Know Your Costs
BYO Group has been looking after a sole trader operation for many years. He is diligent with his accounts and records and does most of his own bookkeeping and reconciliations. BYO Group does his BAS.
After many years in business he decided to consult with us to prepare a budget, sure that he could be doing better in his business. He was only just making a profit and working a lot of hours to maintain the operations; he didn’t really understand why he wasn’t making more money overall and why operations were not more profitable.
We offered insights from an objective pint of view of his financial reports. We sat together and went through the detail of all income and expense accounts. We asked many questions about his operations, business processes, labour, costs and future plans.
Within one consulting session, the owner had realised he was not charging enough for certain products and services. His direct costs in some cases were not being fully recovered, but because he had never sat down to analyse his accounts, and only ever looked at the “bottom line”, he didn’t realise the true financial position and how much better it could be. We talked about how to charge out for contractors and made sure he understood the costs involved in engaging contractors and employees. We prepared a budget for the coming year and showed him how to run reports that compare actual figures to budgeted figures. During the consult, we also rearranged the chart of accounts so that he could clearly see the relationship between certain income and expense accounts; we also customised various reports for him, again so he could get a better picture of the reality of his financial accounts.
He left with a head full of questions to consider, which changed his thinking about how he currently runs his business, and how it could be done more efficiently. He is now in the process of making changes to how he manages his business and we expect to see increased profitability and fewer hours that he spends on administering his business at our next budget and consulting meeting. He is motivated and renewed in his business focus now that he has greater clarity.