You’ll recall that in the last issue, we talked about the concept of becoming “Financially Well Organised”, and the difference this could make to your business and to your personal wealth. 

Today I’d like to share with you 5 of our 10 tips on how you can achieve this in your business.

Tip #1 – Use the right business structure

Your business structure should provide you with asset protection, flexibility of profit distribution and the right amount of tax to be paid.  Are you confident that you achieve this from your business structure?

Tip #2 – Structuring your salary

If you have not structured your salary correctly, you could be leaking money.  Leakage in the form of payroll tax, workers compensation and superannuation.  Did you know that just by changing the way you receive your pay, you could be saving your business money, as well as receiving more cash each week yourself.  Now there’s a win-win situation! 

Tip #3 – Achieve the best profit that you can

You work hard in your business.  You need to make sure that you are making a profit after you have paid yourself a market wage – otherwise why not save the headache and just go and get a job?

Profit gives you options.  Options like, should I pay myself some more, should I build my wealth plan with superannuation or should I reinvest in my business.  You would always rather be the business that makes $200,000 profit, than the business that loses $200,000.  

When was the last time you set a profit plan for your business?  Consider using a bottom up approach, where you set your desired level of profit, add in your

overheads and direct costs, and the balancing number is what you need to sell for the year to make the profit that you want to make.  To help you create wealth & freedom.

Tip #4 – Measure the key numbers

This is really simple!  How did your actual sales for the month go versus budget?  How did your gross profit and net profit go versus budget?  Know where you want to go and then track against it each month …and make sure you get there.

Also look at the key non-financial numbers in your business.  How many new clients did you get this month, how many quotes did you send out, how many of those jobs did you win?  Once you know this information, you can improve on it.

Tip #5 – Know where your cash is

Cash is king!  You know the pressure your business is under when cash is tight.  What is your watertight system for collecting your debtors?  How many days does it take your debtors to pay you?  How many days do you take to pay your creditors?  How many times does your stock turn each year?  These 3 areas are the critical “cash lock up” areas of your business.  If your debtors are taking too long to pay, but you’re paying your creditors on time, your cash will be tightening.  Review this area and make improvements. 

That’s the first 5 of our 10 key ways to get Financially Well Organised.  If you’re game, drop me an email and I’ll send you a quick test to see how Financially Well Organised you are.

If not, stay tuned and we’ll share the final 5 Key Priorities with you in our next newsletter.

Remember, it’s the changes you make today that will give you the results you want for tomorrow.

For any inquiries in relation to this article, please contact Jeni Wilcock at jeni@sullivandewing.com.au.

Would you run a mile at the thought of holding regular Board Meetings with a Board of Directors, cringe at the thought of being accountable to a group of people about your business, gasp at someone else having an opinion about your business …let’s pause right there!

The results of your business are limited to the ideas of the people who give input to your business.  Who is currently giving you the strategic direction and clarity that you need to make your business the best business that it can be?

Consider this:

Your Board of Directors can be as simple as the owners of your business, along with your strategic advisor (with many of our clients Sullivan Dewing), meeting once a month to strategically review the financial performance for the month and discuss other issues, for example:

• Should the business expand interstate
• Should the business open a second outlet
• How to reward key team members
• How to create different product streams
• Analysing different products or jobs to ensure they are profitable
• Moving business premise or buying a business premise
• Analysing sales results by state, customer and product group

It’s important to note that external members of the board are quite often impartial, unemotional & give clarity as well as strategic direction.  They are not concerned or bogged down with the day to day running of your business.

Once the process is systemised and everyone attends regularly it becomes a habit to review the business strategically and discuss key challenges facing the business.

To show you how it works:

We began working with a local family business that had never held regular business meetings.

To start, an Annual Profit Plan was set so that the business owners and the board knew the profit the business needed to make for the year.  Alongside this, a Key Performance Indicator (KPI) monitoring system was put into place. Monthly Board meetings were structured with the board including family shareholders, key employees & Sullivan Dewing as the external advisors.

Each month, the internal accountant prepared the necessary reports to present to the board.  A standing agenda ensured that all items were covered at each board meeting, and an efficient meeting was run.

After initially setting a stretch profit target & making sure at the monthly board meetings that there was a strategic focus on gross margin and profits, the business owners have enjoyed their best year ever.

In the words of the business owner: “The key benefits gained from running a board meeting with external advisors are strategic direction, clarity of purpose and attention to detail.”

If you’d like to know more about using a Board of Directors to benefit your business, contact Jeni Wilcock at jeni@sullivandewing.com.au.