If you commissioned a builder to construct you a home, you’d probably think it was very strange if they started with the roof first. Or ordered the blinds before they’d designed the walls and windows. But every small business accountant has probably come across clients who have focused most on things like advertising and least on fundamentals like structuring a business.
The reality is a business that has a fabulous logo and catchy slogan that doesn’t have the right financial, governance and administrative structures is like a house without a frame or foundation. It’s really not going to weather the storms of the marketplace terribly well.
As small business accountants, another problem we often see when a business has been put together without enough attention on the nuts and bolts is it can take over most of the owner’s life. Instead of working to live, someone is living to work, and everything else including time with family, friends and even sleep comes second.
The good news is, it’s never too late to start improving things, even if you’ve been in business for years.
It’s a bit like when planning a house you will first decide where you want it to be built, and what you want the house to generally look like. Inner city, outer suburbs or on acreage? One storey or two? Townhouse, villa or Federation style? Brick or weatherboard?
Similarly with your business, where do you want to have offices or shopfronts? How many staff would you like to have? How big do you want your customer base to be? Local, national or international? Will you have an online service offering or will your business be all face-to-face and hands-on?
Next, when structuring a business, you need to get real with the vision which includes finding the right people to help you build it. That means not only finding the right staff and suppliers, but also the right small business accountant who can help with all your financial and administrative needs.
These include not only the routine matters around tax and GST and any financial reporting, but also informed advice on the fundamental framework of your business. For example, have you thought about what kind of business structure will work best for you now and into the future? Are you keen to be and stay a sole trader? Looking at a partnership? Hoping to become a publicly-listed company? Each of these models has its own specific legal, financial and administrative benefits and obligations.
Your small business accounting partner can also advise you on ensuring the right financial balance for your business and personal financial affairs. Quite often we see clients who have great balance sheets for the business but extremely high personal loan and mortgage obligations.
This is both stressful and possibly not the most effective way to manage credit and liquidity. If your small business accountant asks the right questions about both your business finances and your personal finances, they can advise you on how to structure things so you have better work-life balance not only in terms of time outside the office, but also in terms of the dollars and cents balance between your business’s books and your personal balance sheet.
To learn more about business structuring and whether you’ve got the right structure for your business, download our free eBook: Your Money, Your Choice – Get Advice today.