With Paul Siderovski M.D. SIDCOR Chartered Accountants
Unlike most of us, Paul Siderovski can handle the truth about running a business. Everyday around Australia, founder and managing director of SiDCOR Chartered Accountants, Paul sees small business owners regularly use money set aside for GST and payroll as their personal bank. He says, “It's not just real estate agent businesses, it's truly 80 per cent of small business owners around the country. They use them as a bank and they don't even know they are.”
Paul says, “The best way to manage the GST and wages tax and then actual tax is to work out an amount from every commission that comes in. Set a break-even point in the cost of your business and then work out how much to put away.”
Put aside money for three types of tax:
Paul advises putting the money aside in a separate account. He says, “Don't get in there and start dipping because once you fall back, it's very hard to make back.”
He explains, “If you've got a debt to the tax office of $100,000 - for you to pay that $100,000 to the ATO, how much do you think you need to make profit again? How much do you need to bring into the business in profit to pay that 100,000? It's not $100,000. You've got to make $300,000 to pay the $100,000 because there's taxes you're going to pay. It's hard to get it back. It really, really is.”
Some people forget about payroll tax too. Paul says, “Depending on which state you're in, if you're over $660,000 with wages, you're paying payroll tax. Even if you're an owner and taking drawings, some still have to be attributed for payroll tax. Payroll tax is one of those ones that just sneaks up on people and they go, ‘Well, I didn't know I had to pay it’. Let's just stop blaming someone.”
Setting a flat number such as ten per cent isn’t the answer either. Paul says, “It's not just a mathematical number. Ten per cent might cover the GST but there are expenses that come off that so you don't have to put 10% away.” You have to know exactly how much you have to put away.
The way to prevent falling into trouble of course is to plan and develop a budget.
Take the proactive approach of doing a plan.
Paul suggests, “Take the proactive approach of doing a plan. Budget in advance going, ‘Here's what we're going to do over the next six to twelve months. What does it mean? What are the costs going to be of this business?’ If you've got that plan, things won't sneak up. That's the point of difference you can have to most other real estate business owners and other small to medium business owners around the country. Just do that budget and plan.”
To turn your business around, Paul suggests developing a plan. The first stage of the planning process is to be really rigorous about every expense for three months and to question every spend. Most of us are complacent - we’re too busy to question the phone bill or electricity provider. He says, “For the next three months, 90 days, every bill that comes into the office, every bill, I want you to question it. From electricity to telephone to ... I don't care what it is, just 90 days and you go, ‘Can we do better than what they're providing us now?’ I promise you, if you ask the question for the next 90 days, you'll put 20% to your bottom line, profit, and just it hits the bottom line.”
Marketing is one area, for example where it is easy to blow a lot of money without monitoring the impact of the spend. Having beautiful brochures makes you feel good but does it provide a return on the investment? Paul is adamant that marketing spending must be considered within the context of the whole budget and plan for the business.
He says, “Marketing is probably the largest expense that I see blow out and it's the first expense that I look at and when I ask a client the question, ‘How did you measure the marketing to the reward you got?’, they don't ever measure. They’ve assessed its impact on their own feeling. They didn't do a part of the business plan. For me, it's wise to have set contexts. Many clients are just content going, ‘Oh so all this looks really good. I'm just going to copy it’. In light of what? What was the plan? Was it a part of a three month plan to get market share or was it to get an actual listing?”
Once you have monitored spending and developed a business plan, Paul suggests having a few meetings to measure progress then check in every quarter. Of course, you must have someone in the business who can do that, who you actually listen to. Paul says, “You've got to have someone in that accounts area who is actually checking the budget and going, ‘We budgeted this, we have already spent this’. You've got someone to have your back on that.”
Paul believes that every business in fact needs someone who is not afraid of the truth. He says, “You need a big thinker who's actually pulling the reins in to go, ‘Hang on, hang on’. That's what I love with real estate businesses who have a General Manager in place who is a thinker because think about sales agents - they're knowers and feelers. They know what they want. Oh they're feeling great, but we want someone who is a thinker and they think and go, ‘Hang on, hang on. How does this fit in with the plan?’. It's just one question.” A question which could determine if the business succeeds or fails.