Problems We Solve

Removing obstacles for businesses that want to grow

The range of problems we have been solving for our clients over the years are of course numerous and varied,
but some are more common than the others and these form the core focus of what we do.

They typically start as questions from our clients and you too may find the answers useful.

To dig deeper, call and book a confidential chat to see if we are a good fit to help you solve yours.

If you have cash flow problems from time to time, you are not alone. Over 50% of Australian small businesses report experiencing cash flow issues. The first step is to identify the source of the cash flow problem. There are seven possible causes and all causes are not necessarily applicable to all businesses. For instance, a business that trade in Stock or holds inventory, will have difference challenges to a service-based business.

It’s also importance to distinguish profitability from cash flow: your business may be profitable, but the working capital required to fulfil orders may produce a negative cash flow and that could spell disaster.

There are 7 levers we can use to identify and improve cash flow:

  1. Debtors Days: How many days does it take you to get paid? Paid faster = more cash flow
  2. Creditors Days: How many days does it take you to pay your creditors? Paid slower = more cash flow
  3. Inventory Turnover Rate: How many times does your stock turnover or sell every year? Turned over faster = more cash
  4. Overheads: How much do you need to sell or invoice just to cover the costs of opening the doors each day, e.g. rent, salaries, utilities? Have costs been reviewed recently? Reductions go straight to the bottom line and improve cash flow
  5. Gross Profit Margin: Is your gross margin sustainable (e.g. Direct Wages/Invoices or Cost of Sales/Sales)? Increased Margin = increased cash flow
  6. Pricing: Are you charging enough to generate a sustainable return and income and keep pace with inflation? Increases go straight to the bottom line and improve cash flow
  7. Volume of sales: Increase the number or value of sales or customers. Increased Margin = increased cash flow. Note however, a situation where an increase in Volume causes Cash Flow to be reduced!

At Fraser Scott & Co, we have the tools to show you what a 1% change in any of the 7 variables above will have on both your business’ profitability and cash flow. Working through this process is both an eye opener and very liberating.

If you want to fix your business’ cash flow problems and sleep more soundly at night, request and complete our Cash Flow Fixer sheet and we will send you a free report showing why you have a problem and the best way to fix it.

The best analogy I have seen on this is one of a battleship. If it was not compartmentalised, one hit by a torpedo and the whole ship would go down!

Your business affairs are no different. Asset protection simply involves compartmentalising differing business risks to protect assets.

You might have a:

  • Superannuation Compartment
  • Personal Assets Compartment
  • Businesses Operations Compartment (may need different compartment for different business risks. For example wholesale distribution vs. manufacturing activities & operations
  • Business Assets Compartment
  • Retained/Accumulated Business Profits Compartment
  • Etc…

Perceived risk and real risk are often different, but good analysis can soon determine the optimum structure for your business affairs. The aim being to separate the risk of anything going wrong which would impact on your personal accumulated wealth.

It all depends on what you do and where you are at on your business journey.

The overriding principle in structuring is that you, as the business owner, must be able to understand your structure, the benefits it provides and the obligations it carries.

The best structure for your business is also very likely to change as your business matures e.g. transitioning from a sole trader to a company, or maybe for reasons of simplifying compliance requirements, from a company to a sole trader.

In any event, this question should form part the annual tax planning review meeting you have with your accountant each year.

If you are in a situation where you own units in a trust or operate your business through a trust, a partnership or as a sole trader, all income must be distributed at tax time.

So, the question comes down to “how can I extract money from my company?”

The answer is through wages or salary (which are taxed), super payments and dividends.  If the company has paid tax on its profits, then the recipient of the dividend receives a pro rata credit for the amount of tax paid.

You can also repay yourself any money that you have lent to the company at any time.

As a general rule though, you can lend as much as you like to the company but you cannot borrow money from the company without having the correct documentation in place, or repaying the debt prior to the lodgment due date of the company’ tax return.

Where do we start! There are so many new ways to automate and more and more tools and apps being developed every day to assist.

Start with 1Plan to map out what you need to do to achieve what you want in the next 90 days. 1Plan has an auto accountability function to keep you on track. Add the Todoist into the mix, and you are now organised with auto reminders.

Next, select accounting system like Xero (jobs/project tracking, timesheets, invoicing and payroll) which automatically fetches the bank account transaction form your bank. Then add a program like Receipt Bank to automatically capture your recurring suppliers’ invoices and take a picture of your expense receipts with the app.

Now, select a marketing app like Active Campaign to track your sales pipeline and automate emails to prospects. Add to that a proposal generating program like Proposify to systemise your proposals and automatically collect payments from your customers!

And to top it all off, add Zapier and automate repetitive tasks between all these apps.

Commit to becoming financially literate if you are not so already, and either:

Engage an accountant or bookkeeper who are great at what they do and have good & flexible availability.

OR

Make reconciling your bank account a daily ritual

The idea being that you know that the information you are looking at in your accounting file is always reliable!

Negotiate a fixed fee with your accountant to:

  • Customise the standard reports so they speak to you and give you the information you want to know
  • Train you on the best automation tips and tricks to save time
  • Work with you to improve your financial literacy
  • Set up an arrangement so you can check in when you want, and not get charged every time you pick up the phone or pump out an email
  • Let your accountant know if you are doing something abnormal, e.g. buying a car or a computer so they can record the transactions correctly

In our Legacy Program we use 5 simple measures over time to keep focus on the strategic direction.

  • Top line Sales Target (vanity)
  • Bottom line – what’s left for the business owner (sanity test)
  • Cash flow target (looking to accumulate cash buffer of 25% of sales)
  • Work/life balance – how many days do you want to work
  • Succession plan – how to transition the business to other shareholders, pass it on to the next generation, sell the business etc.

These are all meaningful, high level measures that we map out over 5 years.

The first thing you need to do is to identify your marketing targets and the purpose of your marketing activities.

Are you aiming to establish and build up your brand? Do you want to start building or improving your online reputation? Do you need to promote a specific product? Are you looking to advertise and promote a piece of digital content (eBook, Case Study, Online Tool, etc…) you own? Do you want to increase the number of online enquiries? Do you need to make the phone ring?

Or (very likely), is it a combination of at least some of the above?

Once you have answers to these, you can start to create a plan. At this point, probably the most vital cog in this marketing machine you are building, is making sure your website is up to the task.

You do not want to spend time putting together a plan, and start spending advertising dollars if your website isn’t going to compel your visitors to take the desired action (see above).

Is it attractive (30% of visitors leave a website simply because they don’t like how it looks)? Is it easy to see within seconds (most people take 7-8 seconds) exactly what you do? Is it easy to navigate? Is it easy to get in touch with you or your team? Is the website mobile friendly (most web searches are now done on mobiles)? Is it fast?

If you know your website is likely to “convert”, you are ready to start marketing.

Establish a content creation calendar, and make sure you post quality original and engaging content on a regular basis. Once a week is ideal, and once a month is the minimum. Doing so will ensure that the website stays fresh, engages its visitors, and gets indexed by search engines for all the new keywords found in your content. This will help your rankings!

Setup (or optimise existing) Social Media properties you own, such as Facebook, Instagram, LinkedIn, etc. and get into a routine of re-publishing your new content there as well, so that you get the most “bang for your buck”.

When you are happy with your website, the new content it’s getting, the social media pages… it may be time to look at paid advertising. This may include Google Ads, Facebook & Instagram Ads, YouTube, LinkedIn, and more.

Even though you may be able to do some of this marketing yourself, we would strongly recommend that you set aside some budget to hire a consultant to do all or most of this for you. Like many other areas of your business, even though you think you may be able to do them yourself, it just makes a whole lot of sense to hire a professional.

Depending on your industry, this can be quite straight forward to ascertain. Many industries (e.g. hotels pubs and clubs) have excellent data and reasonably homogeneous business models.

These will tell you if you’re in the top 25, above average, below average, or in the bottom performance quartile, and highlight the areas you need to improve to increase your performance ranking.

Within smaller, niche and emerging industry businesses, there might not be as much of a data pool to draw from, however bench marking against general business data that may be appropriate to your business can give valuable insights.

If you want to remain a financial investor in your business, i.e. not looking to exit completely, then the two go hand in hand.

To remove yourself from the business, you need to document all you do into procedures. This will allow you to create job roles and positions in such way that the incoming employees can be shown “this is how we do things here”.

In regard to more control, given the number of apps available on the market today, it is very easy to develop a live dashboard that will display your critical KPI’s and measure and report on the drivers of your business’ performance.

Just be sure to actively review the underlying apps on a periodic basis as systems, processes and technology are ever changing.

Your business is worth whatever an independent interested party is willing to pay. Having said that, below are three common ways to value a business:

  • The way a business is valued could depend on what industry you’re in and the size of your business. For example, accounting firms with a turnover of less than $1M seem to be valued as a % per dollar of the fee base. For example, 75c in the dollar would mean a fee parcel of $3,000,000 dollars, and would be valued at $2,250,000.
  • For businesses that are producing consistent losses, they tend to be valued on their net assets, otherwise they’ll be valued by their customer list.
  • Profitable businesses are generally valued on a multiple of maintainable earnings at typically 1 to 4 times for a private company and 10 to 20 times for a listed company. For instance if your business has had profits of one million for the past 3 years and your industry has a multiple of 3.75 times, then your business would be valued at $3,750,000.

The best place to start is always by getting it out of your head and onto a piece of paper. Our four-step process will help you identify the most pressing issues.

The first step is simply a case of picking a timeframe, such as 90days, and writing down what it is you’d love to have accomplished at that point in the future.

For the second step, it is a case of working out what people, processes and resources you need to achieve your goals.

Step three is to choose five things you need to do and five things you can delegate and add a due date to each.

Finally, step four is to find someone who is prepared to keep you accountable and to make the effort needed to help you achieve your goals.

“Successful people all have one thing in common: they’re always looking to the future. Whether that plan changes the very next day is irrelevant.

If they know where they’re headed, they’ll do whatever it takes to get there. A directionless business isn’t going anywhere. It’s time to set some goals.”

Futrli.

P.S. Optimists live longer, too!

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