Business tips for your business

by Shawn O’Grady
4 Minute(s) to read

Business tips for your business

Something to think about to start off the new year

If there’s a universal principle to remember when getting into business, that one rule might be ‘know what you want to achieve in business.’ Business can be a complex (and at times frustrating) affair, but having clear commercial objectives can be the difference between success and failure. We have some tips to keep your business in tip-top shape.

Planning for success

  • Return of Investment: Before undertaking any commercial activity, consider how you will see the return of your investment.
  • Business plan: State in your written plan how your investment will work for you. Set a time frame and review your progress against your plan at regular intervals. Every six months, review where you are against where you want to be in your plan.
  • Budgets: No matter where your capital investment will be coming from, plan on where and how much of your investment you will need to spend to make your business plan work.
  • Capital raising: Your options to raise finance for your business are from your own resources, from borrowings, by seeking investment from private investors or by looking for investment from the public.
  • Know your trading entity: Individuals and companies are legal persons. Partnerships, joint ventures and trusts are (sometimes complex) legal relationships.
  • Governance: The root of good governance is the responsible management of other people’s investment.
  • Reputation: Consider the ‘down side’ of any business decision. Ask yourself, “Would this damage my reputation or business if it went viral on social media, was printed on the front page of the newspaper or put before a judge?”
  • Build good systems: True businesses are systems of routine or repeat processes.
  • SaaS There’s an abundance of Software-as-a-Service (SaaS) providers that may have an app helpful to your business. Find it, get it and use it.
  • Website: Integrate a website into your overall business strategy. As well as being your virtual shop front, the website analytics can provide you with valuable data about your site visitors.
  • Online Sales: Give the paying public reasons to visit your website – as they would your traditional bricks-and-mortar premises.
  • Ask for work: Don’t be shy to find business, provided you also have the capacity to Mind and then Grind that work.

Business fundamentals

  • Financial performance: Know your financial ratios in order to understand the drivers of your financial performance.
  • Financial reporting: Report profit/loss, balance sheet and cash flow (at least) monthly. Good accounting software should compile and produce these reports for you.
  • Cash flow: Cash flow starts with getting paid and ends when you do not.
  • Solvency: This is your ability to meet your debts as and when they fall due. A test is to divide current assets by current liabilities (in your balance sheet). That ratio should be greater than one.

Running a profitable business

  • Stock-in-trade: Your stock-in-trade is either inventory or work-in-progress. Get customer orders first, then fulfil those orders.
  • Terms of trade: Have a standard (and up-to-date) terms of trade and send it with each estimate or quote. Summarise the payment conditions from your terms of trade on your invoices.
  • Invoicing: Invoice your customers as soon as practical after completing the work (or at each stage) when the value of your good work will be remembered.
  • Payment options: Have several payment options to make it easy for your client to pay your invoice – online or credit card are best.
  • Debtor control: Taking on a customer with a reputation for poor or non-payment of  invoices can be more damaging to your cash flow than not taking on the work to begin with.
  • Debt collection: Remind debtors of overdue accounts at 30 days, final warnings at 60 days, start debt collection at 90 days – with reasonable variances permitted.
  • Know your tax liabilities: The IRD should always be the first to be paid. Know your tax liabilities, how they are calculated and pay on time.
  • Pay your taxes: You should never go broke paying tax.

If you receive funds from your customers, then you have also the tax to pay the IRD.
The success of a business rests with the business owner. Plan well, have good systems, believe in yourself and your product or service, and have a clear goal. Above all else, make sure you’re profit- driven.

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Give us a call on (04) 563 6965 or email: dennis@taxman.co.nz or shawn@taxman.co.nz

Keep an eye out for March’s article!

 

TAX DATES TO REMEMBER

  • 20th February 2016 - monthly employers PAYE payment…
  • 28th February 2016 -  Bi monthly GST Return for Dec/Jan 2016…