June 30 has an uncanny ability to send a shiver up my spine. The date screams “tax time” and I feel guilty for no reason, like when I look in the rear view mirror and see a police car behind me. Am I doing something wrong? Chances are “no”, but the end of the financial year gets me thinking about money — what have I achieved over the last 12 months? Can I do better this year, perhaps be smarter, more streamlined? Of course, as the developer of club software for volunteer treasurers to do the accounts for non-profit and community groups, money shouldn’t scare me. In fact, I know for a fact that you can’t wrong as long as you have a solid business plan, a budget, good accounting software and regular time set aside to do your books. The problem is that we’ve built a kind of aura around the financial side of running a small business. It gets so out of proportion that we tap into all kinds of myths. In this month’s blog post, I want to debunk 4 common money myths, ones that simply aren’t tackled elsewhere!
Myth 1: I’ll Get a Grant to Start My Business
Granting bodies don’t give money for start-ups costs, including wages, equipment and every day running costs. Look through the federal government’s business portal and you’ll see grants are usually offered for two key activities:
- The commercialisation of new technologies and novel products
- Special events that benefit the greater good, such as festivals and conferences.
However, this doesn’t mean you can’t get assistance to start (or grow) your business … it just won’t be money. There are plenty of free resources and in-kind support, training and mentoring available — your nearest Business Enterprise Centre is the perfect place to start.
Myth 2: You Need Money to Start a Business
Sir Richard Branson of the Virgin Group has often gone on record saying you need very little money to start a business. In fact, he started his first business, a magazine called Student, with a small cut from a necklace his mother sold. He later started Virgin Atlantic for the cost of a charter flight. Frustration is actually more important than money when starting a business, according to Branson. What he means is that dissatisfaction as a consumer can help you identify and fill a gap in the market.
Myth 3: I’ll Expand My Business When Times Are Good
Popular logic says the best time to expand your business is when sales are great, the economy is booming and consumer confidence is high. In fact, most experts will tell you to expand when you’re struggling to keep up with demand. I disagree. What happens when times change, as they inevitably do? The companies that expanded during the good times cannot sustain their growth and are, therefore, forced to lay off staff and reduce their product offering. Many years ago, at the height of his fame for turning around lagging corporations and long before his “creative” accounting disgrace at Sunbeam-Oster, I heard Al Dunlap speak. The one tip I remember to this day is that the best time to expand is when times are tough. If you can successfully expand a business in a depressed market, Dunlap said, you can sustain that growth through anything.
Myth 4: A Small Business Needs a Bookkeeper or Accountant
I’m not saying don’t have a bookkeeper or accountant … but I am saying use them properly and only if you need to. Bookkeeping is an administrative role — recording receipts and payments, preparing invoices, processing payroll and chasing money owed. In my experience, many business owners use a bookkeeper simply because they’re frightened of or don’t know how to do their own accounts. However, it’s a surprisingly simply job that you can do yourself in a couple of hours a week so I encourage you learn how, even if you plan to continue using a bookkeeper. Many people assume accounting is also an administrative role and end up using their accountant as a glorified bookkeeper, which, unfortunately, is a waste of a precious resource. A good accountant actually has a strategic planning role. Their job is to help you with “big picture” stuff:
- Choosing a business structure
- Making budgets and cashflow forecasts
- Choosing the best financial tools, such as bank accounts and accounting software
- Reducing tax
- Legal compliance
- Analysing your financial reports to help you streamline what you’re already doing and plan ahead.
