The Australian Accounting Awards is the premier event in showcasing the depth of talent in the nation’s accounting professionals and businesses, recognising their success and their passion for the sector.

Ryan Maddock, Director at Maddock’s Accounting & Advisory, said that he was humbled to be recognised and proud to be named as a finalist in the Australian Accounting Awards 2022.

“During 2021, we have helped achieve a number of significant milestones for clients that demonstrates the ability of our Virtual CFO Services to create value at all stages of the business cycle from startup, growth, maturity and ultimately to exit/succession. We aim to have a far broader centre of influence and offer a different skill set to break the mold of traditional accounting practices.”

The finalist list, which was announced on Tuesday, 26 April, features over 290 high-achieving professionals across 34 submission-based categories.

Reaching the finalists stage is regarded as an incredible achievement across the Australian accounting industry, showcasing the depth of dedication and commitment each individual and business brings to advancing the industry.

Accountants Daily editor Philip King said: “The Accountants Daily Australian Accounting Awards night is renowned as the premier event each year when the profession recognises and celebrates those right at the top of their game.

“This year it is especially poignant as the first face-to-face awards night since the onset of COVID. It offers the whole industry a chance to come together and mark its exceptional contributions to the national wellbeing through the trials of the pandemic and testing natural disasters.

“Under such difficult circumstances, to be shortlisted from among the hundreds of high-quality entries is a mark of high achievement, one that echoes throughout the profession.”

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Unfortunately, it’s those first few years when a company is just starting up that establishing good habits with managing financial resources is so important, and, over time can even make or break a business.

Hiring a Virtual CFO is an affordable option for business owners who recognize the need for a financial expert with small business experience. Virtual CFO’s provide top level advice just when you need it, offering incredible value and cost savings to companies focused on growth and long-term success.

Here’s why your small business might want to consider the benefits of working with a Virtual CFO.

High level decision making

A Virtual CFO can analyze your company finances and provide expert advice to help you make more informed, strategic decisions for ongoing profitability. That senior level financial oversight can help you understand any risks or weak spots, identify opportunities, and create a realistic and actionable business plan that steers the company precisely where you want it to go.

Raising business capital

Finding access to funding is important when it’s time to scale your business, expand operations, launch a new product or service, or invest in a new joint venture. A Virtual CFO can suggest the best ways to raise funds, whether that might be seeking venture capital, business loans, industry grants, or crowdfunding. A Virtual CFO can also help fine tune your budget to discover ways to cut costs and spend money more wisely. 

Managing risk

Your business is an asset that needs protection from any potential risk that may threaten its ongoing success. A fire or flood, cyber attack, or employee theft can all cause long-term damage if you don’t take steps to protect your business. A Virtual CFO can undertake a risk assessment and ensure you are investing wisely, have appropriate insurance and that your sensitive data, equipment, and inventory are secure.

Facilitating change

When a business is in a transition period, it’s valuable to have a part time senior-level manager overseeing the numbers to measure and assess long and short term business performance. If the business is in flux and finds itself in a negative cash-flow position, your Virtual CFO can quickly help you determine the key factors and take immediate action to correct.

A custom fit for your business

When you hire a Virtual CFO, you decide how often their services are required and only pay for the services you need. Hiring a financial expert on contract rather is a cost-effective solution for businesses that only need part time support.

Staying on top of your company’s financial management is a struggle for many small business owners, who spend much of their time attending to customers and profit-generating activities.

Working with a Virtual CFO can help you better manage the most important aspects of your business.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

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1. Preparation delivers the best results

The key message to take away is this: start your exit strategy now – don’t wait until that ‘later time’. Life is full of unexpected turns. You may not have the time to do what’s needed to get the best results.

2. The chief barrier

The chief impediment to a successful exit strategy is procrastination. It’s all too easy to convince yourself that you’re too busy at the moment, but you’ll start the process next year or whatever future date you rationalise as reasonable.

All sorts of issues could underlie this rationalisation. One is the dislike of facing up to the future, another is a reluctance to delegate responsibility – after all, like many business owners you may have persuaded yourself that no one can do it as well as you.

3. Develop a succession team

There are advisors out there, starting with your accountant, who have helped other business owners through the business exit process. Find them, and tap into their knowledge. There’s no point in reinventing the wheel on your own

4. Making the business affordable

If you intend to pass on the business to family, or perhaps to a management team, one major issue can be making your business more affordable.  You may need to make some structural changes, such as separating the business into two parts: one company owning the operating part, the second company owning the assets, such as your premises or your equipment. Retaining the asset-owning part and leasing the assets to the operating part could give you a tidy retirement income. But these structural changes can take time to bed in, so to repeat the message, don’t delay, start early!

5. Decisions and training

If family or management are you desired successors, you will likely face issues around fairness to everyone while retaining the skills of key staff. These issues will require careful thought and here again you will benefit from the experience of your transition team. Their impartiality can help take the heat out of potential conflicts.

The next step is to start training your successor(s) – again, a process that takes time. One major hurdle business owners must often clear is learning to delegate.

6. Improving the business

If there’s no one suitable or interested in your family or management team, an outside buyer will probably be your target. Here’s where your accountant can add value by helping you prepare the business for maximum sale value. The changes could range from better business systems and an updated customer database to tighter money management through key performance indicator monitoring. You’ll want to show the buyer they are gaining a well-run business with efficient systems that will make a transition as painless as possible.  Of course, all this is worth doing at any stage.

If your business is presently based largely or wholly around your personality, you’ll also want to show that it can stand on its own if you were to walk out right now. Making these changes can take time. Did we mention that it certainly pays to start your exit strategy as soon as possible?

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

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These tips can help you with the process of making plans to help guide your business to greater success.

Set priorities

Business owners are typically highly creative and optimistic; as a result, they often have difficulty narrowing down their ideas from among all the exciting possibilities, whether it’s an opportunity to expand to a new market or choosing a better time management strategy.

As you update your business plan, focus on what’s most important for your business to achieve this year. Then break your goals down into smaller tasks, to maximize productivity and enjoy the little successes that lead to big changes.

Start by defining your top three business goals for the next four quarters. With those in mind, do some research to help you decide on the best way to achieve those three goals – and a reasonable timeline for meeting specific targets.

Think different

Your priorities in the coming year may be to hit a certain revenue target, launch a new product line or tap a completely new market.

An important thing to keep in mind as youmake plans to move your business forward is how you’ll stay competitive. For instance, it’s important to review your pricing strategy on an annual basis, to ensure you continue to attract new prospects and retain customers.

As part of your overall business planning process, spend some time on competitive intelligence, too. Include in your plans how you’ll increase value for your offerings and continue to stand apart from the crowd.

Find money

If scaling your business is on your agenda for the year ahead, and you don’t have savings earmarked to fund your ideas, you’ll want to make sure your business plan includes adequate financial planning.

Applying to a lender for a business loan is one option. In this case, you’ll want to include up to date cash flow reports, income statements, budgets and projections in your plan for a potential lender.

If your business doesn’t have a credit history, you may need to look at other options for financing your plans. Using a business credit card on a regular basis and paying off the balance can help you build a good credit rating, which will help you prepare to apply for a loan down the road.

Your accountant can also help provide additional financial advice and support as you update your business plan, based on your most current financial records. With these business planning tips in mind, you’ll be well-prepared for a new year of growth and continued success.

Final tips

• Review your business plan every quarter to ensure you stay on track with your goals and priorities throughout the year.
• Be realistic about opportunities and challenges as you plan ahead. Your accountant can offer business advisory services – and help you set meaningful short and long term goals.
• As alternatives to applying for a loan or line of credit, consider crowdfunding or angel investing to help you meet your business goals.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

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To cover the costs of your business you need to sell enough goods or services to reach your break-even point. Knowing where that point is, and how long it will take you to reach it, can be fundamental to your success. This especially true if you’re thinking about starting or buying a business.

Calculate fixed and variable costs

The first step is to establish your fixed and variable costs.

Fixed Costs

Fixed costs are bills your business always has to pay, regardless of its level of sales. Also known as overheads, they could include:

• Salaries for permanent staff.
• Rent on your premises.
• Insurance.
• Interest on debt.

Variable Costs

These are costs that increase with your levels of sales – materials and production costs are two examples. Others include sales bonuses, part-time wages and freight.

Now work out:

• The total fixed costs bill for the year.
• An average overall variable cost for each product or service sold (the Variable Cost per Unit).

Some bills might be a combination of fixed and variable costs, such as a phone bill split between a line cost and toll call charges. Separate these bills into fixed and variable parts for greater accuracy.

If breaking them up is too time consuming, choose which element is greater in the bills and classify it as that. For example, if you don’t make many calls to mobile phones or outside your local area, you’d classify the phone bill as being fixed.

Determine your break-even point

Let’s assume you manufacture shoes with the following details:

• Budgeted fixed costs of $60,000.
• Average cost to make a pair of shoes is $110.
• Average sale price per pair of shoes is $250.

Calculating your break-even point requires the use of a few formulas:

1. Sales Price per Unit ($250) minus Variable Costs per Unit ($110) = Contribution Margin per Unit ($140).
2. Contribution Margin per Unit ($140) divided by Sales Price per Unit ($250) = Contribution Margin Ratio (0.56).
3. Fixed Costs ($60,000) divided by Contribution Margin Ratio (0.56) = Break-even Sales Volume ($107,142).

Based on these calculations, if you sell more than $107,142 of shoes you’ll make a profit. That equates to 429 pairs.

Using your break-even point

Once you’ve worked out your break-even point, the next step is to work out whether the sales volume you’ll need to break even is realistic and achievable.

You can also use your break-even calculation to see the effect of changes in costs on your business. If you were able to source cheaper materials and reduce the variable cost per pair of shoes, you’d need to sell fewer pairs to break even.

If your sales remained the same, you’d make more profit.

To be of real value to you, your fixed and variable costs calculations need to be accurate. Putting inaccurate figures into your break-even calculations will give you an inaccurate result. It’s worth investing time to work out your figures accurately.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

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Understand buyer behavior

In addition to storing real time financial data, your accounting software can also retain important information about your clients. Insights into your customer buying history and preferred payment methods, for instance, can help you tailor your marketing strategies to each type of client you serve. Use what you know about customers to set up a segmented mailing list. Marketing directly to the clients who tend to hire you for a particular service is a much more effective way to make sales than approaching your customers with a one-size-fits-all email campaign or in-store promotion.

Reporting capabilities built in to your accounting software can show you who your best customers are and your most popular products. With this key info, you’ll hit your sales targets by only promoting the goods and services that you know your customers really want. The real time data your accounting software provides can also translate to an improved overall experience that will win over your customers. For instance, when a client gets in touch with a question you’ll be able to respond quickly with useful, accurate background info. With more in-depth knowledge of your customers you’ll be able to cross sell and upsell more easily by suggesting additional products that might meet their needs.

Free up time to reach more customers

One of the great things about accounting software is how much time you’ll save by automating processes like invoicing and payroll. And if your software solution integrates with your other small business apps as well as your CRM, ERP or POS systems, your business will be even more productive. By getting more efficient, you’ll have more time to touch base with customers and find new clients.

Consider making the most of that extra time in your schedule to

• organize professional development opportunities that improve your team’s sales skills
• update your business plan based on real time financial data and enhanced reporting
• determine the best on and offline marketing strategies for your business based on what you know about your customers’ spending patterns
• implement loyalty rewards for your return customers that you know will appeal to them – a sure fire way to spread positive word of mouth
• implement growth strategies designed to scale your business and
• make more informed decisions on every aspect of your business to cut costs, improve productivity and boost your profit margin.

How will you boost your bottom line?

Now that you’re fully aware of the customer insights and time-saving capabilities your accounting software provides, what will you do differently to build a more profitable and successful business?

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

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If you have the money available, and the item is really necessary to your business, then it will usually benefit you to buy the item outright. If there is no way you can find the finance (i.e., you have no money) then you will have to finance the purchase out of cashflow, which means leasing it.

A caution

A special note here: Don’t buy an item at the risk of not being able to meet your bills in the next month. Only use surplus cash—and then only if it really is ‘surplus’, not just temporarily in the bank account. You should work all this out in terms of your cashflow forecast and your forthcoming liabilities.

If the options are not so clear cut, then you have some thinking to do. Ask these questions:

• How often will you use the item?

If the item is only going to be used every now and then, there is no real point in buying one. It will lie around for most of the year unused and is therefore a waste of your resources. So lease or hire the equipment when you require it.

• What else could you do with the money?

Could you earn a better rate of return on the capital required for the item if you invested it in your business? Your business might be at the stage where a few thousand ploughed back in as working capital will give you a far better rate of return than tying up the money in equipment. For example, would the money be better spent on marketing? In this case, it might pay you to lease.

The effect on net profit

The bottom line is always: how will your decision to buy or lease affect net profit?

Let’s take a simple example, and calculate the net profit results for both options. Suppose you decide the business needs a machine worth $2,000 (we’ll ignore GST). You can either buy the machine outright or lease it (rent).

• Option One

If you rent, the machine will cost you around $100 per month, or $1,200 for the year. This can be added to your business expenses.

• Option Two

If you buy the machine, the total cost of $2,000 cannot be deducted from the net profit, as it will now be regarded as an asset. Suppose you can depreciate the machine at 33% a year. This means you can claim $660 as an expense for the year ($2,000 x 33%).

Comparative costs

• Option One

You’ve spent $1,200 in cash, and can claim this $1,200 as a business expense. By having $1,200 as expenses, you’ll pay less tax (as opposed to not having the machine at all) of $288 (assuming a tax rate of 24%). So you could say that you’ve spent $1,200 and ‘saved’ $288, giving a net cash out for the business of $912 for that tax year.

• Option Two

You spend $2,000 in cash, and claim $660 as a depreciation expense, which gives you a tax ‘saving’ of $158 (24% of $660). So your net cash out is $1,842. Therefore, in the first year, it would have been better for the business, as far as cashflow is concerned, to have rented the machine. But what about year two? In Option One you’d still have to pay $1,200 in rent for that second year, and the net cash out is still $912.

But in Option Two, you have no further cash to pay, and can still claim depreciation of $442 (33% of the asset’s now depreciated book value of $1340), which gives you a ‘saving’ of $106.

This comparison shows, therefore, that whilst you might have gained a slightly better cashflow situation in year one, the lease option becomes far less attractive in subsequent years.

So as a rule of thumb, if you lease equipment you will make a cash saving in the first year or two, and this is a viable alternative if you do not have the cash (especially for equipment that may cost thousands of dollars, or items you do not use regularly). However, long term, it’s much better to buy equipment outright, provided you can safely ride out the initial heavy cash commitment.

High-tech equipment

One additional factor is worth considering, though. When it comes to equipment that is strongly technology based (such as computers or even photocopiers) then people often choose to lease, with terms in their lease that allow them to update to new technology as it becomes available.

In this way you avoid being stuck with outdated equipment that has little resale value or no longer serves your needs. This is often very much a judgement call that you can only make after speaking to the salesperson concerned.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

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A non-disclosure agreement (NDA) offers a means to protect valuable company information from being shared with the public or leaked to competitors. An NDA – also known as a confidentiality agreement –specifies that another party cannot share proprietary information without your consent. Some examples of proprietary information include company data, records, intellectual property, and software.

For small business owners, NDAs are a good idea when you hire a new employee, bring in a business partner or consultant, or sign on with a new supplier or vendor.

The ABCs of NDAs

Now that you know why confidentiality agreements are important, here’s what you need to know about drafting one.

A non-disclosure agreement should include the following information:

• The relevant parties – does the agreement apply to an individual and your company, or your company and another organization?
• The protected information – is the agreement all-inclusive or is there specific confidential information the signee is not permitted to share?
• The time frame – when does the agreement take effect and for what period of time? Some business owners choose to draft agreements for an indefinite period after employment is terminated.
• The geographical scope – does the agreement apply locally, nationally, internationally?
• The injunction clause – this is a must so your company can take legal action should there be cause to believe a signee may disclose protected proprietary information, or has done so.
• The consequences – what are the terms if an individual violates the confidentiality agreement (e.g. who pays for legal expenses, the penalties for breaking the agreement).

You can get a sense of what an NDA looks like by searching for free templates online. However, it is highly recommended that you consult with an attorney before signing a confidentiality agreement with another party. A poorly written legal contract may be difficult, as well as costly, to enforce.

If your company’s proprietary information is valuable enough to protect in writing, it’s worth the expense of doing it right. Consider having a well-written, legally-binding NDA in a place a cost-saving strategy for your business.

Final tips

• Be as specific and detailed as possible about the sensitive information you want to protect in a non-disclosure agreement. The description of the protected information – who owns it, what can and cannot be shared, and for how long – will be essential if you find yourself taking an employee, business partner, or organization to court.
• Take measures to keep sensitive data safe from unwanted eyes. Lock up files, use secure passwords, keep work files off personal devices, avoid sharing confidential information by email, and reinforce best practices for appropriately sharing sensitive data among staff, including temporary outsourced workers.
• Be extremely judicious about sharing company secrets. Once confidential information is out, you may be able to seek legal compensation but you can’t make the information that was shared secret again.

It’s impossible to put a price tag on what may have been lost when a NDA has been breached. The best policy for entrepreneurs with a trade secret? As best you can, for as long as you can, keep your secrets to yourself.

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

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Read on to learn the top five reasons to record your company processes and systems, so your business can run more efficiently and effectively even when you’re not there.

1. Improve efficiency

When you sit down to record your processes and systems, you may discover gaps where improvements could be made. You might find better ways to perform routine tasks, reducing bottlenecks, and eliminating extra steps. You may decide that some tasks are too time consuming, and you’d save time and money switching to an automated solution. Reviewing how you do things as you record systems can help create better systems, improving productivity.

2. Support staff training

When it’s time to hire new talent, a systems manual can dramatically reduce the time you spend training. Documenting your processes can also ensure jobs are consistently performed to a high standard. Sharing your procedure guidelines can help new employees and casual staff quickly get up to speed on expectations, and give them a reference to check before asking questions.

3. Sell your systems

Develop a unique turnkey system that other businesses can implement to save time and cut costs, and you can increase profits by selling your operating manual. Those documented processes are part of your company’s intellectual property, and can be licensed just like your brand name.

4. Get away

One of the perks of running your own business is setting your own schedule. But without systems in place, it can be difficult to get away fora vacation, let alone retire. In order to build a business that can run without you, you need to be able to delegate the tasks and processes to someone else, with confidence they’ll be performed correctly and consistently. Another excellent reason to make sure your systems are recorded, and your manual is updated regularly.

5. Sell your business

When it comes time to sell your business, you’ll get top dollar if you can provide a buyer with an operating manual. A potential buyer wants to know the business will continue to run smoothly without you throughout the transition period, and that institutional memory will be retained when there’s staff turnover. The greater ease with which someone can step in and operate the business, the greater the value and the higher your compensation when you’re ready to sell.

As we’ve seen, there are a number of excellent reasons to review your systems and record them, even if you’re just starting out. You might plan to update it yearly, just like your business plan, to discover best practices and ensure it maintains its usefulness to you and your staff. 

Contact the Maddock’s Accounting & Advisory team here to find out how we can help.

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The symptoms are familiar, and their results disastrous:

• Poor or non-existent record-keeping.
• Tax obligations are not met.
• Invoices go out late and debts remain uncollected.
• There is one cashflow crisis after another.
• Goods and services are incorrectly costed and priced.

Any of these factors can lead the business down the slippery path to failure, but all are avoidable. The whole point about putting in good systems is that they free you to spend more time working ON your business, not in it. Here are some tips on good business housekeeping.

Be business-like

To be in business and to remain in business, become a business person! In order to run a business, you must be business-like. It’s not sufficient just to be very good at what you do. Lots of people who are ‘very good at what they do’ have failed. The common cry: “I’m far too busy for that” is also no excuse. Are you ‘too busy’ to be a competent businessperson? If so, your business won’t last long. You must continue to develop your business skills.

To be a businessperson you have to make the effort to become something of an ‘all rounder’, not just a specialist player. You can offer outstanding goods or services, but if you don’t develop good business systems then you are not a fully rounded businessperson and your business will be in danger of failing.

Remember that other stakeholders in your business, such as the building material suppliers who give you credit and the bankers who extend loans and financing terms, are always assessing your business skills. If you consistently pay people late or can’t meet the terms of your debt agreements they will draw the obvious conclusions about your business skills.

How good business systems will help you

Good business systems will make your business stronger, more efficient and easier to run. They will also make your business far more attractive to future buyers because if you have developed clear operating and procedures manuals the business will be seen as an independently viable unit and less dependent on you.

Think for instance of what makes franchises so successful: it’s because they are designed so that people can buy a proven system and operate it after minimal training. They can do this because the business procedures are captured in simple, clear operating manuals.

Here are five steps to a better business:

1. Good record-keeping and bookkeeping will help you keep on-side with the Inland Revenue Department. If you’re able to meet your tax obligations through sensible planning you’ll sleep better at night. You won’t fear a tax audit and you’ll know how your business is doing. You won’t be caught by a ‘sudden tax demand out of the blue’ because no such thing exists for a well-run business. You should always know which taxes are due, and when. You’ll suffer less stress.

• Good business planning will help you set goals for your business, with specific steps on how to achieve these goals. Without goals, where do you think you’re going? Running a business without goals is like turning up at an airport and saying, “I’d really like to go somewhere.” The person at the ticket desk would think you’re clueless, to say the least!

• Good cashflow forecasting will enable you to anticipate a possible cashflow problem (something all growing businesses experience from time to time) and take steps before the problem becomes a crisis. Banks will respect you if you anticipate problems and make plans in advance. Banks will not respect you—and will indeed categorise you as incompetent—if you tell them you’ve been ‘caught out’ by a crisis. Banks don’t like crises. They like you to go to them well in advance of any possible crisis with a plan in hand. This shows them you’re in charge of your business.

• Good creditor and debtor control will improve your cash flow. Invoicing promptly and collecting debts on time gives you the cash to pay suppliers on time and get more favourable credit terms from them. It is a virtuous circle. Sloppiness in this department is one of the most common (and unnecessary) causes of business owners experiencing stress and anxiety. So pay your creditors on time and don’t let your debtors use you as a free banking service.

• Realistic pricing and costing will ensure that you run your business in a competitive but profitable way. Poor skills in this regard could mean that you’re operating at unrealistic levels—even at a loss. For example, if you let costs get out of hand (such as overhead costs) your profits will erode. There is no point in increasing sales if you’re not increasing your profits.

In business you don’t have to be an expert at everything. For example, you might hate bookkeeping. Fine—but do get someone else to do it for you, don’t rely on a shoebox for your accounts! And you should at least understand the processes and the overall accounting picture even if you don’t want to do the ‘drudge work’ yourself.

Having poor systems is the road to stress and burnout. On the other hand good business systems will enable you to work smarter, not harder. They free you to work on your business rather than in it. That way, you’re more likely to avoid burnout and you’ll be able to take time off work because you can train others to follow your clearly documented systems and procedures. Systems are the way to build a better business and liberate yourself from it.

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