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Debt Reduction Tips – Emergency Funds

Debt Reduction Tips – Emergency Funds

Its February and the all-to-common reality of the Christmas period credit card bills are now well and truly upon us. Its time to change, right?. But how do you change? How do you start a process of debt reduction that will work on autopilot and ultimately allow you to cut up your credit cards completely?

The journey can seem long and daunting but it all starts with a simple first step – Open a savings account and put enough money in it to cover 1 month of living expenses as quickly as you can. Why do I want you to put this money away in a savings account instead of putting the money onto one of your credit cards that are likely accumulating interest at 15%-20%? Because we need to break your dependence on debt. In today’s society, even relatively good money managers use credit cards and personal loans to help them out in emergency situations.

Surprises and emergencies are an unavoidable part of life. Heck, some weeks my house feels like poorly controlled chaos! The best way to break the cycle of funding emergency related costs through debt is to establish an emergency bank account for just that purpose.

 

Kickstarting Your Emergency Fund

Here are some ‘quick wins’ when it comes to finding the money to build your emergency fund as soon as possible:

 

Make better use of what you have

The best place to start looking for money to store away for a rainy day is cutting back your expenses and implementing a good old fashioned budget. You’ll be amazed at how quickly money can accumulate when you start tracking what you spend and making deep cuts to your overindulgent lifestyle. My top suggestion is to review your entertainment costs first as these are usually the easiest to reduce. You can’t reduce your rent bill tomorrow but you can cook dinner at home instead of going out. Simple choices like this can save you $1,000 over the course of a year (or in one month for some people!).

 

Make some extra money

I’m not suggesting you all run out and look for a second job. However, if that is an option, at least in the short term, every little bit helps. You might even consider asking for some overtime at your current job just to boost your income a little.

Also, consider what you could achieve through a more minimal approach to life. How much cash could you unlock by clearing all the unused or unneeded clutter out of the house and selling on ebay or having a garage sale?

Another possible income source often overlooked is tax. Have you lodged your tax return for the year? There could be a refund waiting for you that will help your emergency fund take a leap forward.

 

Save Money through research

Don’t pay the lazy tax. Most of your utilities and insurance providers rely on customers failing to research alternatives before renewing their services each year. Don’t play the game their way! Call around and look for a better deal. If your current provider wont price match then make the change. Remember, your goal right now is to top that emergency account up as quickly as you can. These calls and research may seem inconvenient but they’re free and could save you $1,000’s. The less you spend the faster your debt reduction cycle will work, even once this first stage is complete.

 

Other benefits of having an Emergency Fund

Aside from the emergency fund itself this first stage of debt reduction has some other added benefits:

• Watching your emergency fund accumulate is clear proof that you can save money – which is essential for long-term debt reduction;

• If you have any Credit Cards you just hold for emergencies that don’t currently have any debt amount owing on them you will be able to cancel these and save paying the annual fees;

• All the cost cutting measures you make through budgeting and renegotiating your utilities and insurance bills will help when we move onto the later stages of the process.

Regardless of where you dig the emergency funds up from this first stage is absolutely essential to building a foundation for long term debt reduction and on-going financial prosperity.

 

You Can Do This!

5 Signs It’s Time to Close Your Business

5 Signs It’s Time to Close Your Business

Starting a business is a big decision and the initial few years put a lot of pressure on the owner, both mentally and financially. You know what’s even more difficult than starting your own business? The decision to close your business. Shutting the doors and walk away from something you have poured your heart and soul into is an emotionally taxing exercise.
Knowing when to throw in the towel will save you further heartache and lots of money. Here are Five signs that point to trouble ahead. I’m not saying that you should close your business today if you have any or all of these problems but they should be triggers to get you thinking about the future of your business (or lack there of).

 

You are not hitting your sales/revenue targets.

After a couple of years in business its time to take a serious look at your business’ finances. Losses in year one are not unusual as you invest a lot of money in the start up phase. However, If you are still not turning a profit at the end of year two or three and you’ve run out of money don’t go running to the bank. A business loan will just put your further in debt.

It may be time to seriously consider cutting your losses before the business consumes all your personal wealth and puts you into financial crisis. Continuing to trade could be bad for business as well as devastating for your family. Sometimes it can be better to recoup, take the lessons you have learned from the business and start again rather than pouring good money after bad.

 

Your Personal Health Has Gone South

If you find your health slipping — whether through weight gain, weight loss, constant fatigue or anxiety, then you should evaluate whether your business is actually worth it. The business is not your life. The business should be the income source that pays for your life. If it’s slowly consuming you (literally) then either something has to change or its time to walk away.

 

Your Mission Loses Its Luster

Starting to forget why you bothered to started the business in the first place? This could mean one of two things, both of which usually lead to the same outcome. First, it could be that your mission was never really clear to begin with. If you have never really taken the time to work out your objectives its likely you are spinning your wheels and feeling like the business is going no where despite all the money you are spending. Alternatively,  it could mean that you’ve lost your passion for achieving your objectives and working with your customers. Without your personal drive to succeed there is very little else to propel your business forward. Either way, you will need to close your business down if you can’t find it in yourself to set some clear objectives and to really care about achieving them.

 

You Love Your Product More Than Your Customers Do

Is your business providing a product or solution that customers are actually looking for? Or has the market shifted and you are now a business focused on something you care about but no one else is really interested? If it’s the latter you may have a problem. You need to listen to your customers. If they’re not buying what you are selling then trying to force feed it to them is going to get you nowhere. If you’ve reviewed your pitch and you are confident the problem is not ‘how’ you sell it then your customers just don’t want to buy. Its time to shift focus or shut it down.

 

Your business doesn’t have a “Pause Button”

Hitting pause on a business in hard times so that you can resume it later is an extremely helpful option to have. Rather than completely closing your business down if the market conditions are not favourable you could strip it down to its bare bones and wait for your market to rebound, before coming back stronger than ever. If you are on the verge of collapse and you can’t hit the pause button then you may need to close your business.

Show your accountant some love this valentine’s day!

Show your accountant some love this valentine’s day!

As an accountant, I’m probably a little biased here but if you are a small business owner show your accountant some love this valentine’s day!

Now, I’m not suggesting for a second that you date your accountant – even if we are amazing! What I’m saying is its time to inject some time and effort into getting the most out of the relationship you have with your accountant. Forget waiting for ‘tax time’, do it now! Your accountant should be your closest confidant and your biggest ally in business. Sadly, more often than not we only hear from you once a year for your traditionally ‘tax return booty call’…did that just take the analogy too far?

Too many small business owners have an on-again-off-again relationship with their advisors, especially their accountant. According to research conducted by Xero 65% of failed business owners believe their downfall was due to poor financial management. Not a lack of marketing, the fact they were uncomfortable trying to sell or their difficulty finding good staff. The downfall was good old fashioned cash-flow. Who do you turn to for help with cashflow? Your Accountant! So, a strong relationship with your accountant can mean the difference between success and complete failure in the business world.

The path to a productive experience starts with building a foundation for a long-term relationship rather than settling for a once-a-year fling. Here are my top tips for getting the most out of the relationship with your accountant:

 

Get yourself organised

Don’t walk into a meeting with your accountant with scraps of paper and faded receipts. You will save time, money and get better advice if you take the time to organise your records. There are some great software applications (e.g. Xero and Receipt Bank) available that can make this process as painless as possible!

 

Workout what you want

Do you just need someone to lodge your tax return? Or do you want someone familiar with your industry that can help you build the business? Do some homework, talk to your network and reach out to local business associations to determine the kinds of services and expertise you really need. Once you know what you need, be clear with your accountant so they know what you expect and can build a service package suited to your specific needs. This concept extends to being clear about what you want to achieve in the business. If you accountant understands where you want to go they are better placed to help you get there.

 

Collaborate in real time

Your accountant needs access to accurate, timely information to help you and your business. Even if you don’t need a regular check-in with your accountant make the transfer of information as seamless as possible when it comes time to collaborate. Online data-sharing tools make working together easy, no matter where you or your accountant is located. Many online accountant platforms (Xero included) enable accountants to access client accounts on-the-go. These tools can also help us analyse your business data and ensure you are prepare for the future.

 

Your Accountant shouldn’t be the last to know

If you’re planning to make a big purchase or make a large investment don’t wait until the last minute to call us…or even worse tell us about it after you’ve already signed the contracts. Your accountant has a good working knowledge of your business as well as your long-term business goals. They can help you assess whether the decision is in your best interests and help to ensure everything is finalised in the most tax effective way possible.

 

We eat enough chocolate, the best gift you can give is a referral

Finally, remember that your accountant is also a business owner. If you’re happy with them and their work recommend them to people in your social circle and business network. It’s a great way to show your accountant that you support their business as much as they support yours.

 

Looking for an accountant to start a great relationship with? Lets Chat!

Guns N’ Roses – Your new Business Mentors

Guns N’ Roses – Your new Business Mentors

Last Night Guns N’ Roses played Brisbane for the first time to kick off the Australian leg of their ‘Not In This Lifetime Tour’. It was a sensational show for everyone who attended, lifelong fans and recent converts alike.

While watching the guys do what they do best I looked on in awe at what was achieved on the stage with the right formula. Most longtime fans never expected to see the original band come together again after their highly publicised split. After which Axl Rose continued with Guns N’ Roses while other prominent band members moved on to other projects. No single project that resulted from the split was anywhere near as successful as the original Guns N’ Roses itself. For me that says a lot about the power of building the right team and delivering a product your target market really wants to buy.

 

Your Team: Build a line-up like Guns N’ Roses

Guns N’ Roses without Slash on Guitar just wasn’t Guns N’ Roses anymore, despite the name on the banner above the stage. That is an undeniable fact that even Axl Rose couldn’t deny, despite trying to continue the band for nearly two decades after the split. In business it is equally important to have the right people playing the various roles in your organisation. Not just individuals who are competent enough to do the job, but incredibly talented individuals who are clearly ‘right’ for the job. Team members who come together to form something that is bigger than any one person with the ability to impact their customers in a way no single member of the team could have done alone. Remember, millions of people play guitar really well…but there is only one Slash!

 

Your Product: Does it rock your market space?

Are you drawn to your favourite band because of their music? The lifestyle/persona the band creates around the members? Or maybe you love the atmosphere of a great stadium show? Either way it is clear that bands like Guns N’ Roses have a product that withstands the test of time. I sat in QSAC stadium last night with nearly 50,000 people enjoying songs released by the band decades ago which are as popular now as they were back then. The band members had each tried to go in their own direction and deliver new products to their market but ultimately returning to the original product, the original formula, truly gave the customers what they wanted.

What I take away from that is our constant focus on ‘the next big thing’ is potentially short sighted. We could be drifting away from the core products and services our customers want while we look for something new. I understand that innovation is important. Rarely is a true leap forward made on the back of customer feedback alone. However, different just for the sake of being different is ridiculous. If your new product doesn’t deliver what your customers want there is nothing wrong with taking a step back. Remember, there was a time when Coke changed their formula just to make something new and we all know how that turned out!

 

Not a Guns N’ Roses Fan?

You may not be a Guns N’ Roses fan and that is fine….

Ok, maybe it’s not fine but we can move past it! Change the names and the faces but the concept is the same. Build a great team and give them a phenomenal product to take to market and you’ll be Rockin’ your market space in no time.

As a huge music fan myself I’d love to hear your thoughts on what small business owners can learn from watching the biggest acts in the world.

More interested in the Concert itself? Here you go!

Photo by Katarina Benzova – Great Shot!

It’s time to call in your debts!

It’s time to call in your debts!

For most business owners cash is always tight. Cashflow management is an unavoidable part of self-employment. The most immediate way to solve a short term cashflow crisis is to collect all those outstanding invoices your beloved customers haven’t paid yet. Despite the fact they were due 2 week ago! It’s time to call in your debt.

Before we start let’s be honest with ourselves, no one likes chasing money. The conversation can be awkward and we often feel like the call will damage our working relationship with the person. The reality is most of the time your customer may have simply forgotten to make the payment and will rectify the situation soon after the call. However, if the customer is consistently slow paying your bills they may not be the right customer for your business anyway.

 

Who makes contact about customer debt?

When I’ve posed this question to my business clients the overwhelming response is “I should! It’s my business”. While I agree the business owner certainly has a role to play in the process I like to explore other alternatives first.

My personal preference is a 3-stage approach:

  1. Automated reminders – most modern bookkeeping software, for example Xero can send automated debt reminders for overdue invoices. You can customise the reminder message and tell the software how many days after the due day the customer should receive an email. Standalone options can also be used to email or SMS reminders to your clients. You might want to look at options like Debtor Daddy.
  2. A dedicated Accounts Receivable person – where possible the initial phone calls are handled by your accounts receivable clerk. That way the awkward conversation is between the customer and someone other than the person the customer has the primary working relationship with. This can mitigate any damage to the customer relationship.
  3. Now it’s your turn! If the automated reminders and phone calls by your team members have failed to yield a result you need to step in and call your customer directly. In my own Business, Panic Atax, I have a general rule about customers without unpaid invoices. If any client on my list needs more than one call from me in regard to the same invoice I end the working relationship. My time is better spent looking after clients who value my services enough to pay my bills when they are due. That may seem harsh but as a mentor told me many years ago when I first joined the accounting profession “we are running a business, not a charity”.

 

How to approach a debt call

 

Step 1 – Preparing to make the call

Before you call the customer make sure you have all the relevant information. You will need their contact information, total overdue amount (including invoice numbers and descriptions) and it’s important that you have a clear understanding of how many attempts have been made to follow up the debt, either via an automated system or calls from your team.

What options are you willing to give the client? Can they enter a payment plan for the debt? Will that incur interest? You don’t want to be working through these questions in your head while you are on the call so have a firm policy, read it before the call and enforce it during negotiations.

I also recommend you double check your accounting records. There is nothing more embarrassing in this situation than calling a customer about a debt they have already paid. It makes you and your business look bad.

 

Step 2 – Place the call

It’s important to clearly identify yourself and to confirm you are speaking with the right person. Depending on the business you may speak with the Owner, the Manager or the Accounts Payable Clerk. If the call goes unanswered it’s important to leave a message but I’d recommend you avoid mentioning that the call was about outstanding invoices. Who you return a missed call from someone chasing money?

Once you have confirmed you are speaking to the right person it’s important to remain calm and professional. Remove the emotion and judgement from the situation. Like I mentioned earlier more often than not there is a perfectly good reason for issue. Your goal is to get a firm deadline from the customer. A commitment to pay the debt by a specific date. Stay focused on that outcome. Your silence can be a powerful tool. Make a statement, for example “I need payment in full by Thursday afternoon” and then allow the customer to process that and answer. Shift the burden of negotiating onto them.

 

Step 3 – Document the outcome of the call

Regardless of the outcome of the call make sure you document it. Email the client to confirm what was discussed and the promises made by each party. It’s important that everyone involved is clear on what is expected and that, ultimately, the debt is paid.

 

Interested in more tips on how to manage your cash flow? Talk to our team about Profit First!.

Pitching like Donald Trump

Pitching like Donald Trump

Donald Trump is the new president of the United States of America. What does the future hold for one of the world’s economic super powers? Only time will really tell. If you’re like me, you are probably sick and tired of talking politics. Trump this, Hilary that. I was far more interested in seeing an end to it all than I was the actual result! Having said that, in hindsight I find the outcome itself incredibly interesting. As a business owner looking to connect with my target market Mr Trump may have found the answer I was looking for. It might be time to start Pitching like Donald Trump!

 

Stop Pitching to Solve a problem

It’s the mantra of every pitching coaching and brand development expert the world over. Work out what problem your target market has, determine how you can fix it and start pitching that solution. By focusing on the customers ‘Pain Points’ we improve engagement and (hopefully) conversion. For years we have taken that advice at face value and run with it. We’ve incorporated the customer’s pain points into every element our business’ development. So much so that we are pitching to their pain points without even realising it most of time.

After watching Donald Trump’s shock victory in the US election I really started to doubt this traditional wisdom. Every politician is great at pitching to solve a problem. The issue they’re promising to fix depends on which key demographic they are trying to appeal to on any given day. Hilary Clinton did a better job of communicating the problems she would fix than Donald Trump and yet we have a Trump White House. How? Why?….

The key to the Trump victory, in my opinion, was shifting his attention away from pain points and focusing on anxiety instead. He looked at what made his target demographics anxious or depressed and started pitching solutions directly at those issues. The difference is subtle but incredibly powerful. Instead of just promising economic growth and new jobs as most politicians would, Mr Trump promised to protect the jobs voters already had. Even Donald’s controversial immigration policies, which really won’t fix any pain points in my opinion, were designed to target the wide spread anxiety in middle America.

 

The Science

It turns out the ‘trump technique’ is supported by recent psychological research. A major study into The Origins of Happiness was released late last year. One of the key findings from the research is a correlation between your happiness and the absence of anxiety (and depression). By alleviating the anticipation of future threats you increase your happiness more so than any other change monitored in the study. What does that mean? A person with a secure income who feels like they are unpaid is still happier than they would be if they were earning a lot of money but had to live with the constant threat of losing their job.

The happiness formula (below) is a mathematical representation of your happiness to a neuro-scientist. The nerdy accountant in me finds that concept incredibly cool!

The Happiness Equation

Let’s ignore all the symbols and focus on what the smart people in white coats are telling us with this formula. Your happiness has as much to do with your expectations as it does with your experiences. In-fact, the more positive your outlook for the future the higher your current level of happiness. This is true even if your life is full of less than positive current day experiences.

 

Applying this to your business

Obviously this sort of insight could be useful for marketing and sales professionals. However, i’m far more interested in what it means for the rest of your business. Small business owners or constantly looking for new and improved products/services to take to market. Up until now a big focus was on what problem our new services would fix for the customer. Maybe, if our services focused on improving our customers outlook on the future and eliminating fears they have we might improve both our conversion and retention rates.

…just one accountant’s opinion. Do with it what you will!