Q&A with Lauren from The Real Thiel
This week we have the pleasure of hearing from business and personal finance extraordinaire, Lauren Thiel from The Real Thiel.
Can you provide us with a short "beginners guide" to Jobkeeper, Jobseeker and government support that a small business owner could be entitled to plus a break down on how to claim it.
This one is really hard for me to answer in short - I have some big blogs on the matter though which you can read here.
What are some simple aspects of accounting that are commonly overlooked, that they could focus on during this slower period?
If you are stuck at home, or just need a distraction from covid life, then now is the time to get on top of your business and personal finances. Do a budget, set up different bank accounts with a better flow of money (and keep business and personal separate), mark "money stuff" in your diary so it doesn't get left to the last minute. Save for tax ahead of time.
One of the major causes of financial stress is the unknown. Most people do not know if their business is making a profit, or what they spend their money on. Knowledge is power, as they say. Most run their business and their life on their gut instinct. Many people also get overwhelmed come tax time, because they have not kept tidy records, so just put it off, again and again.
This can be different though.
Now is the time to get organised, get everything lodged, and set yourself up with good processes for the future. If you are not sure where to start, then get yourself an accountant or bookkeeper to help you.
I promise it doesn't have to be such a burden. If you dedicate a little bit of time to it, every week or month, keep receipts, keep spreadsheets and track income and expenses, then you will have the info ready for you when you need it.
What are your tips for switching from pen and paper to accounting software without feeling completely overwhelmed by it all?
This is such an exciting move! It is a big one though, and can be pretty complicated. I recommend you go in stages:
Paper lists, shoe box of receipts.
Spreadsheets, and photos of receipts and invoices in the cloud for safe keeping
Accounting software that keeps the info and the supporting documents safe and sound
Accountants can help you to get everything set up in the right way, right from the start, and train you in how to manage your own books (until you are ready to hire someone to do it for you).
Can you give us your top 10 tips on how businesses can look at their finances during lockdown and cut costs?
Breathe. This too shall pass. You will get through.
Do a stock take - write it all down - what are all your bank account balances, debts, assets etc. Where are you at right now? (be honest with yourself)
Forecast money coming in - be realistic. Be creative and open minded to other income streams you could access. New jobs, side hustle etc.
Write down all your expenses for the last 3 months (as a sample). Use this to create a budget for the next 6 to 12 months.
Categorise the expenses as "must spend" vs "like to spend" (i.e. rent/mortgage is have to spend, where as uber Eats is like to spend). Cut out/put on pause as many of the "like to spend" items as possible.
Re-categorise what is left as "fixed" and "variable" (i.e. rent is fixed because it is the same every month, but groceries are varied/different each week).
Set up 5 bank accounts (at least) -
Everyday variable - for things like groceries, petrol etc.
Fixed and Boring - for bills and direct debits
Splurge - for fun stuff (even in darker days we need rewards)
Smile - for short term savings (this might be harder right now and that is ok!)
Fire Extinguisher - for your buffer for the future
Set up a flow of money, so everything comes into "A" and then have an immediate auto transfer to the other accounts. Chat to your accountant or refer to your annual spend totals (Then divide by 52) to figure out how much to put into each account each week.
Put a note in your diary every week to check in on your budget. Be kind to yourself while you learn this new way of life.
Put a "money date night" in your diary once a month, where you treat yourself while you look over all of this money stuff again and again. It is an evolving, regular practice.
How can someone future proof their business so they are better equipped to deal with situations like the Coronavirus pandemic?
Honestly, it is near impossible to be truly prepared for something as unique, global and challenging as this pandemic. It was certainly not something recorded as a potential threat on many risk matrices. I think we have all learned something from this though, and we can move forward with some extra motivation to hope for the best, but be prepared for the worst.
Doing regular SWOT analyses of your business. Keeping on top of your internal and external environments, changes, and being really aware is key to be able to mitigate risks, take opportunities, and maximise your own potential.
Building up a "buffer" account for yourself personally, and another one for your small business. Personally I aim to keep at least 3-6 months worth of expenses saved up. This is money that is not reserved for any other purpose (not house savings, big holidays, tax or anything else). It is just there in case of a rainy day.
Staying on top of your compliance requirements (like tax). We all learned how the government and other support measures favour those who have lodged on time. There are many reasons for keeping on top of your accounting and tax, and this has just highlighted another one.
Build a business that is flexible, agile, proactive. We all love our existing businesses, of course, but sometimes pivoting, changing, and trying new things could be exactly what we need. Stay open to change. Do what you can with the resources you have. Seek new opportunities in the midst of challenge.
Have good people around you. These situations are hard on us all in different ways, and we need a good support crew to help get us through.