A Smarter Path To Business Success

The emotional decisions to change accountants can be a difficult one. For many small businesses changing accountants can seem like a lot of hassle, so many people choose to stay put even though they aren’t quite happy.

Cutting a relationship with a trusted advisor can be tough but the consequences of staying can be far worse. You need to count the cost of inaction, not just think of the ‘effort of changing. The problem is that by staying put you can cost you more then happiness. You may be losing significant income, cashflow not to mention sleep by not getting proactive and clear accounting.

With that in mind here are my 12 non-negotiable reasons to change accountants.

You drop your information off in the second week of July but for some reason an extension is always requested and filed well after the original due date. This is a signal that you are not valued by your accounting firm.

Accounting fees should always be transparent. See an example of how accountants can provide you this information upfront. Each accounting firm should have clear pricing principles that they follow. The answer to the question how much do you charge should never be “It Depends”

Clients want to deal with the partner. When the partner is to busy to deal with “smaller clients” like you, you are passed down the line to the the junior members of the firm, the relationship with the client is put at risk and showing that they are not valued by the accounting firm.

A good accounting firm should be regular contact to check in on your changing needs. Is there any of your clients that you speak to once a year and think that they are a valued client?

You are too scared to contact them as you don’t want to ask any stupid questions or be in a position that you feel as though your accountant is not available to give advice. You shouldn’t also be concerned about receiving a bill for that one off phone call.

Any accounting firm is able to provide so much more than just tax and compliance. Quite often long standing clients fees creep higher despite their work staying the same or decreasing. It is endemic in the accounting industry that long term clients are taken advantage of.

Technology is really important when dealing with your finances. Your accountant should be up to date with the latest technology, whether it is keeping up to date with the cloud or being as efficient as they can when performing your work.

Your accountant needs to believe in your big-picture possibilities, to lead you through a business accounting path that makes the ups and downs more manageable and rewarding.

They need to ask you about your exit strategy and where you are going to take the business long term. They need to challenge you on your future.

If your accountant does not take time to understand what your business is about or what makes it ‘tick’, then there is next to no chance that they will be effective at identifying opportunities for you. You want to work with people who believe as much in your vision as your bottom line.

This is actually the hardest of all the steps by far. You have lived for years with substandard accounting services. You need to change this by getting a new accountant.

We believe in relationships are very important in business. This goes as well for our clients. While we can inform the previous accountant but at Black Sheep Advisory we feel that our prospective clients should take the responsibility to inform their previous accountant they are leaving.

We understand that this is can be uncomfortable and a bit difficult. The best way we have found is say that the needs of our business have changed and that we are heading in a new direction.

There is an informal agreement between accountants that a new accountant will send the previous accountant an ethical clearance letter.

Your previous accountant should reply to this promptly and forward any requested documentation to the new accountant. You are then up and running and ready to transform your finances.

Given you are already browsing our website, the easiest way is to book and introductory meeting, call or email us. Provide us with a few basic details and we will put the wheels in motion and get everything moving forward..

Of course, if you’re not quite ready to make the move that’s fine and we recommend you simply subscribe to our newsletter. This newsletter will give you an insight into how we help our clients beyond their tax and compliance needs.

If you’re a committed, pro-active and ambitious business owner looking for an accounting firm who are widely recognized as business and profit builders, call us today on 1800 491 488 to discuss your needs.

The emotional decisions to change accountants can be a difficult one. For many small businesses changing accountants can seem like a lot of hassle, so many people choose to stay put even though they aren’t quite happy.

Bookkeeping is a tiresome task for small business. Cash however is king in any small business and by improving your bookkeeping and understanding your numbers it can make a massive difference.

By creating a cloud based ‘technology stack’ you can really streamline and improve your bookkeeping process.

At the moment are you caught in the survival trap and using bank balance accounting and living cheque to cheque? Get a system and a structure of how you pay your bills. A big part of this is batching, rather than being ad hoc with how and when you are paying your bills and payroll, get some structure and pay these at the same time every week or fortnight (depending on your pay cycle)

How often do you delay payments received from customers because you don’t keep up with invoicing and payment tracking? It is easy to be distracted by other responsibilities in your business. But, invoicing is an important thing that shouldn’t be delayed or overlooked. Implementing a new, digital bookkeeping and accounting system is the best solution so that you always send invoices and payment requests on time.

The digital world allows you to keep online records for everything in your company. Eliminating the paperwork can reduce the clutter in your office. Not only will you save time on filing, but you don’t have to stress about shredding all of the documents after you are finished. Going paperless means that you have an online, cloud-based accounting program that can be used to manage all of the transactions that move through your account. You have the freedom to access the accounting information from any location, making it simple to keep up with the day-to-day bookkeeping tasks that need to be addressed, all while meeting all the ATO audit requirements

One of the problems that small business owners encounter is the overlap that happens with personal and business finances. Even if you run a home-based business, you need to be careful about creating a distinction between money that is spent for business purposes and money that is used for personal transactions. A digital accounting and bookkeeping system can help you reduce the complications that occur when these expenses are comingled. This step is essential if you want to help your business grow in the future.

A poor financial tracking system can make it difficult to set funds aside to cover upcoming tax payments. There is no way to avoid tax burden, and you could be facing big issues if you aren’t prepared to make the payments when the deadlines approach. An automated system helps with these tax calculations. At the same time, you can implement a transfer into a savings account to ensure that the funds are available when the tax payments are due.

Keeping up with the daily and weekly transactions is good. But, it is essential that you are consistent to schedule monthly reconciliations as well. Not only will these reconciliation efforts help you identify potential errors in the transactions and processing. But, you can also find patterns that could indicate possible fraud or theft in the industry. Mistakes will be made at times, but these issues are easy to fix when you have a good reconciliation system in place.

Is the money always available when it is time to pay for overhead expenses or business costs that are necessary to keep the company running? Cashflow is the lifeblood of your company. If you are struggling with cash flow, then you might be headed to a path that goes nowhere in the future. The best thing that you can do is implement the right system that helps you keep track of cash flow. Then, you can sleep easy at night knowing that the money will be there when it is needed for upcoming payments.

While it might be convenient to have cash in your pocket for small expenses, the use of cash can increase the risk of errors and mistakes with the financial system. It’s hard to know how much you are spending if all of the transactions are managed with cash. Instead, implement a digital system so that you have a paper trail that shows the transactions and categories for your spending.

Not only do you need a good way to track the bookkeeping information, but you need to be sure that your new system can integrate with the other tools that are used in your business. For example, make sure that the software can sync with your point of sale system, website sales, and payroll processing. These integrations might seem small, but they can have a significant impact on the simplicity of your future business processes. Put together the right program now so that you can save the stress and headaches in the future.

Profits First by Mike Michalowicz contains a very good set of principles for small and medium business owners to actually run their businesses. I am an accountant based in Australia and I use an adapted version of profits first in my own business and have found it very successful.

As an initial warning though, it does not remove the requirement for an accountant and/or a bookkeeper. The profit that you pull out does not equal what your profit is for taxes and you still need to make adjustments to lodge your BAS and Income Tax Returns. That being said clients of mine that I have implemented this system with has seem massive improvements in their business and personal financial situation as have I.

By creating a cloud based ‘technology stack’ you can really streamline and improve your bookkeeping process.

The system is built around the insights of Parkinson’s law and some behavioural economics basics. The traditional law is that “work expands so as to fill the time available for completion.” Mike has adapted this to say that the demand for resources (spending) tends to expand to match the supply of the resource (bank balance). By adapting the way we control our money, by removing the profit first we are able to take advantage of this law. Once the profit, money for taxes, super and owners pay is removed we then become naturally more frugal and look for ways to manage our business more efficiently. The practical example Mike uses is Toothpaste. When you have a nice shiny new tube of toothpaste you empty out a massive slug of toothpaste, half of it then falls off while you moisten the brush under the tap.

But hey, who cares — there’s plenty more where that came from!

Yet, when that toothpaste is almost on empty, our behaviours are quite the opposite. We work so hard to extract every little morsel of what’s left in the tube. We squeeze and wring with our fingers until we can extract a small blob — a parcel of gold to be carefully applied to our toothbrush head.

In other words, we’re more frugal.

These principles change the way that business owners think about their cash flow. Business owners have traditionally will spend all their money on the expenses and take whatever is left as profit. They use the traditional method of accounting that we were thought at university is:

Michalowicz’s methodology reverses this equation, teaching business owners to “put profits first”. The result:

It may sound simple but it works.

By putting away your profit first, the rest of the money is budgeted for expenses. This forces you to think deeply about every spending decision. It forces you to innovate by creating the same or better output, with less resources.

I have found it has really made a massive difference to people that just withdraw their money from their business ad hoc, through directors loans or drawings account and then just balance it at the end of the year and pay a tax bill. It is also great combined further with the simple barefoot investor outline to further manage your personal finances.

The first step is to setup five different bank accounts at one bank:

1. Profit Account (Used to accumulate profit)

2. Owner’s Pay Account (Used for paying out your net wage)

3. Tax (and Super) Account (Used for the payment of taxes)

4. Operating Account (Used for payment of day-to-day expenses)

5. Revenue Account (Used to deposit revenue only)

Make changes to your invoices so that all your payments into your revenue account.

The Target Allocation Percentages is how you will allocate the deposits that come into your revenue account. This is a subjective measure and something that you will have to work through to get right. The aim is constant improvement, from where you are now to where you want to be.

An example of the TAP that I am currently aiming for in my business.

Real Revenue - 100%

Profit - 15%

Owner’s Pay - 17%

Tax (and Super) - 32%

Expenses - 36%

Please note that I am in the service business and am a sole trader. All these numbers to aim for are unique, also I include other employees super and tax in the tax account (This again is different to the book).

It is unlikely that your business will be operating at these percentages straight away or that these percentages are right for you but it is something to work towards with your accountant/business advisor and once you have a target in your head it gives you something to really focus on. It is also something that really benefits from an accountability partner.

In the book it recommends to transfer on the 10th and 25th but I feel for myself and most of my clients it is best done fortnightly. I find that it has better rhythm to it. Only doing your bookkeeping and bill paying every fortnight is important as it allows you to actually get a pulse on your business and how it is running, when the income comes in and where the money actually goes.

Every fortnight allocate the deposited funds that have come into the revenue account that fortnight as per the TAP’s. It is important that you are disciplined in this and only spend the money in each account for its specific uses, which are:

· Profit – Used to accumulate profit

· Owner’s Pay – Used for payment of your wage

· Tax (and Super) – Used for payment of taxes and super

· Operating – Used for the payment of day-to-day running expenses

· Revenue – Used for the deposit of income only

Here is a Link to the spreadsheet I use in my own business. Simply put this periods income in cell C5 and then transfer as per the results of the spreadsheet.

Another thing I do differently to the book is I pay out Tax and superannuation with every payment cycle. I know this may be hard to fathom but at the moment there is virtually no interest to be earned and by keeping on top of these amounts and paying them every fortnight it just taxes the temptation away for that money to be used for anything else.

Once you get into this rhythm you will be able to use Parkinson’s law to your advantage and will work for any business owner that wants to improve their relationship with their finances.



Now comes the fun part. Now that we have reached the end of the quarter it is time to take a profit distribution, a quarterly dividend. Take out half of the money that has accumulated in the profit account and transfer it to your own bank account to be spent as you see fit.

There should now also be a transfer to a vault account (emergency fund account) or to a reserve account for capital purchases.

At the end of each quarter you need to review and adjust you system (review the TAP). It is also a very good time to meet with your advisor for an accountability review.

While it might be convenient to have cash in your pocket for small expenses, the use of cash can increase the risk of errors and mistakes with the financial system. It’s hard to know how much you are spending if all of the transactions are managed with cash. Instead, implement a digital system so that you have a paper trail that shows the transactions and categories for your spending.

As I have mentioned previously I am an accountant. I can read traditional financial reports, have probably lodged over 5,000 tax returns and prepared god knows how many cash flow forecasts. Despite cajoling I still perform some of them for some clients as that is what works for them but as I always tell them that’s not how it works for me.

I could monitor and control my cash flow this way but I don’t. I just use the profit first method and it just works for me. It makes sure that I get paid for all the hard work that I do in my practice and helps me run my own business.