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May 2019

Differences Between Gross and Net Profit (and Why Neither Matter Unless You Get Paid!)

Differences Between Gross and Net Profit (and Why Neither Matter Unless You Get Paid!) 1000 668 emily
Wondering if you’re doing everything you can to boost revenue and cut costs? Or if your business is actually more profitable this year than it was last? The best way to answer these questions is with a thorough assessment of profitability. That’s where gross and net profit calculations come in. These are two of the most important metrics for measuring your capacity to generate earnings relative to costs and expenses. Let’s take a look at the differences between gross and net profit, and what they can reveal about the financial health of your business.   Gross profit: a general overview of profitability You can calculate your company’s gross profit by subtracting the cost of the goods or services you sell from your total revenue, over a specific period of time. The equation looks like this: Sales – cost of goods sold = gross profit When determining the cost of goods sold (otherwise known as COGS), businesses take into account all of the processes involved in their production and delivery to customers, including:
  • raw materials
  • manufacturing
  • packaging
  • shipping and fuel.
Once you know your gross profit, you can divide it by your total revenue to calculate your gross profit margin – a percentage that shows exactly how much money is left over after you’ve covered your COGS. This calculation will show you how efficiently you’re managing your resources – and where optimization is needed – so you can work toward a healthier bottom line.   Net profit: drilling down to profits after all expenses The net profit calculation goes a step further by determining how much revenue remains after subtracting all expenses, including COGS.  Net profit reveals your precise profit per dollar of sales after deducting operating expenses, taxes, interest paid on debt, etc. In order to keep abreast of your financial status, it’s wise to calculate net profit every month. Determining your net profit is crucial for a number of reasons, including:
  • knowing how much you can safely pay yourself each month, or divide among your business partners;
  • applying for a business loan, where net profit is an important part of the lender’s free cash flow analysis
  • measuring performance  against the industry benchmark and your main competitors.
  Protect your profits by ensuring you get paid It goes without saying that calculating gross and net profits won’t be very useful if you’re having trouble collecting payment from your customers. Staying on top of accounts receivable is crucial for maintaining positive cash flow, turning a healthy profit, and growing your business. Here are a few tips for ensuring timely payment:
  • require payment up front, and only offer 30 day terms to clients who have proven their trustworthiness
  • track invoices weekly, contact clients immediately after the payment deadline has been missed, and work together to set a new deadline
  • suggest an installment program for clients who are encountering financial difficulties.
Tighter invoice collection combined with clear insights into profitability will pave the way to smarter, more efficient management – your key to long-term sustainable business growth. Quantum Advisory is a business accounting and advisory firm that empowers family businesses to step up, scale up and sell up. Visit www.qagroup.com.au or call 1300 700 711 and start the journey.

Tips for Managing Remote Teams

Tips for Managing Remote Teams 1000 668 emily
So many business employees are now telecommuting, that companies around the world are restructuring their management practices to meet the challenges of remote collaboration. Because they tend to be more agile and open to change, small businesses are particularly well positioned to adapt to telecommuting. Increased productivity and happier employees who appreciate the added flexibility are just a few benefits winning over small business owners. But telecommuting also presents some challenges – in particular, two core issues: keeping track of what remote workers are doing and ensuring that remote and in-house teams form a cohesive unit. These tips can help you effectively manage and support your remote employees. Promote communication and accountability Defining expectations and setting up methods to track results are essential elements of remote team management. Here are a few ways to make sure your remote workers understand what is expected of them:
  • Set up a shareable daily work log your remote workers can use to report their progress on ongoing projects (Google Drive offers some good options).
  • Utilize a project management system to exchange messages, assign tasks and monitor projects rather than relying solely on email.
  • Determine key indicators for success for each remote worker and share these indicators with your employees (these might be daily, weekly or monthly goals).
  • Conduct regular reviews with remote workers to assess their performance.
  Include remote workers in office culture Positive work culture and employee engagement are quickly becoming top priorities for business managers who want to retain top talent. These tips will help your remote workers feel just as valued and validated as your in-house team.
  • If your in-house workers enjoy a monthly pizza party, don’t forget to include your remote workers. Invite them to attend, have a meal delivered to them or offer a gift certificate to a favorite restaurant.
  • Get to know and spend time with your remote workers, just as you would with in-house staff. Set aside a few moments each day to inquire about their families, personal interests, recent challenges and successes.
  • Consider pairing up remote workers to complete complex tasks. You’ll improve efficiency while helping remote workers feel like part of the team.
Ready to enjoy the benefits of remote staff? If the benefits of remote workers outweigh the risks in your view, try offering your staff a work day from home a week – then, if it works out, you can try hiring remote employees. Some small business owners hire a remote employee in another region – a great way to expand their market. If you trust your employees to work hard no matter where they’re located, the main thing to remember is fostering teamwork. A monthly on-site meeting that everyone is required to attend can encourage stronger relationships, allow opportunities to clear the air or discuss any challenges – and improve a sense of teamwork and camaraderie. Quantum Advisory is a business accounting and advisory firm that empowers family businesses to step up, scale up and sell up. Visit www.qagroup.com.au or call 1300 700 711 and start the journey.

7 Ways to Improve Workplace Productivity

7 Ways to Improve Workplace Productivity 1000 667 emily
The success of any business, large or small, depends largely on nurturing an efficient, productive workplace. While improving employee productivity should be always be a priority when the ultimate goal is a sustainable and profitable business, the process is easier said than done. Below are some of the most effective methods of managing a productive, happy workplace while increasing output. read more

Could a four day week help your business thrive?

Could a four day week help your business thrive? 5231 3487 emily
The “overwork epidemic” is a serious problem world-wide. In Japan, there’s even a word for it; to die by karōshi is to suffer a heart attack or stroke brought on by unrelenting overtime and occupational stress. In addition to the negative impact on health and well-being, working too much is bad for productivity. According to a recent study, employees who put in more than 50 hours a week – as nearly half of US workers do – show a sharp decline in output right around the 50 hour mark. Read on to discover why some business owners are embracing a four hour work week – and decide whether a less-is-more approach is right for you. The benefits of balance A New Zealand firm found that productivity significantly improved when a four day work week was implemented; remarkably, 78% of employees reported the change helped them better manage their work-life balance. In addition to reduced stress, improved mental health, and greater work satisfaction, one less day in the office each week can also help nurture:
  • greater focus, energy, and commitment to the job
  • a sense of empowerment at work
  • better overall performance and
  • increased loyalty and retention.
Environmental considerations For business owners concerned about their environmental impact, moving to a shorter work week can be a win-win. You’ll reduce your company’s carbon footprint by decreasing heat, air conditioning, electricity, and water use three days a week – and enjoy the associated cost savings. Both you and your employees will also benefit from reduced fuel costs (not to mention the time you’ll save commuting). Consider the cons Before you decide to make the switch to a four day work week, keep in the mind there may be a few downsides for your business. Although some customers will appreciate a business that keeps longer hours and shorter days, some may feel inconvenienced and take their business elsewhere. You can make the adjustment easier for your customers by giving them plenty of advance notice. When it comes to your employees, some may find it challenging to find childcare arrangements for a shorter work week, defeating your best intentions to create greater work-life balance and a flexible work culture. In the age of mobile devices and 24/7 connectivity, ensuring you and your employees make the most of your extra day off by unplugging can also be tricky. It’s recommended you set a policy around online work communications when the office is closed – otherwise, an additional day off work can easily become a remote work day for you and your staff. Final thoughts If you decide a four day work week would be beneficial for your business, take care to involve your employees in the planning process. Workers involved in the New Zealand experiment came up with a number of valuable initiatives that increased efficiency, such as automating tedious manual processes and taking steps to decrease non-work-related time spent online. When Germany officially moved to a four day work week during the 2008 recession, the impact was overwhelmingly positive – essentially saving the national economy from sliding into a depression. If that’s not reason enough to consider implementing a four day work week, check out this infographic for more persuasive data, as well as tips for working smarter if you decide to make the switch. Quantum Advisory is a business accounting and advisory firm that empowers family businesses to step up, scale up and sell up. Visit www.qagroup.com.au or call 1300 700 711 and start the journey.

We want to let you in on some exciting news.

We want to let you in on some exciting news. 640 480 emily

Quantum Advisory has partnered with award-winning broker – Jason Gibson – to provide an integrated commercial asset lending service.

Jason has over 15 years of experience in commercial lending and has a very hands-on approach to help business owners make the best possible financial decisions. Jason’s main areas of expertise are commercial equipment finance and working capital finance. His dedication to service excellence and first in class solutions saw him named “Asset Finance Broker of the Year” at the prestigious 2018 Australian Broking Awards. If you feel you could use some assistance, or just want to chat you can contact Jason: Mobile: 0427 230 201 Email: finance@qagroup.com.au read more

The ‘Illawarra Factor’ – Our secret unfair advantage

The ‘Illawarra Factor’ – Our secret unfair advantage 1022 682 emily
To those of us who live and work in the Illawarra region, it’s home. A place built on a rich history of steel and mining. A place where we all know the peaks and troughs of Australian industry and the resilience it takes to run a business. A place built buy hard working men and women who spend their day to day labouring somewhere between the mountains and the sea. Of course, as an eclectic group of realists, it’s easy to be consumed by the negatives. The down sizing of BlueScope, the knock-on effect this has had on dependent companies, infrastructure that needs upgrading and THAT Rabbitohs field goal back in September. Sure, we have our challenges but let’s take a look at a report recently released by global advisory firm Deloitte. Their report analyses our city and makes many interesting observations about our location, resources, investment, proximity, infrastructure and access to skilled talent through the initiative of the University Of Wollongong. Their report provides some very interesting numbers. According to Deloitte:
  • The costs of commercial rent in the Illawarra is up to 50% less than Sydney
  • The cost of Labour is approximately 85% of the cost of labour in Sydney.
  • Retention of employees is high with a comparatively low employee churn rate of 5% compared to Sydney’s 25%.
This all sounds impressive but what does it mean? Being nerdy numbers people, we decided to look at how this would impact a real-life business operating right now. We took the Profit and Loss Statement of one of our clients with a manufacturing business in Western Sydney. We removed names, rounded amounts to the nearest thousand for simplicity, and it looked like this: As we can see, this is a well-run business, achieving sound margins and a healthy profit. Next, we began adjusting the numbers to take into account the ‘Illawarra factor’. First, we reduced labour by 15% then we reduced rent. We could have reduced rent by anything up to 50% but we took a conservative estimate for the comparison and reduced rent by 30%. To be completely fair we then looked at additional expenses that may increase due to this particular business being based in the Illawarra and not in Western Sydney. We raised Freight by 40%, Motor Vehicle Expenses by 50% and Travel costs by 100%. The latter assumed that the personnel within the business would have to travel to further to service a comparative market size. That said, this business has less than 10% of it’s market in Sydney and is servicing customers all over the country so maybe we were getting a little paranoid. As can be seen by the revised Profit & Loss Statement below, the result is VERY different. In summary, the Gross Profit margin increases by 4%, the Net Profit Margin increases by 5%, and the tangible Net Profit increases from $778K to $1,147K (47%)! Now let’s be realistic, this Sydney Manufacturer probably can’t and won’t relocate to Wollongong any time soon. However, I would like to challenge every business owner in the Illawarra, are you capitalising on this opportunity? The advantages don’t stop with the profit margins.
  • We have a large pool of skilled talent constantly graduating from the University of Wollongong. Let’s reduce the 20,000 plus people commuting their talent out of town every day.
  • A lot of our talent relocates to Sydney or interstate to larger cities. Even if salaries in Wollongong are 10% – 15% lower than Sydney, the cost of real estate is typically 35-40% lower in the Illawarra. The great Australian dream gets closer.
  • We have a great public transport system and logistics networks to get our people, services and products to the rest of Australia.
  • Residents of the Illawarra enjoy a great coastal lifestyle, world class healthcare and modern shopping, hospitality and entertainment facilities.
How are you using the unfair advantage we have being right here in the Illawarra? Maybe it’s time to check our doorstep for growth opportunities? With over 40 years’ experience working with Wollongong businesses, we’re ready to help you step up and build another great local legacy. Credit: Advantage Wollongong & Deloitte

4 tips for less stressful business travel

4 tips for less stressful business travel 4574 3049 emily
Business owners fall into two categories: those who love business travel and those who hate it. The love/hate dynamic may depend on how much you travel for work, but even if you love business travel there are stressful aspects to being out of town. Although we can’t guarantee that our travel tips will ensure a completely stress-free experience, here are four ways to lessen your hassle. If you’re someone who hates work-related travel, maybe these tips will help you love it. Make packing as automatic as possible One of the most frustrating aspects of travel—whether it’s for work or pleasure—is packing. Many people put packing off until the last minute, which means important items can easily be forgotten. One way to avoid this issue, especially if you travel for work frequently, is to keep a pack-and-go suitcase stocked with items you always need. Toiletries, personal care products, and haircare items can stay in your bag all the time. Buy duplicates of your favorite make-up or grooming items that you know you’ll want and keep those in the suitcase. Purchase travel sizes of some of the medications you take regularly. Then when it comes time to pack, you’ll be ahead of the game. If possible, take only a carry-on bag. Not checking your luggage frees up time because you won’t have to wait to claim your bags. If you can’t take only a small bag, take a carry-on that has everything you’ll need for the first 48 hours, in case anything happens to your suitcase. Plan for your absence at work Business travel is stressful enough without having to worry about how your business will operate while you’re away. Where possible, plan ahead for the days you’ll be gone. Make sure a trusted employee is trained to take over vital tasks while you’re away. Schedule meetings around the days you’re gone and make sure someone is delegated to deal with urgent situations. Write an “out of office” email that warns people you may not respond as quickly as usual and in that email include the contact information of a colleague who can be reached in case of emergency. Keep your routine If you travel for work regularly or tend to travel for long periods, keeping your home routine while away will help you feel normal. If you exercise daily at home, make sure you exercise in while you’re away. If you eat healthy at home, continue that habit. If you go to bed at the same time every night after reading a book for 20 minutes, keep that pattern while out of town. Make sure you have downtime Business travel tends to be frantic and stressful, and it often involves headache-causing meetings and small talk. Make sure you have time to yourself to debrief, think about what you learned during the day, and check in on how you’re feeling. Even 10 minutes of quiet reflection at the end of every day can go a long way to reducing your stress. Final thoughts Whether you love business travel or hate it, there’s a good chance you have to do it. Being prepared for those trips, keeping your routine, and finding downtime while you’re away will help you manage your stress while you’re gone.

The True Value of Networking

The True Value of Networking 5184 3888 emily
There are all kinds of groups dedicated to networking. Some are highly structured with performance requirements, exclusive membership, and the payment of dues. Others are free form, come as you please and no charge. Not every group is right for every kind of business. You will find that some groups may simply not have connections in the market you are seeking to attract. You will find some groups have rules that just don’t fit with how your business works. Yet there is one factor that is often overlooked when considering a networking group; does this group offer more long-term value, or short-term value? read more

How to protect the goodwill in your business

How to protect the goodwill in your business 5911 3941 emily
It takes time, energy, and continuous effort to build a brand that attracts loyal customers and is rewarded by word of mouth referrals. Without a doubt, the good name you worked so hard to earn is one of your most valuable business assets; in addition to your solid customer base and positive employee relations, it is what is known in business as “goodwill.” If you’re like many small business owners, you realize your company’s goodwill is vitally important, but you may not know how to protect it. After all, how people feel about your brand isn’t a tangible asset you can insure, like a building or machinery. There are steps you can take to safeguard your goodwill in the marketplace. This article will show you how. Register a tradename or trademark Registering a tradename – also known as your legal corporate name or business name – can protect your company’s goodwill in two ways: 1. It will help build greater brand recognition. 2. It will prohibit anyone else from registering a business under the same name or a similar one, deliberately or unintentionally “poaching” the goodwill you’ve developed. Likewise, registering a trademark – that is, a word, phrase, symbol, logo, or design used to identify your company’s goods or services – can protect your business’s goodwill under the auspices of your country’s intellectual property laws. In addition to safeguarding your company’s goodwill, a tradename/trademark may become assets included in the sale of your business – thereby increasing your company’s overall value. Legal agreements When partners part ways or employees end their contracts, they leave a company with valuable insider knowledge. It’s crucial to ensure your trade secrets and customer data won’t be used by a former insider to their own advantage – or shared with a competitor. You can prevent your customer relationships (and therefore, goodwill) from being stolen with a non-compete agreement. Take care that any non-compete agreement is signed at the time you make an offer of employment or begin a partnership; otherwise, you may not be able to enforce it. Having a legal agreement in place is wise for several reasons. In addition to protecting the relationship you’ve nurtured with your customers, just like a trade name or trademark, a non-compete will increase your company’s value in the eyes of a future buyer. Final thoughts Because goodwill is largely intangible, it can be hard to measure. Ultimately it is determined by how much above book value a buyer is willing to pay for your business. You can monitor how your customers feel about your business in the meantime by keeping tabs on markers like increased interaction on social media, conversion rates, and profit growth. When it comes to legal protection, the sooner you register your tradename, trademarks, and have legal agreements in place, the better. Of course, the best thing you can do to continually increase the goodwill of your company – and its value – is simple: take pains to consistently provide the best service you can to every single customer who chooses your business over the competition. Quantum Advisory is a business accounting and advisory firm that empowers family businesses to step up, scale up and sell up. Visit www.qagroup.com.au or call 1300 700 711 and start the journey.

A Guide to Profiling Your Customers

A Guide to Profiling Your Customers 1000 667 emily
Easily the most important first step in establishing any type of business is to define your customers so that you have the information you need to attract the right audience and generate valuable traffic to your website. Understanding your customers and what makes them tick is the key to any successful business, particularly if you are paying out large amounts of money to drive relevant traffic. read more
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