guess what? We hate those conversations as well.

If only you had been on top of your profit, if only you had told us that you sold that investment at a big profit, if only you had put some money into superannuation, if only you had planned. The regret, the frustration, if only....

It doesn’t have to be like that. Every year we offer to our clients a comprehensive tax planning service that enables them to get ahead of the curve and stay there. Our best clients undertake this review every year so that they know what their likely profit and taxation position is for the year, what strategies are available to them to legitimately reduce their taxation exposure and how this will affect their planning for the next 12 months. They know 12 months in advance what their likely tax bill will be and when it will be payable so that the cash flow of the business can be managed in such a way so as to not catch them out.

Never again will you have an unexpected tax bill, or at least not have the opportunity to plan for it.

Depending on the complexity we can conduct a formal or informal review of your business affairs. Profit forecasts and scenarios are established in order to provide you with a “Do Nothing” scenario. This gives you an understanding of your likely profit and taxation payments in the event that you choose to accept the position as is. Options and strategies are then provided to help you legitimately minimise your exposure. In some cases these strategies are simple and can be implemented internally and in some cases they are more complex and you may need us to help. The choice is yours!

The clients that undertake these reviews find the results invaluable. They have certainty around their actions, they are able to plan strategically and they can manage their businesses most important resource, their cash, effectively.

Please contact us if you would like to find out more about our tax planning service, and hopefully avoid that 'difficult" conversation.

Written by Geoff Hattam
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Are you giving your clients what they want?

Wed, 04 Apr 2012 03:21:00 GMT

My wife and I had an extremely frustrating experience recently.

She has been at me for ages to build some cabinets and shelves around the TV in our kitchen area. We debated the matter for a long time (being a simple bloke I didn’t think we needed them in the first place), but once I had conceded the point we discussed exactly what we wanted in terms of design, layout, colour and budget. We were very clear on what we wanted especially considering it had to blend with existing cabinetry in the same area.

So with my blessing off Ally went to get some quotes. She contacted a number of leading Adelaide based experts and arranged some meetings. The first meeting she had went so well that we were at the stage where we thought that we didn’t have to look any farther. Prominent company, the designer had awards for her work, the same materials as our kitchen were available, Ally liked the designer and she seemed to understand our wants. They also made it exclusive in that we had to pay for a design. Great I said, go for it. Well that is where the positive experience ended.

After paying the design fee we waited. One week, two weeks, a month went by. Ally started to follow up after about 2 weeks and despite her efforts, no returned calls. Finally the call came, your design and quote is ready when can we meet? So out came the designer, folder in hand, proud of her efforts to meet Ally. What a debacle. The design was nothing like we wanted. It was totally random and didn’t fit with our house. The materials were different than we specified. What’s going on?

When quizzed the response form the designer was, I thought my design was better and that what you wanted would be too expensive. Serious? We didn’t even tell her what our budget was!

What actually happened was that she did a design she liked in the materials she wanted because it was exciting for her, not us! The result? One very disengaged buyer who WOULD NEVER use or recommend the business in question!

So what is the lesson for other businesses out there? Give your customers what THEY want not what YOU WANT to give them. Engage with your customers by asking questions in relation to why they want something and what it means to them to have it. Ask questions and listen. Ask until there is a void. Ask until your customer has told you everything you need to know. During this discussion you will be able to identify any potential obstacles in providing what your customer wants. These obstacles can be raised as issues and can be explored further. These discussions may educate your customer such that the scope of the project or the wants of the customer may vary. Either way you know exactly what your customers wants and your customer knows everything they may need to know. Only then should you provide any sort of response.

That response is simple. Either you can provide a solution or you cannot.

If you are able to satisfy the customer needs you restate your understanding of the situation and then go away and articulate a proposal (design) that will fully satisfy all (not some) of the customers objectives. Once your basic proposal satisfies the customer’s needs offer them options that will add value over and above their expressed basic objectives.

If you cannot provide a solution you should tell the customer straight away and if possible refer them to somebody who you think can. Even this provides an outstanding customer experience.

If you do not follow this process you will inevitably leave a sour taste with your customers and will damage your business. Give your customers what THEY want not what you WANT.

Written by Andrew Mattner
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Are you paying more tax due to your business structure?

Wed, 04 Apr 2012 05:00:00 GMT

The way your business is structured can have an effect on the amount of tax you pay and ultimately the amount of money you make. Each structure has set up and ongoing costs and different legal implications, however, investing in a good structure now can result in benefits in the future.

Sole trader

This is the simplest way to run a business and has low setup and ongoing costs. However there is no legal separation between the individual and the business. Are you in a industry where you could be at risk of debts or law suits? If so your personal assets could be used to pay these debts. Are you willing to risk your house or car?

Partnerships

Partnerships also have low setup and ongoing costs. Partners are liable for the business debts and obligations and each partner is equally responsible for decisions made by other partners. Each partner can be sued, and can be required to pay the full amount of any debts of the partnership. A partner's only recourse is to sue or cross-claim against other partners. Can you see any issues down the track with these legal implications?

Companies

Companies are separate legal entities and asset protection is achievable in most cases. Income tax and capital gains tax are capped at the 30% rate. Is the 30% tax rate reasonable and does it provide the flexibility your circumstances require? Will the structure limit your ability to plan effectively?

Trusts

Trusts can achieve asset protection in most cases. They have higher costs to setup, maintain and administer, however if are you willing to invest in this structure, trusts also have access capital gains tax benefits that companies don’t have and other planning flexibility which other structures don’t afford?

For more information regarding the potential tax you and your business could save give one of the team at Hattam McCarthy Reeves a call.

Written by Elouise Barker
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Reflections over 25 years

Thu, 19 Apr 2012 01:25:00 GMT

2012 marks the 25th year since Hattam McCarthy Reeves was launched. With a feeling that this is actually a significant achievement in the life-cycle of a business, I thought I would take an opportunity to reflect back over the 25 years and perhaps have a look into the ‘crystal ball’ to see what the future might hold.

1987 seems such a long time ago! Bob Hawke was prime minister, Dallas was still on TV, and North Adelaide beat Glenelg for the SANFL premiership. Together with my father Jim, and Ed Reeves we established Hattam Reeves on Greenhill Road from the remnants of a previous business partnership - these were exciting times as there was a lot to do and a lot to prove.

From humble beginnings, the early years proved challenging for our small team. The 1987 stock market crash, followed by ‘the recession we had to have’ and interest rates in excess of 20% proved demanding for our business and those of our clients. A flat economy over much of the 1990s made growth difficult, but we slowly expanded, necessitating a move to our current premises in 1997.

After a failed attempt by John Hewson in 1991, the GST under the Howard government eventually appeared as a distinct possibility. The 1998 election gave Howard a mandate and a major change in the way small business was to operate emerged, together with the expanding market reach of MYOB. The effort in educating our staff and clients and attending to the registration of a multitude of businesses was an experience that was brutal and exhausting. The government’s claim that this was a ‘simpler’ system was surely ironic!

July 2000 saw the introduction of Paul McCarthy to the partnership, and a change of name! Paul brought with him considerable enthusiasm to Hattam McCarthy Reeves and the pace of change picked up. Technology was quickly shifting the way businesses operated and we always strived to be at the forefront of these changes. Out team was growing too.

The retirement of Ed Reeves and Jim Hattam followed and everyone worked hard to maintain the professional and personal service they had given their clients over long and distinguished careers.

Andrew Mattner joined the team in 2004 and quickly raised the standard again, driven by his experience at a much larger firm. Things were going from strength to strength, however my illness at the end of that year and ensuing extended sick leave put enormous pressure on the business. I am to this day indebted to the team for their efforts at that time. Andrew was admitted as partner in 2005.

The last 25 years has witnessed an amazing number of technological advancements, from our first fax machine (costing $5,000!), through the explosion in affordable personal computers, Windows 95, the emergence of the internet as an essential business tool, emails, mobile phones and the recent dominance of the iPhone and ipad. Watch this space.

Over the years we have had some great people working for us and making valued contributions, we have also had a few I would rather not remember!

I should also acknowledge the loyalty of those clients that have been with us since 1987!

So what are the secrets to surviving for 25 years? Perhaps surprisingly, I don’t think it’s actually that complicated.

1. You need to have a precision focus on what your client/customer needs. This may not be necessarily what they think they want. Communicate effectively and regularly. Always provide more value than you charge them for.

2. Employ the best people you can and treat them well – they are the ones that will make it happen.

3. Understand that the business of tomorrow will not succeed with the methods of today. Be on the lookout for innovation.

4. Have a vision, and a detailed plan to get there. Do not let your short term priorities hijack your long term goals.

5. Make sure you understand the numbers, and how cash moves through your business.

6. Don’t become over-reliant on debt

7. Have fun. Every day.

And where do I see the future of business? It may be a cliché, but change really is the only constant.

1. Data storage and processing in the cloud will become the accepted and natural way of doing business. Witness the stunning uptake of Xero cloud based accounting.

2. We will see a return to ‘relationship’ based business. People still like dealing with people and over-reliance on automation and/or digital communication is fraught with risk.

3. I also see a return to a greater allegiance to local business as a response to globalisation and monopoly forces.

4. Time is the commodity most valued by everyone (more so than money), and those businesses that can return ‘time’ to their clientele will prosper.

Heres to another 25!

Written by Geoff Hattam

Hattam McCarthy Reeves

Chartered Accountants and Business Advisers

Are you risking your nest egg by purchasing a cheap self managed super fund?

Mon, 26 Mar 2012 02:13:00 GMT

Here’s my dilemma. Every time I open the finance pages of the newspaper or magazine or I log on to a website regarding finance or superannuation I see these advertisements.

Advertisements saying – Self Managed Superfund Annual Returns from $990, free brokerage, no other fees, no set up costs. Well here’s the good oil – you pay peanuts, you get monkeys!

What does it all mean and what are my tips?

Tip 1 – buy on value not on price.

All of these advertised packages include a very important word, FROM. Read the fine print you will find that the fees they disclose are rarely the real fee.

Notwithstanding improvements in technology and systems it costs money to do things, and these companies are not going to provide something for nothing.
Before committing to pay anything ensure that you read the fine print and have clarity on what you are getting for what you are paying. Just because something is cheap does not mean that it is good value.

Tip 2 – don’t take unnecessary risks.

The advertised prices are based on certain conditions, most of which surround no advice, no strategy and most importantly NO HELP. I know for most of my client's superannuation, the asset they are going to use to fund a healthy lifestyle in retirement, is one of if not their most important asset. The question is then why put that at risk?

Superannuation and SMSF’s are complex vehicles. They have many rules that must be complied with to ensure that the benefits that the superannuation environment affords are retained. Breaking the rules or doing the wrong thing, even if that is in error, can have catastrophic consequences to your nest egg.

Tip 3 - get a decent deed

The trust deed of the fund is your bible. The deed defines the governing rules of the fund, what you can do and what you can't. The deed needs to be robust yet be flexible enough to easily move as legislation changes or opportunity arises.

You do not want a deed that needs a major upgrade each time the government changes the rules at significant cost to the members. Most generic packages provide basic deeds that may be more costly in the future.

Tip 4 - understand the structure

Your SMSF structure is important in so far as future management challenges and opportunities. Who should be the trustee? What happens if I die?

No advice often means no education which often means no understanding. Having a structure that you do not understand increases your risk of getting it wrong.

Tip 5 - understand the strategy

Before you establish a fund you need to understand why. Why are you going to establish and run a fund? What are the benefits? What are the costs? What is my strategy?

Establishment of a SMSF and the ongoing management is a strategic action to improve your retirement position. It should not be done randomly.

Understand you objectives, your strategy, what you need help with and what you can do yourself.

Get decent advice regarding the why, and the how will become more evident.

Tip 6 - use the services of an expert

SMSF strategy and advice has been a passion of mine over a long period. It is an area of practice that can make one of the most significant contributions to the lives of my clients.

It is for that reason that it is of great frustration to me that the trustees of funds make the decision to use the services of advisors that are not experts in this area. Incorrect or no documentation of trustee actions, financial accounts prepared incorrectly, members benefits not correctly brought to account, incorrect tax returns advice to action certain strategies that are not allowed under the terms of an outdated trust deed. These are all issues I see on a regular basis. In some cases it may be too late to fix these errors meaning that clients have missed an opportunity or have a lifteime problem. Alternatively the issue may be able to be corrected but that is a costly exercise.

Advisors, in the most part do the right thing by clients and want to help and do not deliberately do the wrong thing. Notwithstanding, superannuation is a complex area and as such is not the domain for part timers.

These generic packages and offerings have their place. The reality is that their place is for those that are knowledgable regarding their retirement plan, those that understand the complexities of running their fund, those that have a clearly defined strategy that those that are able to execute hatbstrategy n their own account.

If you can tick all these boxes go for it, if you cannot be very very careful.

Written by Andrew Mattner
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Are you making excuses for your use of time?

Wed, 14 Mar 2012 23:02:00 GMT

I would love a dollar for every time a business owner has told me that they are too busy to work on their business. I don’t have enough time, I am too busy, I don’t have enough hours in the day, I am already working 14 hours a day, I can’t do any more. What a load of cods wallop!

So here it is – ‘NO TIME’ IS JUST AN EXCUSE. That’s it, ‘no time’ is just an excuse.

Time is a resource we all have and how we choose to use that resource is completely our own decision. We can choose time to work, to spend with family, to read, to plan, to exercise, to sleep. We can use the 24 hours we are allotted everyday to do whatever you like. An amazing insight, isn’t it?

So let me translate what business owners are really saying. What we mean when we say we have no time is that we are not prepared to allocate resources to work on things in our business that are required so that

1) We don’t have to work so hard (maybe 10 hours a day instead of 14)

2) We have more time to spend with family

3) We have more time to enjoy our favourite pastimes (exercise, golf, fishing, travel)

4) We have a business that works independently from our own inputs

5) We have a better financial return on investment

Stephen Covey depicts it well in his time management matrix out of the “7 Habits of Highly Effective People”

Most business owners I know spend 80% or more of their time working in quadrant 1 when they should be working in quadrant 2. This is the area you work on your business and not in it.

Before we consider how to change your behaviours we need to understand some background. Technicians, the people who perform the tasks that the business does, work in quadrant 1. The problem is that most small business owners are technicians. They started with a good idea and understand how to do the technical work but not how to run the business itself. It is naturally difficult for technicians to think about their business in a different way because they know how to do it best. They spend very little time on systems, planning, networking, and relationship building and so on. They spend most of their time in production, in sales, quoting. They spend their time “on the floor” so to speak.

Successful managers and entrepreneurs spend more of their time working in quadrant 2. They plan, ensure that systems are implemented, they train and empower their team, and they spend time building relationships with customers, suppliers, bankers and other key stakeholders. They ensure that financial operations are established and that they understand the key drivers in their business. They ensure that these drivers are measured and managed. All of these activities lead to fewer crises and less crisis management.

So how do you achieve the balance?

1. You need to you need to understand the operational and financial status of your business, the tasks everyone is performing (including yourself) and your ideal organisational structure. What would the business look like when it operating at its peak.

2. You need to be prepared to allocate other resources such as cash to increase the amount of time you can implement change and to focus on quadrant 2 activities. This could be in the form of additional wages for new staff to do the technical work, an investment in technology, external consultants, seminars and so forth.

3. You need to be committed to change. Getting off of the tools is hard. Some people find it a constant battle to be disciplined enough to focus on working on the business. Someone to keep you accountable helps.

4. Plan. Plan your calendar. Set aside time to work on quadrant 2 activities. Do it on a daily and weekly basis. Then stick to it.

5. Get help. Engage a mentor or hire external advisors. These people understand what you need to do and can help you implement. These simple tips will give you the best opportunity to get your life back. Remember, time is just an excuse. If you want to change, you can!

Written by Andrew Mattner
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Do you really know whether your business is making a profit?

Mon, 05 Mar 2012 03:17:00 GMT

I recently blogged about businesses that do not utilise their investments effectively. Oftentimes they invested heavily in equipment or technology only to reduce their overall profitability.

So how do these businesses transform their thought patterns and adopt a new way of doing things? The answer, they need to educate themselves.

Investment goes beyond mere plant and equipment. It extends to knowledge so that you are able to understand the key drivers of your operation and your market so that you are able to use that equipment to maximize your returns. This will ensure that your business not merely survives but thrives in a difficult market.

I had a discussion with a proprietor recently regarding the key drivers in his business and the impact that relatively minor improvements to them would have to his profitability and ultimately to his quality of life. The problem was he didn’t understand what I was talking about. He was not alone in this respect.

Over the years I have spoken to and worked with numerous owners that were specialised in terms of their day to day activities, were extremely competitive and in some instances controlled by a small number of large customers. Most of these owners understood how to do the technical work involved but did not have an understanding of cost structures, labour or overhead rates, breakeven point, customer leads, conversion rates, average sale value or other key drivers. They are unable to measure profit per job or item and could not identify if the business was working anywhere near its full potential. Most had never considered the benefits of budgeting, strategic planning or documented systems.

More often than not the financial records, whilst “clean”, did not correctly account for income and expenses on an accrual basis. They did not account for depreciation or finance costs and in some cases the reported profit was based on funds banked and spent. They often had customers who owed them a large amount of money, in many cases outside of agreed trading terms, yet they were not aware of this nor did they know the amount or the time it took his customers to pay. Given the competitiveness of many of the industries,this is a pretty scary and dangerous position.

So why don’t they know these details? The simple answer was that these owners were not prepared to engage someone to teach them. Why not? These businesses were often not achieving what was possible, the owners are working extremely hard to the detriment of their lifestyle, but at the same time they don’t value the expertise that could help them improve.

Investment in education and information is a key element of longevity. Reading, attending seminars, quality systems (both financial and operational) and the help of external advisors are the keys to improving your knowledge base. It is this knowledge base that will provide you as a small business owner with the tools to extract that bit extra from your business. An extra 1% gross profit, a reduction in debtors’ days by 3 days, an improvement is your sales conversion rate can make a huge difference to your success or failure.

Make time to get out of the day to day grind of what you business does so that you can educate yourself; educate your team and explore opportunities to do things better. Use technology and the many clever tools that are emerging in the market every day to provide up to date and accurate information. Spend money on resources to perform the day to day activities to enable you to plan and think strategically about your organisation. Most importantly, spend time with people that know more than you do. Talk to them, listen to them. What you learn can help you improve your business and more importantly your life. That investment will pay for itself many times over.

Written by Andrew Mattner
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

Extraordinary clients achieving extraordinary results!

Mon, 05 Mar 2012 06:27:00 GMT

At Hattam McCarthy Reeves we love it when our clients win awards. It gives us a great feeling as business advisors to see our clients achieve extraordinary results and receive external acknowledgement from their peers.

Winning awards can be quite a spur for a business. They are a boon for the owners, and an important milestone for the business to build upon. Awards can engender the credibility to attract new customers and can provide comfort to existing customers that the business is an industry standout.

Two of our clients have won major industry awards in the last 12 months and we’d like to congratulate them and acknowledge their success.

Pyper Leaker Surveying Service won the ‘Small Project Award’ at the 2011 South Australian Spatial Excellence Awards for their work on the Dry Creek Railcar Depot Relocation Project.

The quality of the surveying services they provide was crucial to the success of the project overall and owners Martin Leaker and David Pyper and their staff were thrilled to win the award as a result of their hard work.

Another client who picked up awards very recently was Tumby Bay IGA Supermarket who won the following awards at the IGA Retailer of the Year dinner:

• SA Store of the Year

• Best Meat department*

• Best Fruit & Vegetable department*

• Best Customer Service

*Tumby Bay IGA also won these awards last year – back to back triumphs!

These awards were a great achievement for owners Brenton Lockwood and Kerrie Stutley and Scott and Melanie Quinn and their staff. They reflect the extra effort from everyone at the store to go that step further and provide great customer service.

We are very proud of both businesses for their awards and look forward to continuing to work with them and seeing them both improve in the future.

Written by Nick Ciccocioppo
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers

How do you ensure that your chosen successor has the wings that they need to fly?

Wed, 29 Feb 2012 19:18:00 GMT

The findings of 2011 Family Business Australia family business survey were released late last year. The responses from the 658 businesses polled were interesting not only in relation to their feedback regarding their outlook on their current business circumstances, but more importantly in relation to the challenges they are facing.

One of the key issues raised by respondents related to issues surrounding the training and development of successors to the family business. Nearly 60% of businesses indicated that this is of great or urgent concern to them. I have seen direct evidence of this many times over my years as an advisor as families have followed the natural course of succession from one generation to the next only to find that either

1) the successor has the potential to be successful, but has not been suitably trained

2) the successor does not have the skills to successfully take over

Inevitably the lack of skills of the successor leads to disappointment and in some cases devastation. Not just devastation from the point of view of business failure, but also in terms of damaged relationships - relationships between parents and children, between siblings, and between owners and team members.

We have all heard the old saying "you reap what you sow". This has never been truer than in the case of business succession from one generation to the next. Ill equipped successors are destined for failure, disappointment and inevitably conflict.

So how can this be prevented?

Many family businesses are steeped in tradition. They have roots going back multiple generations. These roots establish the values of the family business. Family business owners find it easy to transfer these values across generations. This is what our family business stands for, this is the way we act, the way our family business treat our stakeholders, and this is the quality of our product on so on. The transfers of these values are essential to ongoing success.

Together with the roots it is equally if not more important that the incumbents give successors wings. They must be empowered through knowledge and support mechanisms so that they can move the business forward. More often than not it is this aspect that is forgotten or neglected. Without wings to balance the roots your family business will be stuck in the past.

Some family businesses manage succession extremely well. Essentially they plan well. They ensure that the likely successor is suitably educated, that insist that they gain sufficient experience and demonstrated results away from the family business in a field that is beneficial to the family business, they commit to further education (e.g. an MBA), they arrange for mentoring and they establish appropriate governance structures for the business. Essentially they give the successor every opportunity to succeed.

So where can you get help? How do you ensure that your chosen successor has the wings that they need to fly?

Thats easy

1) First you start with a commitment from both parties to do something
2) Secondly ask. Ask your advisers what other clients have done, ask peers what they have done, ask industry or professional bodies.
3) Commit to and attend training or further studies
4) Educate yourself through reading, attending seminars etc
5) Establish rules relating to entry into the family business
6) Establish governance and support structures

Once you have done these things you will give your family business the best chance of successfully transcending generations.

Written By Andrew Mattner
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers