Attention Business Owners - You Can Borrow Just Like Everyone Else
The vast majority of our self employed clients books are in a shocking mess!
Of course, this will come as no surprise to you if you are a small business owner. The Blue Zinc client base is largely made up of self employed and small to medium business owners. They are excellent at their craft or service and their businesses are successful as a result. However, their financial accounts and tax returns are an absolute shambles.
When it comes to buying a home or an investment property, our clients know what they can afford, I know what they can afford, but when we show the bank or lender the financials - their numbers just don't stack up.
Now, at this stage, it is very easy to blame the grumpy/dumb/(insert adjective of choice) lender who just doesn't understand your business. However, the majority of SME’s are not helping themselves. Getting their accounts and financials in order is not expensive and usually pretty straight forward for a good bookkeeper.
We often need to explain to our clients that with your current financials and with your accounts looking the way they do right now you can only borrow $X. However, with these few adjustments to your financials this year, you will be able to borrow $XXX next year and buy your dream home or next investment property.
A few clients started asking us to do their bookkeeping and after saying no initially (we are mortgage brokers), we actually thought this is a great way to help our clients and potentially write more loans (we are mortgage brokers).
Better Books Means Paying Less Tax ...Not More
Good financial records will ensure you are able to utilise all the tax minimisation options available.
For example, many small business owners do not manage stock in their accounts. Their accountant does not usually go out to visit the client and so will not see the warehouse full of stock sitting there. In the past month alone I have visited three clients who have proudly shown me their premises and all their widgets. When I ask them where this is recorded in their financials they look at me blankly. Their accountant just does the fastest tax return possible and stock takes time so they will usually opt to skip it. Stock is an asset and can effect your taxable income. Lenders like stock.
The Mighty Add Back
Believe it or not banks actually like lending money. We just have to present the case in the best possible light.
We have many clients whose taxable income is between $60,000 and say $100,000. However, they can afford to borrow $1,000,000 or more. How? Through the power of add-backs.
Add-backs are expense items that the majority of lenders allow you to add-back to your taxable income. So if we start with the taxable income of $100k, we can then add-back depreciation of $40k, interest expense of $15k, a once off office relocation and fit-out of $50k and a bad debt write-off of $20k. Now our client is earning $225k and the bank is much happier.
These add-backs are often considered unimportant to the business owner and their accountants. Moving office is just an expense so it will get lumped into a general office expenses in the accounts. However, unless you move office every year this is considered a non-recurring item and most lenders will allow this to be added back to the taxable income. I bet your accountant didn’t know that.
Online & Efficient
Having your books in order makes running your business ...and life in general, so much easier. We transfer your books to an online system, so you and your accountant can log in and download reports or allocate expenses as you need.
We can ensure your invoices are sent immediately and more importantly they are paid on time. To make things really easy we provide your clients with several options to pay their accounts including PayPal and online.
Reconciling your credit cards and bank accounts is done by us every month. We pay your bills as they fall due and check their values and accuracy. We can even provide cashflow forecasts to help with managing your business better.
As a business owner you are far more valuable doing what it is you do. If you spend a day per week doing wages and paying bills you are actually losing 20% of your revenue. Not to mention probably paying more in tax and not being able to borrow to buy your dream home or next investment property.
If you would like to discuss having Blue Zinc Business Services get your financials streamlined and effective please call, email or book an appointment. We look forward to partnering with and supporting your business.