August, 2016

5 Great goals for the new financial year

5 Great goals for the new financial year

The start of the new financial year is a great time to consider what you want to achieve financially over the coming months.  It’s a great idea to set yourself goals so you have something to focus on and work towards.  Below we identify 5 goals to set yourself up for a great year.

1. Get Out of Debt – Completely

The great thing about this goal is that anyone can do it, regardless of income or wealth level. And if you want to get the most out of your finances, it’s virtually a requirement that you get out of debt.

For the moment, let’s ignore the good-debt-versus-bad-debt debate. At some point in your life, all debt is bad debt and needs to be paid off. That includes the mortgage on your home. Although the purpose of that debt may be noble at the beginning, it’s no less a drag on your income than any other debt as time goes on.

There are more reasons to get out of debt than I can list here, but here are just a few of them:

  • Getting out of debt means that you’ll have full control over your income – and that’s an incredible feeling
  • It will leave you with more money for savings and investing – and even more for spending
  • It will remove the asterisk from your finances – I make $X,000 per month, but $X00 has to go to pay my debts
  • It will make it easier to quit a job you don’t like
  • It will free your mind of the worry and stress that come with debt

2. Plan For Early Retirement

When I started as a financial advisor and finally grasped the concept of compound interest, I was determined to put myself in situation where I could retire by the age of 50 if I wanted to.  I don’t know if I’ll ever really retire, because I absolutely love what I do.

Even if you absolutely love what it is you do for a living, planning for early retirement is one of those top rated good financial goals.

Here’s why:

  • Reaching your retirement goals may take longer than you think; if you plan to retire at 50 you’ll have plenty of time to make it by 65 in the event that you hit a few snags
  • Poor health could make early retirement a necessity – if you’ve planned and prepared to retire early, then you will be ready
  • Family circumstances often require more of your time, and early retirement will help you to have it
  • Though you may not want to fully retire early, you may decide that you would like to downshift and not work so hard
  • It’s better to be able to retire early and not need to, than to need to retire early and not be able to

There’s one other advantage to planning to retire early, and it’s a big one. By working toward early retirement, you will be front-loading your retirement investment portfolio. That will give you a larger portfolio early, which will mean that you won’t have to work so hard saving for retirement later in life when doing so may be more complicated.

3. Have a Well-Stocked Emergency Fund

We normally think of having an emergency fund as being a short-term financial goal. And from a mechanical standpoint, that’s true. However, an emergency fund has important long-term benefits, which is why it’s one of the good financial goals that you should plan to achieve.

Here are just some of the benefits that a well-stocked emergency fund can provide you with throughout your life:

  • It can take away a lot of the money worries that you have, since you know that you will always have a reserve should you get into a tight spot
  • As is expected of an emergency fund, it will be there to cushion the blow in the event of a sudden emergency, such as a job loss or a large medical expense
  • It’s an important money management tool – if you can save money for an emergency fund, then you can save money for any financial goal that you have
  • It provides you with an intermediate funding source – a kind of halfway point between your paycheck and your investment accounts – that you can use so that you don’t have to disturb your long-term investments
  • Just having an emergency fund will make the wide swings in the stock market more emotionally tolerable, knowing that your survival isn’t at stake when the market falls

For us, having an adequate emergency fund has offered reassurance in many life situations.  Most notably was having our first son, building our dream home and starting my own investment firm.

When you consider all that comes from having a strong emergency fund, it should move it up the priority ladder a few rungs.

4. Be Able to Live on Less Than You Earn – No Matter What

I’ve covered this topic in other articles, but it is well worth repeating here since it is one of the most necessary of all good financial goals. By learning to live on less than you earn – no matter what – you will always have plenty of income. That means that you’ll have plenty of income for savings, investments, and for paying off debt.

It’s important to always be on the hunt to increase your income. But that strategy will only be effective to the degree that you are able to live on less than you earn, so that you can put the difference to better use to improve your life.

5. Have Enough – But Not Too Much – Insurance to Cover Contingencies

Insurance is something of a tough call. A lot of people don’t have nearly enough coverage, while many others are paying too much for the coverage that they have. Striking a balance between the two is another of those good financial goals.

Here are some strategies in striking that balance:

  • Where life insurance is concerned, stick with term life insurance – it’s cheaper so you can buy as much as you need. Just make sure that you’re not buying so much life insurance that you’ll be worth more dead than you are alive; it’s just an expense you don’t need to carry
  • Unless mandated by state law, look into the carrying the lowest level of auto insurance possible, particularly if you have a long history as a safe driver
  • Take the highest deductible you can on your health insurance, and make up the difference with an emergency fund that is large enough to cover that deductible – if you seldom use your health coverage, you’ll be way ahead from the lower premiums

Part of your goal should be to work with a knowledgeable insurance agent on a regular basis to make sure that you have just enough – but never too much – insurance coverage.

If you would like to discuss your personal financial situation and receive help and support to reduce your tax, pay off debt and improve your personal financial situation give us a call today and we will be happy to help.

Small Business Accountant Perth

Small Business Accountant Perth

Eight characteristics of successful small businesses

When making plans for their business, most people aim to be successful and we have identified eight characteristics important to business success. International researchers who have studied many small businesses have found that these characteristics consistently play a part in the success of small companies.  The eight characteristics are:

  • Owners leading by example
  • Having a simple business structure
  • Information sharing among staff
  • Carefully chosen staff
  • Staff commitment and loyalty
  • Unique products or services
  • Specific customer focus
  • Prompt follow up

1. Owners leading by example

The owner or manager leads by example.  He or she is usually the first to arrive and the last to leave.  The owner knows everyone by name and their presence is obvious.  They show a strong commitment by setting standards across the board.  This commitment should be easy to understand; after all, if they don’t work hard in their own company, how can they expect any one else to take their business seriously?

2. Simple business structure

They operate a simple and open business structure, encouraging easy access to the owner for every employee. They value the contribution of each employee, many of whom are given the opportunity to influence aspects of the business that would ordinarily be denied them in a large hierarchical company.

3. Information sharing among staff

Staff often receive information as soon as the owner does.  Goals, problems and concerns are discussed openly and feedback on issues is encouraged.  Staff are asked to contribute their own ideas for making improvements and overcoming difficulties.  It is often this aspect of open communication that staff appreciate the most; after all, it is fairly unique to small businesses.

4. Staff are carefully chosen

Staff are recruited very carefully, because the owner(s) recognise they are the lifeblood of any small business. Staff are hired on the basis that their knowledge, skills and abilities will be beneficial to the business rather than because of friendships or family relationships.  Staff are not only carefully chosen, but are nurtured and trained so that both the staff member and the business get the maximum benefit possible out of the relationship.

5. Staff commitment and loyalty

When staff are very committed and loyal, their performance is rewarded with praise, extra responsibilities and money.  Poor performance is not.  Consistently poor workers are removed as they upset the rest of the team.  Businesses whose staff show optimum commitment and loyalty have a source of competitive advantage that is hard to copy or to beat.

6. Unique products or services

Most successful businesses have unique products or services such as their own designs, systems or some other aspect which sets them apart. This uniqueness is an important source of competitive advantage and one which many companies work hard to sustain, adapting and innovating their products or services as their competition catches up with them.

7. Specific customer focus

Successful small businesses have a specific focus on their customers and are geared to supplying them with exactly what they want.  This focus means adopting a market led approach, with the owners and their managers consistently looking for ways to solve their customers’ problems and improve their products to match their customers’ requirements.

8. Prompt follow up

On occasions when an enquiry or complaint is received, successful small businesses actively follow up and solve them as quickly as possible.  The results are promptly reported back to the customer and, in the case of complaints, measures put in place to reduce the likelihood of similar issues reoccurring. Successful small businesses view complaints and problems as opportunities for growth and improvement.

If you want to make a change to embed some of these characteristics into your business, you need to ensure you have a robust plan in place to deliver this change.

If you’ve never written a business plan before, it can be a daunting prospect.  You can download our free eBook – A Foolproof Guide to the Perfect Business Plan.

If you need help to develop a business plan that will drive your business forward, contact us.  Until the end of September 2016 we are giving 25% off the price of a business planning session.  Contact us today for more information.

Download your FREE eBook NOW 

Business Plan Perth

Business Plan Perth

Set a course for the new financial year!

Last month we focused our blogs on setting goals and targets, however if you want to achieve your goals you will have to plan what activity you are going to do in order to make a change.  After all, if you keep doing what you’ve always done you get what you’ve always got.  So if growth, profit improvement and cost reduction are on your agenda, it’s essential you put in place a robust plan as to what you are going to do and when, to enable you to achieve your goals.

Every business needs a plan. Your business plan will keep you focused, provide direction for employees and can be used to help convince investors to lend you money.

Why do you need a business plan?

You may be wondering why you need a plan in the first place. After all, you have a clear idea in your mind about what you want to achieve. You know the market, you have the necessary skills, so why do you need a plan?

There are many good reasons. Here are just a few of them:

  • To clarify your ideas
    Writing something down gives it structure and substance. Your ideas will be clearer on paper than in your head.
  • To discover and solve problems
    The business idea you have in mind may have some holes – you might not have covered everything. This will become much more apparent when your words are on the page.
  • To get feedback from others
    A properly written business plan can be shared with trusted people to get their advice.
  • As a formal document
    Banks, investors, accountants and lawyers will want proof that you’re serious about your business. A written plan will provide that proof.
  • To guide you as your business grows
    A good business plan will keep you on track and focused, even as day-to-day work becomes a distraction.

Identify your strategy

Your business plan will also include your business strategy and will outline the steps you plan to follow to achieve the goals and objectives you have identified. This, in turn, will direct the day-to-day operations of your business. Each of your business goals will need a plan of action that needs to be followed to achieve the objective.

As a rule of thumb, your strategy will outline the most practical and cost-effective way to achieve each objective. It will detail any extra equipment or personnel that might be required to achieve this.

For example, you might need an extra staff member and an additional computer to increase output by 10% within the next six months, or you might consider enrolling your sales staff in a course to achieve the objective of increasing sales to existing customers next year.

Forecast the financial implications

The financial implications of your goals and strategies will be reflected in the financial forecasts in your business plan. Your goals will identify the areas of improvement, like an increase in sales or a reduction in costs, and your strategy will identify any additional expenditure needed to achieve these goals.

Most business plans will include a 12 month cash flow forecast, a profit and loss forecast, and a two or three year projection.

Your cash flow forecasts will identify whether you have sufficient financial resources to implement your plans immediately, or whether you will need to explore other financing options. Monitoring your actual spend against your projections is a way to ensure that new project costs do not escalate much beyond planned expenditure.

Review your business plan

Your business plan is a living document that grows and changes over the lifespan of your business. Its objective is to identify your key goals and how to achieve them, while taking market and technological trends into account.

The effectiveness of your business plan as a management tool depends on you referring back to it as a reminder of your plans and objectives, and updating your plans to keep them relevant.

Reviewing your progress against your business plan, on an annual basis, is a good way to measure actual performance, and will form the basis for revising and updating your plans.

Because the nature of your business and the market you operate in will change over time, it is a good idea to review and update your business plan once a year. The most efficient way to achieve this is to set aside a few days at the same time every year.

If you’ve never written a business plan before, it can be a daunting prospect.  You can download our free eBook – foolproof guide to the perfect business plan.

Download your FREE eBook NOW