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Business

Easy steps to prepare your family business for the next generation

The future of your family business may seem like a problem for tomorrow or sometime next decade, but forward-thinking business owners know they need to plan for the future today. The steps you take now to prepare your company for the next generation will go a long way to determining how successful it remains after you retire.

At Hockley Giblin & Co, we’re a family business, we know how tempting it is to think that things will automatically work out for the best, but that rarely happens without planning.

 

Businesspeople Arguing In Meeting

Here are some easy steps you can take now that will help your business survive after you’re gone.

1. Write a formal succession plan

You might know in your head how you want the business to run when you’re gone, but that doesn’t mean what you want will come to pass. It certainly doesn’t mean that everyone will agree with you. In fact, not having a written plan can lead to conflict and legal disputes.

Put in writing how you want the business to run after you leave. Who will take your role? Will your job be divided among various family members? Will one of your children own the entire business or will they all be part owners? Is everyone in the family aware of your decision?

Talk to the people affected by your succession plan. Make sure they are willing and able to take a role in the business. Don’t assume that because you want your son or daughter to take over the company, they are capable of it or even want to.

By working on your succession plan early, you also have time to determine who has the skills to take over certain roles and who might need additional training.

2. Invest in professional development

Many business owners assume their children know how to run the family business because they’ve grown up in the business. That doesn’t mean that they have all the skills necessary to run the business successfully.

It makes sense, then, to invest in education and professional development, not just for your family members but for young employees who could one day take over management roles in your company.

Start slowly handing over more responsibilities to the people who will one day manage your company, so the job isn’t overwhelming to them when you decide it’s time for you to retire. By the time you go, the person or people taking over your role should already be very familiar with the job expectations and feel comfortable in the role.

3. Foster innovation

It’s no secret that the younger generations have embraced technology as a way to make business more efficient. Fostering technology and innovation in your business early makes it more appealing for the next generation to stay with your business for the long term. It also shows them that you are forward-thinking and that you value their input and ideas.

Adopt new technologies and encourage your employees to be innovative. They may find ways to make your business more successful, or at least more efficient.

Final thoughts

Planning for the future might not be the most fun way to spend your time, but it is vital to do so to ensure the continued success of your business. It also keeps the transitional time after you retire as smooth as possible for those who follow in your footsteps.

As always, we’re here for you if you need some help, so please don’t hesitate to get in touch.

Categories
Business General Financial Information

Separating personal and business expenses

There are some things in life that go together well and others that definitely do not.

Business and personal finances are in the category of items that should not be mixed!

Although it may seem like a headache to keep them separate—who wants to manage all those bank accounts?—your life will be greatly simplified once you separate your personal and your business finances, especially your expenses.

Paperwork and taxes will be easier to manage and you’ll have a better idea of how much money you spend on your business. Here are some tips to keep your personal and your business expenses separate:

Understand the difference between personal and business expenses

Most times, the line between personal and business expenses is clear. Any expense that is directly linked to your business earning an income is a business expense. If you buy something to be used for your business, it’s a deductible business expense. If you buy something to use privately, that’s a personal expense.

If something is mixed between business and personal, such as a laptop that you use partially for business and partially for personal use, you can only claim a deduction for the amount that you use for business. So if you use the laptop for business 75 percent of the time and for personal use 25 percent of the time, you can only deduct 75 percent of the laptop.

Whether you use something entirely or partially for business, you need to have a record of the purchase.

Open a business credit card and/or bank account

Having a business credit card and/or bank account provides you with an easy way to not only keep your private and business expenses apart, it also gives you an easy way to track your expenses. When you use the same accounts for business and personal use, everything is mixed on the same statement and it can be difficult to determine—or remember—which transactions were related to your business and which were for your private life.

With business accounts you know that every transaction is related to your business and should therefore be deductible. You don’t have to search through every statement at tax time to highlight the deductible expenses because every transaction is business related.

You can also easily check your statements to see how much money your business is spending. That’s incredibly difficult to do if your business and personal transactions are all linked to one account.

Where possible, buy separate business items

Depending on how small your business is, you may not be able to keep all items separate, but buying devices that are used for both business and personal use gets complicated. In an ideal world, you have a separate computer for home and work, a separate work and personal cell phone and even separate vehicles.

Having duplicate items for work and personal use makes it much easier to track expenses. Rather than determining how much of your cell phone bill you can deduct for business, you know that your business phone is 100 percent deductible. Same with your computer and your vehicle. It costs more—especially the separate vehicle—but it keeps your personal life separate from your business life.

Final thoughts

It can be tempting to try to write everything off as a business expense but don’t fall into that trap. Open separate accounts, buy duplicate items where you can and keep receipts of your business expenses.

If you’re unsure, talk to us to find out which activities count as a tax deduction and which do not. We can answer your questions and can even help you come up with a system to track your expenses.

Categories
Business

Avoid These 4 Costly Accounting Mistakes

Owning your own business:

  • PRO – You love the flexibility and feeling in control!
  • CON –  Bookkeeping is bringing you down…

You understand that effective financial management is key to business success. But lack of knowledge, frustration, and even avoidance can add up to accounting mistakes that derail future growth.

Protect your business, and reduce your stress, by avoiding these 4 costly accounting errors:

 

1. Mixing personal and professional finances

From day one, business owners should have a separate bank account in which to deposit their income and pay their business expenses.

It’s also crucial to designate a business-only credit card. Come tax time, separate statements will make submitting claimable expenses quick and easy, while reducing the risk of a painful audit.

2. Letting accounts receivable slide

It’s frighteningly easy to lose track of which customers have paid you and which clients are late. Implement a strict policy and schedule for tracking accounts receivable and pursuing unpaid invoices.

  • ask customers to pay at the point of purchase or no more than 30 days later;
  • contact clients to confirm they have received your invoice and to agree on a payment date;
  • follow up immediately when payment dates are missed; and
  • keep accurate, up-to-date records of each client’s payment history.

Investing in a cloud-based accounting solution can make Accounts Receivable a breeze by automating your monthly invoicing – and contacting late payers with a reminder email.

3. Not using tech to track your expenses

Tired of chasing down missing receipts and struggling to justify claims come tax time? There’s an app for that! Choose from numerous options, such as Receipt Bank, Squirrel Street or Expensify.

Many of these apps generate expense reports that are easy to share, or sync automatically with accounting software.
Neglecting to strategise for long-term growth

Effective accounting means managing day-to-day finances while making provisions for future growth. Software and cloud-based solutions offer easy ways to track your financials, but they also generate reports and provide analytic tools SME owners can use for future forecasting.

Familiarise yourself with the reports your software can generate to track long-term trends, identify and mitigate risk, and discover new ways to increase profitability. Talk to us about which reports and metrics are most important for your particular business and how to utilise them.

4. Final tip: Don’t go it alone

Small business owners are rarely trained accountants. Don’t try to manage your company’s finances all by yourself.

Collaborate with a trusted professional, invest in quality IT solutions, and spend some time familiarising yourself with relevant tools and trends.

You’ll feel empowered, which is step one to forging a more love-filled relationship with small business accounting!

Categories
Business

Save or Spend? Smart money tips for business owners

Business, Owner

Small business owners know how important it is to save money. They know that one day that dollar could come in handy, especially during slower times.

Saving money is definitely important, but there are also things small business owners can – and should – spend their money on today. It might seem counterproductive to spend money when you want to put it in the bank – and make no mistake, saving and investing are also vital – but sometimes spending your money can wind up helping your business immensely, protecting it from slower times.

What are 3 things smart business owners spend their money on? Employees; Marketing; Administrative tasks.

Why? Read on…

1. Their employees

Your business is nothing without your employees and happy employees are more productive, motivated and loyal. Smart business owners know that it’s worth spending a little extra money to ensure you have the best employees on your staff and to reward them for their hard work.

When you can, spend money on your employees. Offer bonuses or gifts for meeting their goals or exceptional service, provide better-than-average benefits plans, give them opportunities for training, or increase their salaries.

Happy employees not only give more to your business they reduce the turnover rate, saving you the cost and headache of finding and training new workers. Plus, your clients and customers like seeing consistency in your staff, so they’ll appreciate that you keep your workers happy.

2. Their marketing

Many business owners think marketing is about finding clients today, but a good marketing strategy looks to the future. Just because your business is busy today doesn’t mean it will be tomorrow and if you only focus on your marketing when things are slow, your downturns will last longer than they should. Unfortunately, too many business owners only gear up their marketing efforts when business slows down.

By then it’s too late.

No matter how busy you are today, marketing should be one of your financial priorities. You need to market yourself today to ensure customers tomorrow, next week, and next month. Spend your money on a proven marketing strategy that draws customers in and you might be able to avoid future downturns or at least stop them from lasting as long.

3. Their administrative tasks

There’s a lot to running a business that can be outsourced. Yes, outsourcing costs you money. But it also saves you valuable time and energy. It may also prevent needless headaches.

There are many service providers out there that offer valuable assistance, freeing up your time for the things you love to do, and are more skilled at. You can outsource your payroll, invoicing, bookkeeping, accounting, legal advice and marketing. You can even hire an administrative assistant to help you with day-to-day business tasks.

These outsourced service providers are specialists in their field and can provide you with the services you need, when you need them. If you’re not an expert in those fields – especially legal and accounting – outsourcing those tasks can also prevent costly errors.

Your time is valuable. Spending money so someone else can take care of the mundane tasks you dislike is worth the expense.

Final thoughts

Smart business owners know there’s a time and a place to spend money. Spending your money in smart ways saves you time and energy. It can even save you money in the long run by reducing turnover and preventing expensive mistakes.

Consider whether you could help your business, and yourself,  by spending money on your employees, marketing, or administrative tasks.

Categories
Accounting Business

Why Bookkeeping is Crucial to Your Success

Keeping track of sales, earnings, expenses, and purchases is fundamental to the overall health and sustainability of your business. Effective bookkeeping produces the data you need to evaluate your current practices, anticipate challenges, and set attainable future goals.

But despite their proven importance, many business owners dread and avoid accounting tasks. In fact, 40% of surveyed entrepreneurs claim that bookkeeping is one the worst parts of running a business!

Wondering if it’s really worth the aggravation?

Here are four reminders of how effective bookkeeping is the cornerstone of small business success.

Keeping track of reimbursable expenses

A reliable system for tracking reimbursable expenses ensures you reap all the benefits you’re entitled to when filing your taxes. Expenditures sorted into categories, such as “food”, “travel”, and “office supplies,” can be catalogued quite simply with online bookkeeping software.

Using a dedicated credit card for business expenses, and updating your records on a monthly basis, will put money back in your pocket come tax time.

Measuring profitability and planning for the future

In order to grow your business, you must be able to track and compare its finances from one year to the next.

In addition to reconciling the books and bank statements every month, effective bookkeeping generates records you can use to gain a comprehensive overview of your business. This data can help you:

  • measure year over year profits;
  • identify opportunities to cut costs;
  • plan for major expenses (such as new office space, equipment, or staff); and
  • develop data-based strategies for expansion.

Preparing for tax season

Few things are more stressful for business owners than scrambling to get poorly maintained financial records ready for tax season. In addition to the panic of last-minute filing, inaccurate or incomplete documentation can lead to serious penalties, fines, and even an audit.

In the United States alone, 40% of small businesses pay an average penalty of $845 per year for late or incorrect filings!

Save money and get peace of mind with sound bookkeeping. You’ll be assured of compliance with regulations, and will receive a reliable estimate of amounts owing long before your tax bill is due.

Final tip: ask for help

Most entrepreneurs are passionate about developing new business ideas – not crunching numbers. Employing a professional bookkeeper, even on a part-time or as-needed basis, can help optimize your accounting and increase overall profitability.

There’s a good reason 71% of small businesses outsource at least one accounting function to help manage tasks like payroll, closing the books each month, and managing accounts receivable.

It’s well worth it. Invest in effective bookkeeping and you’ll build a solid foundation for a resilient, forward-moving small business.

Categories
Business

Email: The productivity killer

Remember when email was new and novel, and everyone thought it would vastly improve communication while freeing up time? It did improve communication on some levels and freed up employee time at first. Now, however, email has become a productivity killer.

Workers have to wade through hundreds of emails in their inbox each day, and many people choose to deal with email as it comes in rather than all at once. This takes the focus off their work and makes it difficult to concentrate on their tasks.

So why is email such a productivity killer?

The problem with email

A significant issue with email is that workers tend to feel that they have to read and respond to every work email immediately. This means that they never stay fully focused on any one task because they’re often waiting for more emails. When emails do come, employees stop their work, focus on the email, deal with the content it contains, and craft a response. Then they go back to work, but it can take time to switch their brains back and forth between email and their previous task.

Ever heard of attention residue? That’s a phrase coined by Sophie Leroy after two experiments showed people’s productivity dropped when they moved back and forth between tasks, rather than focusing on one at a time. It refers to the tendency to have thoughts about a previous task in your head even as you move to another task, which makes it more difficult to complete the new task.

So what can a small business owner do?

Switch to other communication methods

Not everything that needs to be said should be communicated through email. Issues that require back and forth should likely be dealt with either in person or through the phone. Likewise with topics that require an immediate response. Documents that are being reviewed by multiple people should be done through Google Drive, Dropbox or another format. This ensures everyone sees the most recent version of the document each time they open it.

Create a list of the types of communication your organization uses and develop guidelines for using them. List the circumstances under which each method of communication should be used and follow it. Be very clear about when and how those communication methods can be used.

Get email under control

By setting limitations to when email can be used within your company, you’re already limiting the amount of emails your workers deal with. That’s a great step.

Encourage employees to set aside dedicated email time during the day—say once in the morning and once in the afternoon—to deal with their emails, rather than checking on an ongoing basis. If that’s not practical for your company, encourage them to check every so often (once every two hours, maybe) or only between tasks. This limits attention residue and encourages them to focus on the task at hand.

Have your workers turn their email notifications off so they aren’t distracted as each new email reaches their inbox.

Final thoughts

Email can be a productive and useful means of communication, but not if it’s constantly pulling your employees’ attention away from work and draining productivity. Setting guidelines for its use, finding other effective methods of communication, and decreasing the risk of distraction will help your employees better deal with their inbox.