Managing your cashflow is critical

One of the most important aspects of running a business is to ensure you have adequate cash flow to meet all of your financial obligations. Cash is the lifeblood of your business and ensures you stay afloat. Once you are securely afloat, you can then sail towards your destination. (Maybe with a nice refreshment in hand and the people you care about sitting beside you.) Read more

PEOPLE are great…

People are great…when you have the right ones around you as support, but not so when you don’t. With them, you can achieve so much, without them, you run out of power or battery, just like your favoured trusty drill.

When you are working on a job in your building and/or development, I am sure that you get the right specialists for the particular parts of the job that are outside of your specific expertise or even if you have the expertise, you want to have someone else do that particular part so you can concentrate on something else.

Well, it should be no different when it comes to the financial management of your business. If you do not have the expertise, then you need someone that does.

Do you truly understand financial reporting? Do you understand the difference between cash and profit? Do you understand the difference between income and capital? Do you understand return on investment? Do you understand tax law and compliance? Are you planning and budgeting? Are you managing your cash flow?

I apologise if that seemed a little heavy but I do not apologise for the need to know all of the above and a whole lot more I haven’t mentioned. The reality is you need a high level of financial intel to be able to be successful in business today and likely even more so in the future.

If I personally need or want something done that involves building and property development, I will go and find the right person or people to help. Someone just like you.

If you need or want something done that involves anything financial with your business, will you go and find the right person or people to help? Maybe someone like me.

TIME can be a beautiful thing…

Time can be a beautiful thing…when we have it, but not so good when we don’t. With it, you can do so much, without it, you feel like you’re suffocating and you can’t breathe.

You need time in your building and property development business to be able to find your next opportunity. To be able to cost and quote on that opportunity. To be able to organise all the resources for that opportunity whether that is equipment, materials or labour. To be able to manage the project from start to finish. Then, you’d definitely like some left over so you can get onto the next one and do that all again or even just lay back and enjoy the fruits of your labour.

You don’t want your time taken up running around wasted on the little problems that seem to come up almost daily. We need to stop you being sucked into that vortex.

Without time you may not secure an opportunity or worse still, secure it and not make a profit because you weren’t able to cost it, quote it, resource it or manage it right. Ouch.

Your time needs to be managed well, always. You need to be as efficient as you possibly can to be able to make the most out of your time.

So what is taking up all of your time? The answer is YOU. You are trying to do too much. In fact, most times, you are trying to it all. That is a problem. A big problem.

You are good at what you do in the building and property space and that is where your time needs to be concentrated to generate the profits and grow the business.

You do not need to be spending your time on those things that do not actually generate you money and therefore profit. Those things need to be done by someone else or something else. Yes, that’s right. You need to have systems in place and what’s more they need to be the right systems.

Not using technology to its fullest advantage seems like a waste. Not just because it’s available, but because what it can do for you and your business. Getting information in real-time and being able to make informed business decisions is the only way to eliminate the next potential mistake that could cost you plenty.

Have you ever thought or actually said, “No one can do it as well as I can.” I am sure you can do a lot of things very well, but can you really do everything very well?

Have you ever thought or actually said, “I can’t afford it.” Well, I am not sure that you can afford not to. You see, what might be missing here is that it can cost you more if you don’t get your internal systems setup and managed efficiently. I don’t think you want that to happen. Do you?

MONEY can be a beautiful thing…

Money can be a beautiful thing and at the same time it can be a nightmare. With it, you can do so much, without it, you feel helpless.

You need money in your building and property development business to be able to acquire land and property. To be able to acquire equipment and machinery. To be able to acquire labour and resources. You also need to fund the project through to completion. Then, at the end of the project, you would definitely like to have some left over for yourself once it is all done. The more the better.

Without it, the project, no matter how big or small, will suffer and worse case, not even get off the ground.

Your money needs to be managed correctly, right from the beginning. If your business is not structured right so it suits your particular situation then you are destined to cost yourself money from day one. The wrong structure will mean that after all your hard work building and developing you will give up to half of your profits to the government and you’ll be left with the other half. I don’t think you want that to happen. Do you?

Worse still, without the right structure and foundation of your business (just like your building and property), all your personal assets will be at risk should something go wrong and that doesn’t mean that you have to have done something wrong either. Many unforeseen circumstances arise and you could be exposed and potentially lose it all. I don’t think you want that to happen. Do you?

Introducing Miriam Sandkuhler from Property Mavens

AD Partners is excited to announce its new partnership with Miriam Sandkuhler from Property Mavens.

Miriam joins us as an Accredited Property Investment Advisor and Licensed Buyers Agent with over 20 years industry experience.

Together we will work closely to provide our clients with independent and unbiased property advice, enabling smarter property investment decisions and more profitable outcomes.

Over the coming months, Miriam will share with us her expert knowledge, thought-leading ideas and how to avoid common property investment mistakes – keep an eye out on our Facebook Page for these must-have investment tips!

Our partnership with Property Mavens continues our mission to provide our clients with a complete one-stop solution for all your Financial, Taxation, Business and Compliance needs.

To find out more about Miriam and the team at Property Mavens, please visit and like their Facebook page –

Please contact us on (03) 9349 3499 or at for any questions you may have.

How often should you speak to your Accountant?

Your answer:

1. Once a year when I lodge my tax return – WRONG

2. When I have a problem with the ATO – WRONG

3. When I need some advice – CORRECT

So, let’s elaborate of this issue of needing advice.

When do you need it?

That will depend on you and your level of financial intel, your systems and your support. If you have these 3 things well covered, then less frequent contact might be needed. However, if you do not have the required level of financial intel and the right systems and the required level of support, then it should be quite often.

If you see your Accountant as someone who merely lodges tax returns and activity statements, then you’re missing the mark. The reality is, you can do that yourself (assuming you have the inclination).

You should be seeing your Accountant as a Trusted Advisor. Someone who can work along side you to help you grow your business. Someone who you can bounce ideas off. Someone who can guide you down the right path. Someone who can bring in other professionals to ensure you’re getting the best of everything. That is what your Accountant should be and if he or she is not, then maybe the right relationship does not exist.

So, ask yourself again, how often should I speak to my Accountant?

Can you effectively manage the entire business on your own?

One of the single biggest mistakes business owners make is that they try and do everything themselves.

The reality is, you can’t. At the very least, you shouldn’t.

So, what do you need?


Who can help?

Your own personal chief financial officer (CFO).

What do you do if you don’t have a CFO? Employ one?

Not all businesses can afford the luxury of employing a full-time CFO, particularly, small- to medium-sized businesses. So, what then?

The answer is simple. You employ a virtual CFO.

Now I hear you ask, ‘What is a virtual CFO?’

A virtual CFO is essentially the same as a CFO, but fills the role on a part-time basis for a fraction of the cost of a full-time CFO.

The virtual CFO is your personal financial adviser – someone who becomes the trusted source for financial perspective. Someone you can trust who works closely with you and your business to help you make the right decisions to improve the financial management of your business, and your business’s performance as a result. They act as a sounding board and provide financial sanity to you and your business. In these tough economic times, a virtual CFO will provide you with the valuable insight you need to navigate your way to success.

Your virtual CFO will enable you to take advantage of a level of expertise not previously available to you, which will now enable you to run your operation while knowing that all your financial matters are being taken care of by a highly qualified and experienced adviser.

Outsourcing this part of your business makes perfect sense. If you have a plumbing issue, you hire a plumber. If you need an electrician, you get one. If you want to get fit, you engage a personal trainer. If you want a financially healthy business, you get yourself a virtual CFO.

Doing so will resolve your financial management issues.

You will no longer have to base all your financial business decisions on gut feel. Instead, you will have sound, informed financial advice at your fingertips.

You will no longer have to worry about what the numbers mean in all those financial reports and tax returns. You will have them explained clearly so you understand what they all mean and why they are important.

You will no longer feel like your efforts are not being rewarded financially. You will have the required expertise alongside you to convert your effort into dollars.

If you do it, you will never look back.

Do you have (the right) systems in place to help you manage your business?

Good financial systems need to be in place to help you manage your business.

They will assist in monitoring your financial situation as you move towards your goals, they will ensure you have enough money in the bank to meet your expenses, and will keep you on top of your statutory requirements.

Which systems do you need? At a high level, you will need to look at managing your cash flow, managing your financing and troubleshooting any problems.

Managing cash flow

One of the most important aspects of running a business is to ensure you have adequate cash flow to meet all of your financial obligations. Cash is the lifeblood of your business and ensures you stay afloat. Once you are securely afloat, you can then sail towards your destination. (Maybe with a nice refreshment in hand and the people you care about sitting beside you.)
Unfortunately, most business owners tend to focus on profits rather than cash flow, and this is where most cash flow problems begin.

Put simply, there are two sides to your cash flow:

1. Money you receive from your clients for work performed.
2. Money you pay out to workers, suppliers, the ATO and others.

One of the biggest killers to your business cash flow is slow paying customers. It is great to have lots of customers, however, if they are not paying you on time (or at all), that will make it very difficult for you to pay your bills. Your employees, subcontractors and suppliers must all be paid on time, but if your customers aren’t paying you, where is the money going to come from?

The second silent killer is your commitments to the ATO. Depending on the size of your business, you will have to pay the ATO for your GST and PAYG obligations either monthly or quarterly. Many business owners still continue to overlook this critical obligation. Whether that is because they don’t want to admit they owe anything to the ATO or simply over commit their funds elsewhere, this is a problem. After your workers, the ATO should be your top financial priority. It is one organisation that you do not want to get on the wrong side of.

The third silent killer is over committing expenditure. The way you manage your stock of materials is important. The vast majority of material supplies are readily available and therefore there should be no reason to buy extra ‘just in case’. The same goes for equipment. While we tend to want to have every piece of equipment that we could possibly ever need, that is not a sensible approach, particularly if there are certain items that would just end up sitting in the warehouse gathering dust. In addition to that, we tend to want the best of everything, and sometimes just because ‘the other guys have one’. Neither of these are smart business decisions.

It is possible to be making a profit, yet still experiencing cash flow problems. A simple example is when you are generating sales, which increase your profits, but you are not collecting the money and therefore your sales revenue is not the same as your cash inflow. It goes without saying that it’s no good completing a job if you don’t actually receive the money for it.

Having said that, I am sure you do receive the money at some point in time, but the timing of the receipt is very important. Why? You have financial commitments to make to the ATO, not to mention to your employees, contractors, suppliers and so on. If you are not collecting sales receipts on your agreed terms, then you will find it difficult to meet those commitments and you could potentially find yourself in severe financial difficulty.

Simply, making more money will not solve your problems if cash flow management is the problem. So it’s important to establish strategies to make sure that you have enough cash in the business to operate on a day-to-day basis without facing any sort of cash crisis.

We all want to make things easier and more efficient. In the building game, this has been made possible through innovation in tools, equipment processes and materials, all of which save you time, avoid problems and enable you to achieve more without extra effort. The same is true when it comes to money management – by adopting standard processes and systems in your business, you can save time, save money, solve problems and move towards the lifestyle you want.

Are you aware of and meeting all your statutory obligations?

When it comes to the financial management of your business you need to ensure that all of your statutory compliance is met on time and with complete accuracy. If you don’t, you’ll be hit with penalties, interest and extra costs to fix the problem.

This is even true in areas that you may believe are simple or straightforward, such as hiring contractors versus hiring employees. You may think you know the difference, but do you really? To be considered a contractor, certain criteria need to be met:

• They need to have a certain level of control over the work they are performing on a day-to-day basis.
• They are engaged to produce a specific result.
• They have the right to delegate work.
• They bear the commercial risk and responsibility for their work or injury.
• They provide their own tools, equipment and, in some cases, materials.
• They work for you on an as-needs basis, rather than being an integral part of your business.

They may have an ABN, but that in itself is not enough. They may work for you only 80 per cent of their time, but that is also not enough. They may only work for you for a short period of time, such as two months, but that is still not enough to consider them to be considered a contractor.

So let’s take a look at the main compliance requirements for your business, and how you can ensure you meet them.

Compliance requirements

The main compliance requirements you need to be aware of in a building and property development business include tax, superannuation, workers’ compensation, payroll tax, land tax and stamp duty.

There are a number of tax obligations that every business needs to meet.
The first is your obligation to lodge annual tax returns to the ATO, be they as an individual, partnership, company, trust or self-managed superannuation fund.
The second is your obligation to lodge monthly or quarterly activity statements. Activity statements account for your goods and services tax (GST), your pay as you go (PAYG) withholding and your PAYG instalments. The frequency of your activity statements will depend on the turnover of your business (for GST) and the level of your payroll (PAYG). Irrespective of the frequency, the obligation remains the same: lodgement must take place.
Lodging your annual tax return and your monthly or quarterly activity statements can be managed with minimal effort using cloud accounting tools – a must for businesses in today’s commercial world. It not only helps with lodging on time, but also making sure you’ve reported accurately.

The next compliance issue relates to your labour force – superannuation.
The superannuation guarantee scheme requires you to provide a minimum level of superannuation for your employees, currently being 9.5 per cent of their gross pay. If you don’t pay the required minimum, you will be liable to pay a non-deductible superannuation guarantee charge, which is made up of the superannuation shortfall (the super you should have paid) plus nominal interest of ten per cent plus an administration charge of $20 per quarter per employee.

Workers’ compensation
A requirement from day one of employing a labour force is to ensure that they are covered for any injury caused relating to their employment with your business.
Workers’ compensation applies in a similar manner to superannuation. If the labour, be it under an employee relationship or as a permanent or semi-permanent subcontractor, is considered to be an employee relationship in the eyes of the industrial relations and tax law regime, then workers’ compensation is required to be paid.

In summary, there are many statutory compliance obligations placed upon you in your building and property development business. Being aware of these is the first step. Being set up to account for these is the second. Knowledge is power but management is success.

What should you be thinking about when it comes to the structure of your business?

So how do you know which structure you need?

There are a number of factors to consider when choosing a structure. Some of the key ones are as follows:

Asset protection – The first consideration when choosing your business structure is how you can best protect your personal assets, like your home, your car and so on. Running a business can make your personal assets vulnerable in a number of ways – should you ever get sued by a client, partner or supplier; when you need to borrow money from a bank or other trading partners; and should something happen to you as the owner.

Tax minimisation – When it comes to structuring your business to minimise tax, there are two areas to consider – your business’s taxable income and any potential for Capital Gains Tax (CGT). If your business derives a taxable income, then minimising income tax will be an important factor when choosing your business structure. If your business derives income that is considered capital, then planning to minimise CGT is important. Income that would be considered capital is the profit made when you sell an asset.

Control – Ownership and control are not the same thing. It is important you understand the difference and how it may impact you moving forward. Control is when a person, or group of people, have a controlling interest (more than 50 per cent) across two or more businesses. Control is not limited by the type of structure that you operate in, meaning the different businesses could be operated as a sole trader, partnership, trust or company.

Active or passive income – The type of income you earn will also influence your structure, and is linked to the tax minimisation strategies you use. Your income might be active, passive or both. Active income comes from a trading business, such as a building company, while passive income comes from investment activities, like having an investment property that earns rental income.

Cost – All structures will incur a cost, whether that is the cost of setting up the structure, registrations, ongoing renewals and the cost of tax and accounting. Generally, the more complex the structure, the higher the cost will be to set it up and maintain.

Ease of administration – A complex structure that involves various layers will have more compliance issues attached to it, than a simpler structure. Unfortunately, there is no one-structure-fits-all-scenario. Therefore, your particular circumstances need to be taken into account. Trading businesses generating income are best kept simple. Remember, the KISS (Keep It Simple Stupid) philosophy.

Adaptability – Having a structure that can provide flexibility can be of great assistance as your business grows and changes. Changing market conditions and changing legislative provisions can require that a structure be altered, whether in a small way or completely.

Succession planning – None of us like to think of a time when we won’t be around anymore, but this needs to be considered up front so you can plan for it effectively. Whether you plan to sell your business on your retirement, leave your share to your partners or hand it on to your children will influence the type of structure you choose. It’s also important to consider what you would like to happen should you pass away while you are still holding the reins. You need to consider who will control the income and assets of the structure and how this control could be changed, if required.

Generally, the structure should take care of itself, as long as all the factors have been considered. So let’s take a closer look at those factors.