They are right, and I am wrong Accounting, tax and stuff.
So, for almost 23 years, I have been preaching that business owners need to understand financial documents. I have always ensured that our accounting team is capable of educating clients what the profit and loss statement, and balance sheet convey and how to use these documents to extract information at a glance.
Why not – I can.
But the thing many of my clients tell me is that they don’t understand what these statements mean and indicate. They look at their annual profit and loss statements and are puzzled as to where the money has gone. I try and explain the flow of funds through their balance sheets but I could be speaking another language.
I am currently working with a very successful English insurance brokerage firm and the owner admitted to me that he has no clue what they all mean. Is this a case of I don’t know how an engine works, but I am driving cars, is it that I play Muddy Waters and yet can’t play a guitar?
The truth is most people in business (let me assure you there are a lot of accountants among them) haven’t been grounded in the maths of double entry. So it’s like having someone show you mathematical theorem to explain your business performance.
Business owners need information that makes sense to them, starting with what’s really in their bank statement. It’s not just the information – there is always the practicality of “what to do” financially in business. Information needs to make sense as a valuable tool which would then equip a business owner to manage the business.
The real problem with accounting is that it’s historical, and if a business is in trouble, all you are doing is describing water to a drowning man. After 30 June, there is nothing you can do but to pay tax on your exposed profit. Mounting tax debt may have occurred while the business owner was making cash flow work – all sorts of things can happen during this time and ‘WHAM’ all of a sudden, financially a great business is struggling.
That is why we have had a real good look at creating an accounting product that reverses all the problems that a business owner has in running their businesses.
We call it “Precis Accounting System”.
It’s a system, not a product and it has been created to solve many financial problems that I have identified during my 25 year tenure in dealing with business owners. Have a read, does this solve your problems, give you both time and control?
Here are some of the problems that we set out to solve.
Using an accounting package sucks so much time and I don’t even know if it’s accurate or not.
In Australia, businesses up to $10 million turnover now can report on cash basis*. So, the Precis System is operated by a bank feed. The business owner receives a cruncher (a cash flow statement and financials) and BAS on time (guaranteed) without a single line of entry.
The business owner keeps the debtors and creditor ledger and any other relevant documents required to operate the business without having to hear the excuse that BAS will be late because the debtors aren’t tied back or some other nonsense.
*Cash accounting means that you only account for the tax when you have banked income or paid a bill.”
I don’t get ahead, I never am going to get any advantage in running a business.
If I ask a SME business operator in Australia: have they any super or have they made provision for their superannuation, they will tell me – no they haven’t.
The business owner should be growing a pearl.
Truth – Australians aren’t taught to save money. We have been on easy spend street for a long time and being bombarded with ways we can spend money that we don’t have every day doesn’t help either.
The Precis System means that the accounting team will calculate what your business is capable of and in the system, we get you to put away the tax-free money first. Simplyput, a small business operator can have capacity to gain wealth, prepare for retirement. Instead of waiting to see if anything is left, the Precis System works in a way to ensure that the business owner grabs the tax-free money first and load their super.
If the money has gone, then it’s gone. We have seen owners who then get the idea that they are working for a reason. They make budget adjustments and see why they go through all that “complexity, grit and irritation” which is what you need to make a pearl.
BAS and other tax belt the business owner over the head.
Every three months, BAS is a problem. The business owner has to find the BAS money that includes GST and PAYG (including the owners’ PAYG as it’s important to know what tax the business owner has).
The Precis system also has a percentage for tax, so that after the business owner first puts investments, super etc. aside, they then pay a percentage into the running balance account with the Australian Taxation Office. This is not a GST bank account, but it actually pays the tax man every time the business banks money.
The money is gone, so is the threat of a tax debt.
The business owners have no idea what they are looking at and when they receive their accounts.
Business owners have long told us they see what’s in the bank account – that’s all. So taking this on board, we have built the cruncher that is sent to the owner every month. The cruncher shows the business owner how cash has flowed through the business and is a document that is examined, queried and used by nearly all of our clients.
The key was to have something that made sense.
Yes, we send the profit and loss statement and the balance sheet, but we have found engagement through the use of the cruncher, which has the effect of allowing the business owner to make sense of the financial statements.
Our clients are more engaged with their businesses now.
We set out to create a system that changed how Australian business owners could manage tax and gain wealth (an advantage from being in business and understand what is going on financially in their business).
We had to do something a lot more than build something and simply call it beautiful.
Precis is functional, it manages tax, creates wealth bit by bit and creates a healthy pressure for a business owner to manage budgets and business performance. Precis is continuing to evolve. We aren’t creating a product that can have a 1000 apps screaming at it, we are building a system to give business owners time, peace of mind and wealth.
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