Ask any business leader how they are and the response is almost unanimous: busy. The busier we are, the more likely we are to make mistakes – which can wind up costing big bucks if left unchecked. For time-poor CEOs, the following mistakes are by far the most common.
Failing to plan
In business, you’ve probably heard the phrase ‘failing to plan is planning to fail’. The same is true of finances, both personal and business.
Create a spending and investment plan, and adjust the figures as needed. Block out time in the calendar (at least once a year) for reviewing costs such as insurance, utilities, loans, credit cards and so on. Keep employees informed of the business’s financial position – they’re more likely to conserve capital and assist in waste reduction if they know the impact of their efforts. And develop contingency plans such as an emergency cash fund, data backups and insurance.
Too busy to seek advice
Getting your mind or schedule clear enough to seek advice can be difficult. Having the right information to hand, waiting until a time-consuming project is complete or waiting until the right people are available often causes delays.
Are you missing out on opportunities or making mistakes? Your team of advisers should add value to you and hopefully pays for itself by reducing tax, interest and finance costs, accessing grants and incentives you may not have known were there, and helping you focus and achieve goals. Seek advice before it’s too late.
Record keeping and unclaimed deductions
The irony is that many people say they don’t have time to set up and maintain good records. But having solid records is both a time- and money-saver.
You can only claim what you can prove, so ensuring not only you, but also your entire team, are tracking all the entitlements is key.
You can use apps that work with your accounting software or use the ATO app for personal items, which photographs the receipt and records the expense – no more paper receipts.
Don’t forget to keep logbooks to track those trips to Officeworks, the COVID-19 work from home allowances, income protection premiums and ongoing financial advice fees. Personal tax rates are different to company tax rates, so maximise your deductions appropriately.
There are many misconceptions surrounding super, meaning mistakes are common. Consolidating multiple funds into one saves money, right? Not always. First, you need to roll over high-fee funds into a cheaper one to pocket any savings. But don’t overlook insurance such as income protection, life insurance and disability cover. Most policies automatically terminate when you close a fund through consolidation, yet many people don’t consider this until it’s too late.
Self-employed Australians often forgo paying themselves super, believing the business is their retirement fund. What happens if there are no buyers? Or market conditions drive its value down? Or the business fails and you lose everything? Denying yourself super may be a short-term cash flow boost, but it denies you a fallback option.
Self-managed super funds are often spruiked to higher-income earners and the self-employed, but there are management, compliance and legal obligations involved. Depending on the investments, you may not need this complexity.
Being busy often leads to bandaid solutions. For example, does the business pay for staff coffees? It could be cheaper to purchase an office coffee machine and use the instant asset write-off for an up-front deduction. Can you and your team identify other wastage such as subscriptions and unnecessary retainers?
Being time-poor doesn’t need to translate into being cash-poor. A little time spent checking in with your finances can be a rewarding investment.
Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce: Your Survive and Thrive Financial Guide.
Note this is general advice only and you should seek advice specific to your circumstances.