The Five Key Numbers you should check regularly in your Financials

We are often asked which are the most important numbers to focus on in the financial statements.

So, we’ve put together a list of the Top 5 Numbers to check regularly in your financials.

In our opinion, even though your financial statements are full of numbers, there are FIVE super important ones which you need to check on a regular basis. This will ensure your business is on track and profitable. If these numbers are off a bit, or outside expectations, by checking them regularly, you have time to put in place the necessary adjustments to get them back on track.

1. Sales.

   Check the level of sales you are making. Sales of last month, last quarter and year to date. It’s best to compare this to your budget, to see if you’re tracking in line with your plans.

2. Cost Of Goods Sold.

   This is one of the critical numbers for a business that buys goods in, converts them and sells them. It’s a measure of how well you trade. Show this as a % of Sales to get the most meaning. Important to track this over time and definitely compare to budget, or benchmark.

3. Wages %

   Wages as a % of Sales, shows the proportion of sales spent on wages. As one of your biggest expenses, it shows how effective your team is. Keep a close eye on this %.

4. Net Profit.

   You need to make a profit to survive. So, monitor Net Profit each month, quarter and year to date. Compare this against your budget. Is there a profit? Is it enough?

5. Current Liabilities.

   This shows how much you owe suppliers. Include Tax and Super in this to get a realistic figure. Your ability to pay your bills is a key indicator of the financial strength of your business.

These are the key numbers to check regularly. If you’re not happy with any of them, look for ways to improve them.

Let me know if you need a hand.

Peter

Is it a good idea to buy a Poolwerx franchise?

Are you thinking of buying a Poolwerx franchise?

This might be a really good time to consider it.

With COVID restrictions impacting people’s travel plans, more people are staying at home.
And with summer here, we know pools will be getting a lot of attention.

A Poolwerx franchise is a well developed franchise model. In fact, they have a development plan for you as the franchise owner.

In the Poolwerx franchise model, you typically start out as a ‘man in a van’ to get to know the business. This helps you learn how the technical side of the business works and lets you build your customer base at the same time.

Then as it grows, the model is that you take on another van, with a technician in the second van. So, that means you have two vans on the road. Fully signwritten, which means you’re getting twice the amount of visibility in your territory.

The plan then provides for a retail store after a few years. A sensible growth path, building your business and asset base along the way. It’s not too aggressive and gives you the chance to build your business in a sensible manner.

The Poolwerx franchise gives you flexibility with this plan. You are not forced to go with the above plan. They will fit the plan to you. This means there will be franchisees who will be happy enough just staying with one van.

I't’s important to find the franchise model which best suits your skill set and ambitions.

Areas to check:

• The obvious downside of a pool business is the seasonality, so you need to clarify what happens over winter?

• What does Poolwerx suggest you do during the quiet months?

• Territory size, are there limits to your growth, or can you keep expanding?

• Training, what’s covered, how long is it, is it on site or on line?

• Ongoing skills development for the franchisees. Retail requires a different set of skills to the ‘man in a van’, so how is that dealt with?

• What ongoing support is provided?

• What’s included in the total costs?

And of course, have the numbers checked out before you commit buy with a Pre-purchase Review. This is one of the most important elements of your due diligence. You need to be sure the numbers stack up. You will be making a significant investment so you want to be sure of the financial position.

Let me know if you need a hand.

Peter

Tax Scams: What to watch out for

Scams are so much a part of Australian life that there’s an official site to help you identify and report scams. Even so, plenty of people still get caught out and end up losing money to scammers.

For instance, in early 2021, the ATO warned about a new scam that involves a robo-call impersonating the ATO with a pre-recorded message informing a target that their TFN has been suspended following suspected fraudulent activity. The victim is then persuaded to transfer money from their bank account to a fake ATO holding account to “protect” their funds.

(Yes, that’s a scam that is set up to protect you from a scam. Sneaky!)

And yes, people do fall for them! In early February 2021, one person lost $36,000 to the scammers.

Know how the ATO communicates. It can save you from tax-scams.

Tips to keep you safe from tax-scams

The simplest way to stay safe is to understand the way the ATO communicates with taxpayers. It’s very different from the scammers.

The ATO does call taxpayers. But note that they will never:

• send unsolicited pre-recorded phone messages

• use aggressive or rude behaviour, or threaten you with immediate arrest, jail or deportation

• suspend your Tax File Number

• request direct transfers of money to a personal bank account

• project their number onto your caller ID (ATO calls are always No Caller ID)

You may also receive genuine reminder texts from the ATO, for instance when a BAS is due. However, these don’t include links.

It’s also wise to make yourself aware of the types of scams, so you have more chance of spotting them. The best source is the ACCC Scamwatch Site.

What to do if you receive a suspected tax-scam call

Don’t hand over any money. Remember, the ATO will never request direct transfers of money to a personal bank account.

If you have a genuine concern about your status with the ATO, check with your accountant. We receive ATO correspondence and can access your ATO information. If needed, we can call them on your behalf.

Report the scam. You can do this via the ATO Website or the ATO App.

What if you’ve fallen victim to a scam

If you have handed over to a scammer sensitive personal identifying information, contact the ATO

If you have handed over financial details, contact you bank.

If you have paid money into a scammer’s bank account, contact that bank.

Directors' Loans: How to get your money back

What happens when you need the money you invested in your franchise?

Remember that money you put into your business to get it started? How are you going with getting that money back into your personal bank account?

Unfortunately, many franchise owners forget about their loan to the business. For some, perhaps, there never seems to be enough money in the bank to repay the loan. Others may see the amount shown on their Balance Sheet, but aren’t sure what it is and what to do about it.

But the fact remains that the director’s loan is your money and one of your business goals should be for the business to repay the loan.

What are the steps involved in repaying your director’s loan?

1. Find out the balance of your directors loan account: Look on the financial statements prepared by your accountant at the end of last financial year. You will see the Director’s Loan in the liabilities area.

2. Decide how quickly you would like to repay the debt: The quicker you want the money back, the more profit you’ll need to make each year. The main driver of profit in a franchise is almost always sales, so the faster you want your money back, the higher your sales target will be.

3. Work out how much extra revenue is needed to repay the debt: To do this you’ll need to calculate a revised breakeven sales figure for your business, and include in it both your regular wages and loan repayment. If you’re not sure how to calculate breakeven, ask your accountant.

4. Write out your target for directors loan repayment: Your target is all about ‘how much’ and ‘by when’. You can’t afford to be vague about important business goals!

5. Establish a plan to increase revenue: It’s important to ask your franchisor for help but don’t neglect your own responsibility to work on increasing sales revenue. You can learn about how to sell more from business books, listening to podcasts, or attending courses.

6. Work the plan: Once you have a plan, the next step is to work it. This means diligently implementing the parts of the plan. But not only that … it’s important to check your progress and adapt as you go. You may find it helpful to work on this with a coach or accountability buddy.

7. Check in with your accountant: There will be tax implications from repaying your directors loan, and your accountant is likely to have recommendations as to the most appropriate way to take money out of the business. So, it’s a very good idea to book a meeting with your accountant to discuss the best way to repay your directors loan account.

With a well defined plan and support to implement it, you can find a way to repay your own loan to your business. This will put money back into your personal bank account, and you can then decide how best to invest that money.