Sweet tips to simplify your accounting. EP #120 - Michael Wark

accounting podcast systems Oct 01, 2020
 

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Today we have Michael Wark in the studio. Michael Wark is a charted accountant who is anything but your garden variety accountant. For starters, he's a surfer dude who's rubbed shoulders (and worked with) with movie stars such as Angelina Jolie and movie producer Ridley Scott. Michael's also made a few films himself, but his real gift is numbers. Today, Michael reveals a few tricks of the trade that will help you get a handle on the numbers in your business.

Here's a sneak peek at what you'll hear:

  • The 3 most important numbers to know in your business. If you don't know these numbers, well... good luck. - 5:07
     
  • The single most ignored numbers in accounting. (Show me a business owner who's ignoring these numbers and I'll show you a business owner who's about to run their business into the ground. - 5:20)
     
  • Sweet tips on simplify your accounting. - 5:45
     
  • When it's smart to buy equipment for your business and when it's criminally stupid. Sadly, many people in the video production industry (especially camera guys) are buying equipment at the wrong time and for the wrong reason. Here's why... - 9:25
     
  • Why focusing on paying less tax screws with peoples' heads and ultimately their business's bottom line.  (And... what you should focus on instead. - 10:30)
     
  • How today's more simplified accounting software is hurting the average business owner. - 12:15
     
  • Why charging your personal expenses through your business is far worse than you ever imagined. - 13:05
     
  • The case for outsourcing your bookkeeping. (Are you doing your own books? You might change your mind after you hear this. - 14:10)
     
  • Why trusting your “gut” in business without the numbers is foolhardy. - 17:00
  • The single biggest blind spot for people who do their own books. Listen up at 20:50
  • critical things to know once you've done your bank reconciliations and coding. - 21:00
     
  • A little-known cash flow accounting system that can help transform any business from a cash-eating monster to a cash-making machine. - 24:40
     
  • How learning to do a basic cash flow forecast can save your "financial" arse. - 27:30
     
  • Leasing or buying - what's best? Hear Michael's answer at 29:50


About Michael Wark

Michael is a qualified Chartered Accountant and passionate to help entrepreneurs’ level up their approach to finances and grow profitable businesses that make a positive impact in the world. 

This starts with bringing clear steps to better understand their numbers, empowering owners to smash their financial goals, and ultimately provide the freedom they deserve.

Connect with Den on LinkedIn https://www.linkedin.com/in/denlennie/

Connect with Michael Wark on LinkedIn
https://www.linkedin.com/in/michael-wark-18627628/
Get more great resources over at https://www.denlennie.com/ 

 

Episode Transcription

 

Den Lennie (0s):
Hey guys, Den Lennie here host of the How to Scale a Video Business podcast and today we're talking finance. Now, before you switch off and go out God financing, we are talking to Michael Wark is a qualified accountant and is passionate about helping entrepreneurs level up their approach to finances and grow a profitable businesses and make a positive impact in the world. Now what's interesting about Michael's he used to work in feature films and then watch, there are some pretty big projects. What's interesting is translating those big financial decisions on a feature film down into your small business.

Den Lennie (35s):
And this starts with bringing in clear steps in to play to better understand your numbers and empower you to smash your financial goals and ultimately get the freedom that you deserve. So what we discuss on today's show is what are the three key reports you should be keeping an eye on every month. Some of the benefits of not doing you're on bookkeeping and an important lesson on Why spending money on gear is not necessarily the most effective or efficient thing to do in your business.

Den Lennie (1m 8s):
So I'm sure you're really going to enjoy the short. Please make sure to subscribe over an iTunes or the app that you can use. And it would be just awesome. If you could leave us a review on a rating on the platform of your choice, let's get started with the show just before we get started. I just stumbled across this article about you're on the Ben and Jerry's website that just happened, and that you spent some time working in the film industry before we get stuck into the real kind of nuts and bolts of finance. Tell us a bit about that because that's obviously very relevant to this audience.

Michael Wark (1m 42s):
Yeah, I did look on produced a couple of short films actually, and I worked on a bunch of bigger Hollywood Productions. I kind of got into it over in London and worked for a production company called working title. We had some great experiences they're and got exposure of some really cool films are cool. People are over there and came back and worked on a few Productions that we are shooting here in Australia. So a, I worked on, on broken, which was a film Angelina Jolie's directed and worked on an alien covenant, which really Scott was out here directing. So I got to be involved in some of these bigger films and it was, it was fascinating to see all that.

Michael Wark (2m 18s):
So on an, on those, I was working in the finance team. So I was kind of working in the, in the finance function of these bigger Productions. So yeah, yeah. We spend a bit of time in that world and I love it. Yeah.

Den Lennie (2m 28s):
And of course, you know, its called the film business because it's actually all about business. And I would imagine these things are uncommon, quite a corporate Wei. And I suppose where what I love this, this lovely segue is a small video production companies who are creating their own Productions, who are doing corporate often can get very caught up in the creative, but I guess on a feature from it, you guys are keeping the whole thing running because your keeping a track of payroll and cash flow in finance, how does that relate to the small business owner? Because the principles or the same monthly, you know, if you've run it as a cash in the small business, you've had it, I guess it's the same for a few of them and you, you don't have a bottomless pit.

Den Lennie (3m 6s):
So I guess its a, its I'd love to just because of you share a little bit about the process of why it's so important to keep track of numbers, even then a creative business, probably more so

Michael Wark (3m 18s):
I think its probably more so we created this because as this is a nature with delivering the creative process there's iteration's and there is no definitive finished line or it depends on when people agree that the product is ready. Mmm. So making sure that these things are budgeted and measured and we know how much a string we have to play with, I think is really, really crucial in, in helping you to manage these projects and make sure that each project is profitable and that you're not losing money or spending too much time in one area or another because that that's eating into your overall, you know, week and you can't serve other people with that time.

Michael Wark (3m 56s):
So I think, you know, the principles of the bigger film production world, which is managing budgets, but it's just, there's a few or zeros on the end of those. It, it, it still works good money management and keeping on top of these things, it's still, the concepts still apply from the beginning of town through to manage your own smaller production. Definitely. So yeah,

Den Lennie (4m 16s):
Let's talk about the smaller end of 10 because I love that analogy of just adding more zero and the guests has more people and more and more room for error, but in a smaller business, isn't their just as much room for error in that if you are not paying attention to the numbers, I love the analogy of a dashboard and you're driving a car, you buy the dashboard and you got a fuel gauge and a speed or mutter. And you know, you can look ahead and see where your going, but if you don't keep an eye on the fuel tank, you could run a, a few days before you get to your destination. And I guess that's the same in accounting, isn't it?

Den Lennie (4m 48s):
That's it it's the same principles of, of the dashboard and actually knowing not just what your profit and losses, but what your cash flow movements are.

Michael Wark (4m 57s):
Yeah, yeah, absolutely. Absolutely. Yeah. The driving the car analogy is a, is a great one that really helps you understand it. Clearly. It it's a crucial part of it. So you mentioned a couple of things there, but obviously managing your cashflow is a really crucial part of it. There's probably three important documents, even for small business owners. Umm, there's a balance sheet, there's a profit and loss. And then there's a cashflow forecasts, which I think is probably the one that some small business owners may be ignoring, but that is really, really important.

Michael Wark (5m 29s):
And that can be a rough one then that can just be tracking what jobs you have coming up. But you need to be seeing what cash is going to be coming in the door for the next 12 months and what some of those expenses associated with that might be. So it's, it all starts with getting quality data and having, you know, using cloud accounting software that to have stuff all in one place I'm and then working out what the right metrics are for your business that you should be looking at. And it doesn't need to be complicated, can be just one or two numbers and at least spending a little bit of time to understand the basics of those reports and then using those to help you make decisions in your business.

Den Lennie  (6m 6s):
Well, I think, you know, for the, from the point of view of just let's assume someone listens to this, hasn't got very good handle on the accounts and you talk about the balance sheet cash flow forecast and the P and L I think most small business owners understand a profit and loss. They're like, I know when I was sort of starting at my 11 years ago, it was like, wow. As long as we've got more money being billed than we're putting out, we should be good. But can you give me just explain those three different reports and, and why they're important?

Michael Wark (6m 36s):
Yeah, absolutely. So the PNL, most entrepreneurs will be familiar with that's the first one we check usually the, the number of ride at the top, which as your top line revenue in that is how you gauge your businesses success. What's also really important and that I work with clients on his to become efficient at delivering your services. So there's more money leftover at the end of the week or at the end of the month. And that's your profit because it doesn't matter how much you sell your services for. If it's costing you more to deliver them, you have no profit at the end of the month are awake to help reinvest into the business, invest in your growth or take home as a reward as far as the shareholder.

Michael Wark (7m 15s):
So you pay an El is really important. Most people will know that you want more revenue. If you try and minimize your expenses will be really efficient with your expenses to in order to scale it and get a little bank. So that's kind of a, a snapshot of how your business has performed over a set period of time. Your balance sheet is more, ah, this is where your assets lie and its kind of a snapshot of the value of your business at a certain date. And he said, I'll have all your assets like your cash and you no equipment, things like that will sit there.

Michael Wark (7m 45s):
So we'll also any liabilities. Maybe you could have got a loan or things like that. And that kind of shows the net value as a shareholder in their as well. So P and L was probably the one that people look at operationally and, and work out how they're going week to week, month to month. And then the balance. Shane is also a key part of that as well. And then the cash flow forecast that is a more of like a forward-looking statement. And so the balance sheet and panel will tell you what's happened in the past or how things have gone. And the cash flow forecast is then turning that around and looking into the future with a lens and trying to predict or best guess what might be coming up to help you plan for the future and potentially change cause of action.

Michael Wark (8m 25s):
You, things are looking a little bit tough and you might be running out of cash in a few months. You can then make some adjustments.

Den Lennie (8m 33s):
One of the common, if you like Chinese whispers in the video production community, especially amongst the freelance camera, man is umm, if you make some good money on a job, best thing to do is buy some equipment because then you don't have to pay tax. And, and this is something that has been, I've lived in the UK and Australia. I hear it kind of disturbing me because oftentimes people who are gonna spend a large amount of cash flow, let's call it a $10,000 computer.

Den Lennie (9m 5s):
They're going to spend $10,000 on the computer because they think, well, if I've got that computer as an asset, I'll need it. I don't have to pay tax. What is wrong with that approach?

Michael Wark (9m 13s):
Yeah, that approach that, that entity, that's a really big when you've used to be doing that, essentially what's wrong with that is that you will spending a hundred bucks to save $30 on tax, but you still having to spend a hundred dollars and removing that from the business that you could be spending in a much smarter way to help you grow or actually to contribute to revenue. Now there's an argument to be made for our cameraman.

Michael Wark (9m 43s):
If he's, he has a valuable way to charge out that, get on the next job and he can get a camera rental on that that becomes an income producing asset and potentially could be a good investment because you're getting a return on it. But if your just upgrading your MacBook pro, because you would want the shiny new object, that's not really going to contribute to your revenue in any meaningful way. And that is, as you said, removing cash from the business that could be used it much more productive wise. So that mindset is definitely the wrong one. And it is very common, but spending a hundred bucks to save $30, you still spend that a hundred that could be used in other ways.

Michael Wark (10m 21s):
So the why, or try and talk it through with my clients is that having a profit of the end of the date is a good thing. That's a sign of a healthy business and you can't grow sustainably by just breaking even by at the end of tax, you know, coming up to the end of tax time, buying a bunch of gear and then feeling lucky to have kind of one the gain because you have know tax to pay that is, there's not a long term sustainable solution and you should be trying to run a profitable business that pays yourself a good wage, but also its has got some money left over for, you know, to, for future growth and things like that.

Michael Wark (10m 56s):
So it's a common one, but its definitely not the right way to do it. Well,

Den Lennie (11m 0s):
That leads me to my next point at which is so often filmmaker's in my experience goes on to forums and Facebook groups too, kind of share and ask advice with, from each other on how they should bash on the business. And something else that I've come up against at a surprising amount of times is when I meet a business owner and we start talking about moving some coaching, I'm like, okay, so who does your books? And the number of people who say, Oh I've got zero. I just did it in myself. Only takes me 15 minutes a day.

Den Lennie (11m 32s):
And that is something else that there, the very first person that I hired back in 2011, when I started my business was a bookkeeper because well let, let me ask the question. Why as hiring a bookkeeper or bookkeeping services so valuable because they think a lot of people would just see it as idle, want to pee out for the service when I can do it myself because the software makes it again. Can you share some insights from your experience on why that's perhaps not the most sensible way to look at this?

Michael Wark (12m 3s):
Yeah, I mean, I mean we, a lot of them will come through the door to be ninjas who have tried it out themselves that may not have had enough of an understanding around the mechanics of accounting. Zero is quite easy to use. But allocating things and the right way to give you some meaningful data to help you make a better decision in the future is a whole set of this is a whole nother set of kind of problems. So umm, people will come to us usually to outsource a problem because they don't wanna have to think about it and they wanna focus on running their business.

Michael Wark (12m 35s):
But also we get people coming in the door who've made a complete mess of it and they can't even use what they've got in zero and they're the validated things to the wrong place. And that doesn't actually, it gets them into a more complicated spot than if they just did nothing and then did a catch up job later on. So some like some of the common problems we see with people trying to do it themselves, they might be feeding all their personal expenses through their business. I think they kind of gaming the system again. You don't get a real snapshot of how you business is doing an actually if you're charging enough to your services because its kind of a convoluted with a bunch of stuff that's not relevant to your business.

Michael Wark (13m 14s):
So that's probably one, but you don't get the visibility you need. If it's a sole trader or you know, a freelancer just starting out so that you don't have any, any staff or kind of subcontractors, making sure your paying yourself a set wage to help kind of manage that cashflow over time and that will help bring some stability. And when you're running your profit and loss to see how you're going once a month. So rather than taking out a bunch of funds, when your feeling rich and going broke for the next few months. So that's probably another really important one doing it yourself.

Michael Wark (13m 46s):
You may forget about your tax obligations. So if you're charging GST, making sure you are putting aside funds for that and also your income tax obligations. So putting aside funds at the end of you, that's a huge one. And especially for freelancers who are on, on a payroll kind of system, you get a big chunk of change, but you need to be putting aside stuff for income taxes. So that end of year surprise can be a real painful one for some people.

Den Lennie (14m 14s):
Sorry, go on.

Michael Wark (14m 15s):
Yeah, that, that that's a few examples of people who've come in the door maybe and try to do it themselves. Some of the problems they face, all things there may not consider when, when, when trying to do it themselves. So

Den Lennie (14m 27s):
I guess, I guess the analogy would be, umm, I know this is something that greats most filmmakers when, when people call him up and say, Oh wait, we've shot this footage herself. Can you kind of come in and just fix it for us? Or a final cut pro or Adobe premier. It's a piece of software that's fairly inexpensive to access. And they pretty much anyone with a couple of hours on YouTube can figure out how to make the mechanics. But if you're a talented editor, it's the craft of editing and knowing how to stitch the story together is where the real skill is.

Den Lennie (14m 59s):
And I guess that's what your seeing about Bean Ninjas as you guys are, are there to help, not just understand that the software, but you understand the counting, you understand how to present numbers. And I guess for me, the thing about great bookkeeping and accounting has always been that you, you can sleep easier at night because you know exactly what your liabilities are as opposed to coming to the end of the financial year, everyone has scrambles around and they look at their top lane and they go, well, you need to spend some of this money because if I don't want to pay tax, of course that's only the first, the first hole to fall into, isn't it?

Michael Wark (15m 32s):
Yeah, absolutely. I guess it depends what you want out of your numbers. If you okay. With just a cursory kind of top line idea about what you're doing and that's enough for you, then it, maybe it's not necessarily, but if you want to be actually getting some value from them and maybe you want to be tracking how profitable certain jobs or certain clients are to help you work out further down the line, do I want to work with them again? Or is that not really a profitable service I'm delivering, those are the kinds of insights you could get from good bookkeeping. You can't necessarily get from your gut instinct.

Michael Wark (16m 4s):
So it depends kind of what kind of value you're looking for from the numbers. If you are trying to use is to actually help you improve your business, we'll make decisions about the right job, how much you should be pricing that job, things like that, tracking your overruns that can really help by having good data, which comes from regular bookkeeping. But yeah, I guess it depends how much you want out of it.

Den Lennie (16m 28s):
Yup. So what other advice would you give to a small video production company who perhaps has been running their own books for a while? What are some of the steps you would recommend the tech to, to make the turn that into something that's gonna be very valuable?

Michael Wark (16m 46s):
So do you mean in terms of like their, their running, their bookkeeping and, and things that I should be considering to help improve? Or what do you mean by that?

Den Lennie (16m 53s):
Yeah, I mean, I think so, but more so like I guess I, a big advocate of outsourcing, you know, outsource that process. If someone with knowledge, maybe a better question is why would someone, why would you recommend someone looks at a service like yours as opposed to trying to figure it out themselves? And I guess they're the reason I'm asking these questions, sorry. If the confusion is, is that filmmakers tend to try and do things themselves because they think AR, but I do it myself. It will save me money or I can keep more of the profit.

Den Lennie (17m 26s):
And I think that the problem with that is, is it too much of a lack mindset where to much like a freelance sole trader mindset, I think to, to speak to a week or two, what you are seeing about scaling and, and, and actually thinking about the future and growth. What, what a, what are some of the reasons if someone is sitting here thinking, Oh, you know, I just want to pay someone, you know, what a fee every month to do my books when I can do the month. I'm not that busy, I guess what would be some of the reasons you would suggest not to do that?

Michael Wark (17m 57s):
I mean, the opportunity costs are you having to learn and perform that and your business is probably not the correct use of your own resources. You'd be a specialist in, in whatever craft that you're specializing in editing, you know, DOP, whatever that, whatever that is, you should be charging that out as an hourly, right, and getting paid 600 bucks an hour, not in the trenches, doing bookkeeping when you get our source code for a lot less, it was probably the opportunity cost at the time. It's the potential to make a mistake.

Michael Wark (18m 29s):
And that might come back to haunt you a tax time and things like that. It's the lack of clarity over what these numbers mean and having that kind of person who would tell you what they mean and how you can improve them. So to give you that kind of value added performance based aspect of, of how the business is going and also long term, your not going to be doing it in your business. So if you want to grow and develop your gonna need to get used to not waring all of the hat's in our business and making sure you got an expert in each of the different seats, so you can focus on what you could at in the business and then let the other people take care of the rest, which frees you up.

Michael Wark (19m 5s):
Then your brain up to five years on the key tasks for, and if someone just starting out, it does make sense. Maybe if, if you don't have a lot of cash flow to try and manage it yourself. But once there is a little bit, a bit of momentum in the business, it's usually a service that most people feel pretty comfortable outsourcing these days, to be honest.

Den Lennie (19m 24s):
And then just because I think some people who are confused by bookkeeping and accounting, I mean, bookkeeping is more than just tracking data is. And it's about imputing. That data correctly is about making sure that you can interpret those numbers that the end of each month, what are some of the things that you can, I guess, predict from looking at a set of accounts on a monthly basis, rather than waiting till the end of the financial year, handing over a box of receipts to your accountant.

Den Lennie (19m 56s):
And thank you for helping with their fingers crossed that there's, there is like, you know, there's got to be some, some money left over.

Michael Wark (20m 4s):
Yeah. I mean, yeah. I mean the big one for the smaller-sized businesses will be keeping a track your expenses and making sure over time, these things are fluctuating to much out of line with what your revenues were bringing in. So we've been able to keep them a solid track of, of what it's costing you to run your business is probably a big one. Obviously the tracking the revenue and making sure you're on track with that. But that's an obvious one that most people we'll do regardless of our bookkeeping or not. So it's about having for us, for me, bookkeeping is about using the right accounting system.

Michael Wark (20m 37s):
So we use zero making sure you are plugged in your bank accounts, doing the coding consistently to each of the different expenses and doing it on a regular basis as well, doing it every two weeks or a month to make sure that you're getting that reporting. So you actually looking at those reports is probably the big blind spot is peak for people to doing it themselves as they may do the bank reconciliations and code everything. And then they close it up because its done and they don't actually try and take that next step in the reporting and say how much cash I ever got in my bank? What are my sales looking like coming up?

Michael Wark (21m 8s):
Am I going to run out of cash? Do you have any sales I'm and then doing some things about looking at what your experience management is as well. So those are probably some key basic things that having a set of reports that you can look at might help you with. And then there's a more detailed analysis depending on the business structure and working out, as I mentioned earlier, like which jobs are profitable, which clients are profitable and more detailed, things like that as well.

Den Lennie (21m 34s):
You know, it always blows my mind that I have some really good friends who are pretty, pretty talented and, and are doing, you know, we have mid-six figures. And when I say I was thinking it's is like, yeah, it's pretty cool. What are we producing? Alright. I said, are, are you, Hey, how are you, how are you tracking your numbers? They were like, Oh, I dunno, kind of around about it, you know, to 5,302. And like they've got absolutely no idea. And, and this, this was a friend of mine recently. He just won a big job and, and, and went out and spent 20 grand, have it on a camera just as a kind of like, well, you know, that, that, that mentality have spend the money quick before the taxman gets it.

Den Lennie (22m 15s):
And no, these, these 10 people have had issue with the, with the tax office and the past because they get a surprise. And I guess the analogy there is that I know so many stories of videographers, small production companies who just ignore it. And I just, I don't know how to, I guess, what are the reasons I wanted to get you on the show is because I think it's such a, such an important subject that, I mean, having a good bookkeeper who has saved me hundreds of thousands of dollars over the years, because it, you see it, it's avoiding those as well.

Michael Wark (22m 51s):
Hmm.

Den Lennie (22m 52s):
What does that mean? What does it, what is it a monthly report to tell you about your business that is really useful for forward planning?

Michael Wark (23m 1s):
It's going to tell you how sustainable is that Business and, and what are the key areas you need to be keeping an eye on? So making sure you're looking at the trends over time. So when I, when I run a set of reports for a client, I'll be not looking at not just this month, but I'll be looking at the past eight months, nine months, depending on the year. And then we have a look at it as a percentage, how are these numbers moving up or down? So if someone runs one of these reports for just this month of may not add a huge amount of value to them, I would suggest run it with a comparative period, going back in time to see how these numbers are moving over time and analyzing the trends of how these things are moving is going to tell you a little more information that you're business.

Michael Wark (23m 48s):
And that will help me. That will be an early warning signal. If things are trending in the wrong way, if your revenues trending down, but your expenses are up, you need to address that and you need to look at why that's happening. So being able to see the movement of trends and your data going back in time will help you predict what's going to happen in the future and then take evasive action. Maybe it depends on what or what level of Business they are. So if your friends are running a team with staff and managing staff and payroll, that's a whole other kettle of fish, maybe if he's on his own or just doing those kinds of figures and these kind of manageable, because perhaps they can really reduce the expenses when he needs two.

Michael Wark (24m 26s):
And when she needs two, in order to get through these periods for one on one is really handy strategy that a lot of our clients are using at the moment is something called profit first, which is a cashflow management strategy. So this might be a nice midway point that people may be not ready for reporting, but wanting to kind of bet a budget and their business and profit first, basically get you to split up things into different buckets in a different bank accounts, and you split it up into income or profit on an, his compensation tax on operating expenses.

Michael Wark (24m 58s):
So breaks it up for the key areas or of your business. And then you allocate at a certain percentage for you to each of those key buckets, which are the main things that you need to be looking after it in your business. And that helps you to put aside funds for a tax put aside, funds the pay yourself. And then the way what you have left over is the operating expenses you've gotta play with. And then you can decide if I, if you can buy that 20 grand camera or because sometimes you, you can afford it. Or sometimes you can't that quite often, if you, by the 20 here on camera and then people will come in in the door to us and say, I've got an ATO payment plan bill, and I need to pay back to the government 30 grand from last year's taxes.

Michael Wark (25m 36s):
And then they've got these debt that's weighing over there. So you just need to be aware of your future financial commitments and not just how you did this month.

Den Lennie (25m 45s):
Yeah. And I think cam the other thing that I have been doing for quite a little while though, is every month I go through my expenses line by line, because I think especially in video production space in, in the kind of small, you know, one man band, maybe to team up to half a million dollars, they're there are, there are lots of hidden expenses in video production ever since Adobe move to a subscription model. There are so many services. They are, you know, $49 a month, $97 a month to $97 a month.

Den Lennie (26m 18s):
And those things can really start to add up. And, and I, I go through Andy and every month look at what are we still paying for and are we still using it? And I find that that's a really beneficial process. Is that something that you guys recommend it? And what other kind of things do you recommend people doing a monthly basis to kind of just make sure that actually reading the data and the report, not just simply pressing, reconciling then looking at a profit and loss sheet yeah.

Michael Wark (26m 44s):
Doing in a space analysis, that's what it would help. I think adding that extra element of the cash flow forecast helps address a lot of these problems and it brings a hell of a lot of value. There's fairly simple templates. You can get online to help you do a cashflow forecast, but basically it lets you run your daughter in your reports from how you're been going over the past six months. And then you're trying to predict that how you will go over the next few months. And part of that process is predicting out of your expenses for the next six months. And you have to enter them line by line, which is naturally lets you examine actually, do I need all of these?

Michael Wark (27m 19s):
Cause you can see your expenses, those subscriptions stretching out in time for the next 12 months and you start to realize it actually that's a lot of money over the next 12 months. If I'm still paying for this and you see the power of reducing these things now to save money into the future. And the forecast also plugs that gap because you have to predict that as your revenue's, which makes me think about yourself strategy and how things going to be looking at. And do I have enough, you know, a retainer work, do I need to be going out trying to find bigger jobs to fill the pieces there?

Michael Wark (27m 50s):
So I think the doing it as a cash flow forecast is a really, really useful task for any small business owner. Okay. And that's what I'd highly recommend a help open up those conversations and a natural way.

Den Lennie (28m 4s):
But I think something else that I, that I did recently, I bought a new laptop to years ago and that the laptop is looking at it with $8,000. I'd remember that time just thinking that his $8,000 of cashflow and asked myself the question, why do I need to own this? And at the time Apple had a business financing or leasing service and we're just coming to the end of that lease. I think it cost me a thousand dollars across $300 a month. Now I got full access to that laptop in, in month one, but it was only paying $300 a month.

Den Lennie (28m 38s):
We're coming to the end of the term know, technically I've paid the same amount of money in Leasing it as it would have been to buy it outright. And I'm going to just hand it back now that to me made a lot of sense because I can now take another lease on another piece of equipment. But what was interesting was that was fully tax deductible because it was a leased piece of equipment rather than only claiming a certain amount of tax that they have that is, is leasing some thing that is a good idea.

Den Lennie (29m 8s):
And obviously that you can't really give advice, but from an accounting perspective, what are the benefits of leasing over buying equipment?

Michael Wark (29m 17s):
Yeah, I, as you said, it's a, it's an amazing impact in your cash flow. You don't have to have that three to six grand upfront and take that hit from the start the with Leasing. I think that the devil is in the detail and making sure, you know, what the terms are, what interest charges may or may not be in the future and how easy it is to get in are out of that lease of what the bright causes are, if circumstances change. So from an accounting perspective, having it as a lace and having it as an expense on your page and all those great.

Michael Wark (29m 50s):
Mmm. But for those people maybe who want a bit more, certainly they may want to buy it and keep it as an asset on the balance sheet and to appreciate it via our accounting principles. So it depends on what your cash reserves a lie, but Leasing has definitely an option of, especially for the, for the larger asset's in a business.

Den Lennie (30m 10s):
Yeah. Fantastic. Well, I call it, this has been really helpful. Now you obviously work had been, just tell us a bit about some of the resources available. If someone is sitting listening to this and watching this and the don't have a bookkeeper, what's, what's the best next step for them to engage with you

Michael Wark (30m 30s):
A week, they can come in and visit us beanninjas.com a I'm also on LinkedIn my name's Michael Wark feel free to getting in touch and drop us a line. So we help people with recurring bookkeeping. And I personally help people with in a virtual CFO role is to help them use that daughter and make better strategic decisions. That's kind of like the role. I do have been an interest, but we have a great reoccurring bookkeeping team as well, where people are looking to maybe outsource that and stop spending time in those kind of areas. So yeah, beanninjas.com.

Michael Wark (31m 1s):
And there's a contact us page where you can drop your details in and we can try and line up a call. Otherwise you can have me on LinkedIn as well.

Den Lennie (31m 8s):
Well mate we will add a link to that, but with this podcast, thank you so much. I, I actually love these conversations cause there are not necessarily sexy, but actually, once you get into the, once you get really solid numbers, they are most of clarity. It gives you the amount of security you feel is, is, is life changing. Hey guys, thanks for watching. I hope you got a huge amount of value from that episode. If you're looking for additional support or resources to support your business journey, then head over to denlennie.com, where you can get a whole heap of other resources, free downloads and access all the other episodes in the series.

Den Lennie (31m 47s):
Be sure to subscribe and I'll see you next time.

 

 

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