Kundun Consulting

Well here we are - April 19 and a new business is firmly established.

You can look here for what we do so I won’t rehash the already obviously stated. I will however simply state the this blog is for you. It is really a blog about what we encounter in our everyday lives trying to help small business. If you have followed my previous blog at www.kundunconsulting.com.au then you will be aware of what it is about.

Generally I will be offering some practical tips on how to deal with practical small business issues - but I am happy to be led by you. Just use the comments and suggestion box to ask me to address something that may be useful. If you have the query then chances are someone else has the same query.

We will post three updates per week so please subscribe to the RSS feed - or via email and stay connected.

Hi Everyone.

I have some very exciting news that I wanted to share with you all.

As of today (Feb 1st) my business is merging with two other like minded practices. Having known each other for nearly 10 years we have decided to put our combined experience together and create an offering encompassing a greater range of services and skills.

Bentley Partners www.bentleypartners.com.au will be in a better position to assist more small businesses than any of us are able to do individually. We don’t offer gimmicks just highly skilled consultants with a desire to provide small business with big businesses skills.

Please stay tuned over the next week whilst we get things up an running properly. The blog will continue so that I can continue to impart my wisdom.

Time to push my own barrow and smack one of my pet hates.

Hands up anyone who thinks that all accountants know everything about tax.

Ok everyone please put your hands down!

I hate to burst your bubble but the simple fact is that not all accounting requires in depth knowledge of tax. Let me paint a picture.

I have been an accountant for around 18 years. I have however prepared very few tax returns. I can do it because I hate paying more tax than I have to - however for many years I had my own tax return prepared by a tax agent.

To highlight this further, law is an area where people specialise. If you need a family law expert there is no use going to a migration expert. The tax field is the same - it is simply just too broad to know every aspect. So should you be prepared to pay the exorbitant rates of any of the big 4 or second tier accounting firms then you will have access to GST experts, property tax experts, FBT experts - you get the picture.

So following the same logic:
Hand up those of you out there who believe that their tax accountant can help with anything relating to accounting - for your business.

Ok you 50% can put your hands down now.

Your tax accountant is by far the WORST possible person to help manage your business. No disrespect to them, but their knowledge about how practical businesses operate is limited to the end result of a period i.e. the end of year for tax purposes.. In many cases they have not even worked in a trading entity. How can they possibly advise you how to go about targeting a profitable line in your offering or determining pay-back on the purchase of an asset. Simple answer is they can’t.

If your business relies on this type of financial advice only then I must implore you to go out and find an accountant who can review your operations and provide strategic - not necessarily tax - advice.

It may just keep you operating through the turbulent times.

Technorati Tags:
Accounting, Tax, Small business

Seasons greetings to you all. I hope that you have all taken time off to spend with you loved ones and to enjoy the end of a successful year.

This week brought an unexpected level of conflict to my world which I had never come across before.

I manage the cashflow forecasting for one of my clients who has a very good business although slightly bloated at the moment - but that is another story.

To cut a very long story short the model that I have created involves his staff doing a daily update and then I access the spreadsheet and manipulate the payments and sales predictions to ensure that we stay within the terms of our overdraft. It has worked very well for the last year and in last few months been very accurate.

Over the last week a sales promotion that was expected to do very well has been a flop and my sales predictions have been around 10% lower than expected. Coming into the Christmas period cash is obviously tight and this 10% has involved a little bit of manipulation to make ends meet. After performing a juggling act I managed to meet everything required except for a delay of a few days in making a scheduled tax payment.

Well here is where the fun started.

My client, through my almost flawless record over the last year, had expected my “predictions” to be closer to the mark. The fact that there were factors outside of my control seemed to bounce of his rather colourful description of my performance.

Thankfully we have managed to each understand each others issues with this process and have moved on - but it certainly has highlighted a fatal flaw that too many of us business owners make.

Communication is the single most critical factor in our client relationships and in managing their expectations.

The basic issue here was the fact that there was an expectation that everything was under control - but each of us were assuming different levels of control!

Your clients must receive regular feedback about how things are progressing to ensure that they are in the picture. With my experience in dealing with many different clients I had no issue with a delayed tax payment - but my client and his risk profile were not comfortable about the delay. His position was that he would have come up with the cash personally to ensure that it was met - if I had told him it would be late.

I did make the assumption that everything was OK - but didn’t check with my client to ensure that he was OK.

This also highlights the power of a clearly defined engagement specification. I had one that covered general engagement but not one covering the delivery of this specific service. That has now changed.

Every mistake is an opportunity to learn - just don’t make a habit of making mistakes.

I am often asked how much it costs to employ someone. Often my client will have a need for a short term or part time person to fill a vacancy and they want to know what the “on-costs” component is.

Well you can see from my assessment of the amount above it is around 25% on top of the wages that you pay.

It gets a little worse when you employ someone casually as the super is still payable, assuming they meet the minimum monthly wages threshold of $450, yet you have to pay them a 25% allowance on top of their salary.

There are numerous opportunities where you are able to engage people as contractors but not in all cases. The balance comes back to normal management criteria and ensuring that you get what you pay for. Quite obviously a contractor is not an employee and as such you will gain some benefits and lose others - control being the one that jumps to mind virtually immediately.

The example above was borne out of some work that I did with a client to determine the true cost of employing someone, to see how much it differed from the cost of having them come on as a contractor. In this case we paid the contractor $50 an hour and had the added bonus of having them provide their own laptop and their own insurance coverage. It was a much better result - but it won’t be the same in all circumstances.

And so here is the caveat. Engaging contractors can still have the same consequences as employing a person. The Income Tax Assessment Act does not want people outside of the tax system and thus not having tax deducted from their wages. The superannuation guarantee legislation can still catch the payments to contractors as wages and thus you are forced to pay super in these cases. Finally the workcover and payroll tax legislation can still catch these payments and deem them to be in effect wages in which case you are required to include them in your wages calculations for determining these costs.

So in summary you need to ensure that you get the right advice before you engage a contractor to ensure they will meet your needs and also to ensure that you do not pay “on-costs” unnecessarily.

I spend day after day giving advice - and being paid well for it!

Personally I really don’t care whether a client listens to my advice and uses it or not. I find it frustrating that I have worked pretty hard to provide the guidance which I believe is the best solution to their issue. Sometimes I even promise myself to move that client on - as they obviously wouldn’t know good advice if it jumped up and bit them on the posterior!.

And then i realise that sometimes my advice is used as a clarification of what the client is already thinking. They are asking me to support their own proposition - i.e. to prove that they are right.

And I understand that this is sometimes the best advice that I give.

I would never presume to know my clients business better than they do. I may know more about the real estate industry per se` but I would never know more about a real estate business in Sunbury where a client has been working for the last fifteen years.

The point being is that the advice that you pay for is not always the best advice.

Sometimes your own advice - that has been clarified - is more relevant to your decision than any advice that a trusted advisor can provide.

There is however a line that you must draw to ensure that you are treating the advice correctly. If passion overtakes common sense and good business practice then you may need a reality check. Ignoring advice is not what you should ever do - whether paid or otherwise. The most successful businesses that I have come across utilise the services of a range of associates to bounce ideas off. Never believe that you are alone. There are many people out there willing to assist you with your issues - as you will be able to assist them with there’s.

Take the time to strengthen your netwrok and en>sure that you use it effectively - this also means giving something back to them.

I was reminded of a Winston Churcill saying today which I had forgotten but which I have always found very sound.

“We make a living by what we get, but we make a life by what we give!”

Good advice and great people go hand in hand - make sure that you take and give and your business operations and your personal growth will benefit exponentially..

In my role as a trusted advisor I often am asked to provide my advice on how a particular issue should be dealt with. I often have to ‘adjudicate” on whether I see the merit in pushing an issue to a level past “comfort”

All too often the answer - yes but NO!.

Justice is a word that we all like to think actually occurs. We want to believe that if we are doing the proper thing and if we are “right” then we will triumph in the end.

Well unfortunately the pursuit of justice often ends in a big screaming heap!

I would dearly love to tell you a glowing story of how the underdog came out and took on Goliath and beat him. I would love to tell you how they received everything owed to them and some more to compensate for the discomfort of having to enforce their rights and I would dearly love to tell you about the lawyers whose advice ended in smiles all round. But that is a story that I tell my daughter before she heads of into the land of nod.

Sometimes even when you are right - you lose.

The moral of the story is to always take a position that lets you live to fight another day. If you are a real estate agent and your competitor won’t hand over the authorities that they are required too, or if you are a lawyer whose client has elected to go to a new practice headed up by your recently resigned senior associate - sometimes it is simply better to let it slide.

Long drawn out legal battles only ever make one group of people happy - the legal profession. I definitely tale the position that a bird in the hand is better than 2 in the bush - so keep our hard earned cash in your pocket and live with the irritation. Let them think that they have been able to get one over you - then go out and take market share - hurt them where it really matters.

You never know - all that bitterness, anger and frustration may have a silver lining after all if you channel it into the right areas.

And finally a word of clarification. There are times when you will have to enforce your rights. You will have to sit down with your lawyer and work out a strategy. Just be sure that it does not consume you and keep it in perspective. Unless it is earth shattering sometimes a compromise is the best result.

I have worked and operated with payroll frequencies at all the levels - weekly, fortnightly and monthly. My clients are always asking me what the best timeframe is. My answer is always fortnightly.

Of course you can pay any method that you want to however experience has been that fortnightly is the most efficient for the following reasons:

- It is just he right timeframe. People get enough pay to splurge or pay larger bills and don’t have to wait too long for their next pay.
- It is short enough for everyone to remember what has happened.
- It simply stops complaints. The other frequencies get too many questions asked and complaints made.

People don’t like monthly. They get too much money into their accounts, spend it quickly and then struggle for the remainder of the month. Complaints and “whinging” occur too frequently as they make an unsuccessful attempt to change the process.

Weekly is too short and just forces people to plan too much to meet their larger expenses. It also creates too much work for your payroll processor and should be avoided at all costs.

Ultimately your staff will tell you whether they are happy or not, but getting this right is critical to a happy workforce.

Well it has been a little while and I must apologise - but my world has definitely been on a roller coaster lately.

The financial market issues that we have at the moment creates a real challenge for many businesses - mine included. But it does also create real opportunities.

Please if you are in small business stay away from the media - it is just too negative - and you need to stay positive!

Instead focus your energies on your business. Make sure that you have your processes and systems in place. Everything from sending out statements, to interest rate and exchange rate management, to looking at how and what your people are doing to help you through this short short term glitch.

I read a very interesting statistic the other day care of Seth Godin .

Apparently Time Inc has previously reported that the majority of top 500 companies in the US started after 9/11.

Now that got me thinking. If your business is not taking an opportunity because of fear - maybe the right time is now!

This probably goes beyond the normal accounting conservatism approach but these are not times for conservatism. Getting into a position where the cycles of business are not so difficult to navigate, is a scenario that we all should be tying to achieve. Risks , that are calculated, are worth pursuing, if you have made the right analysis and have control of where your business is heading.

To highlight this fact I must rekindle my fond memories of Brownie - my favourite barrista! He decided to shut his small kiosk and has taken ownership of a brand new shop around the corner. He is now operating a thriving business again - and serving his loyal customer base. I asked him why he decided to take such a risk in such uncertain times and his answer was:

“Simple really, I couldn’t meet demand and needed to give my customers a better experience. I had built up such a custom that people were prepared to spend a lot of time waiting - but they deserved more. I looked at what I thought would fix that and went and took the lease out on this place.”

He then went onto tell me that he had in fact partnered up with a caterer who was sharing the kitchen. Together they had created a business that served great coffee and great food - basically he has spread the risk and doubled his income. Not bad for these bad times hey!

There will be many opportunities to come the way of those businesses that are willing to take a stake in their future. Why shouldn’t it be you.

I had an eye-opening experience today courtesy of a client who, for her age, really knows what she needs to do to succeed.

I spend a lot of time with clients who try to be everything to everybody. They offer a full range of products that they believe they can sell as opposed to determining whether they should even be selling them.

So a real estate agent will list and sell a property in any area as long as there is a commission involved. And all too often they focus on selling the highest value, highest profile or perceived best product.

But what happens when a business decides to simply focus on doing the best that they can with a limited range of products or services. They actively pass over those items which take away their focus, in favour of delivering the best service or product that they can?

Well I saw the results today.

My client is a real estate agent and has a territory of approximately 9000 properties in which to market her office’s services. Her strategy has been to market to every property owner in her territory - basically the more people that you contact the greater chance that you have of selling your offering. In these tough Melbourne real estate times it is imperative to hit the market with your marketing buck as strongly as possible to ensure that you are attracting the right level of custom.

During the business planning process a few months ago, I crunched some numbers and identified that they had not been penetrating a particular pocket in their territory. They were marketing in the same manner as the other areas but not getting in enough doors. After a great deal of discussion we decided to test a “differen” type of marketing campaign to gauge the effects of a more concentrated and focussed effort.

We stopped marketing into that area entirely and instead spent the marketing dollars in another area where they were ranked second in terms of market share. The strategy involved concentrating on families and family driven activities throughout the area, to see what could be gained from a very loyal section of the real estate market.

Secondly, the entire office agreed to meet a set of service level agreements. As an example, things such as calls were to be returned within 45 minutes of a message, open for inspections by appointment only, emails with information requirements to be delivered within 90 minutes and all potential buyers were to receive a personalised written message within 24 hours.

Today when we ran the results for the 2 months of the campaign we discovered a very significant trend.

1. The badly performing area had actually increased in performance. Still bad but at no cost!

2. In the concentrated area, market share had moved to equal first - but more significantly with better quality properties that attracted greater commission levels.

Now such a short trial doesn’t establish a true trend, so the trial will continue -marketing is being slightly realigned to ensure that we do not lose an entire pocket of the market, for example - but the signs at this stage are good.

I too have been guilty of not being focussed enough and providing an OK all round service - but not mind blowing excellent service in any area. I am going to change that from here!

I want to be proud of what I do - not comfortable with what I do.

I want to deliver great value to my clients and take the frustration out of their financial numbers.

And I am going to do it by being responsive, pr-oactive and reliable.

It may be this won’t equate to significantly improved financial returns - but it will definitely make me more content with my life and with that of my business. And I have the feeling that the financial returns will be achieved because the focus is improved and the service delivery and personal satisfaction are greater.

But we will see!