business set up and purchase
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Beginning in Business series: Business Set Up and Purchase. Accompanying PDF is Paper 01.03TRANSCRIPT
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BEGINNING IN BUSINESS
Business Set Up And Purchase
Alan Lewis AAccccoouunnttaannttss
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Determine salary and profit expectations for:- your time- your investment- your expertise
Be realistic in your expectations Survey the market
1. Setting Up
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Obtain work in that type of business
Lifestyle? Match skills, knowledge and
experience List assets that you will require Are there any businesses for sale?
1. Setting Up cont'd....
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2. Consultation With Professional Accountant
Type of entity Documentation
required Explanation of
entity’s operation
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Feasibility Study:- Sales- Overhead expenses- Wages- Set up costs- Budget- Break even levels- Sensitivity Analysis- Cashflow Forecasts- Pay As You Go (PAYG) tax payable- Business Benchmarks Comparison
2. Consultation With Professional Accountant cont’d.......
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2. Consultation With Professional Accountant cont’d.......
Statement of Net Worth
Projected Balance Sheet
Ongoing role of accounting firms
Competent Commercial Solicitor
Bank interested in small business
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3. Purchasing A Business
Financial accounts last 5 years
Tax returns last 5 years
Debtors’ Aged Analysis
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Access to:- Cash Payments Book- Cash Receipts Book- Tax Invoice Books- Journals- Bank Deposit Books- Bank Statements- Ledgers
- Creditors’ Aged Analysis
- Creditors’ Invoices- Stock records- Work in progress
records- Wages records- Order Book- Lease Agreements
3. Purchasing A Business cont’d....
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Is the Vendor running a similar business?
Check purchases, sales and wages Restraint of Trade Will customers remain? Review stock History of the business Market share Competitors Suppliers
3. Purchasing A Business cont’d....
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Suppliers’ Terms of Trade Terms of Trade with Debtors – are they enforced? Are Tax Invoices and Statements prepared
promptly? Check plant and equipment Is the plant owned, leased or on hire purchase? Leased premises – get a copy of the Lease
Agreement Landlord’s approval for transfer of Lease
3. Purchasing A Business cont’d.....
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Check the Lease – what would your obligations be for:- removal of equipment at the end of the Lease?- rectification of premises?- option periods?- exercise of options?- painting?- repairs and maintenance?- re-fit requirements?
3. Purchasing A Business cont’d.....
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Acquiring the building? – Check Title Deed details Zoning Apportionment of price If taking over Debtors – BEWARE! What employees are you
retaining? Holiday, Sick and Redundancy Pay Long Service Leave
3. Purchasing A Business cont’d...
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Customer List Vendor’s intention Vendor assist in the
changeover? Valuing of stock Politics Gazetted hours Wages for staff What is the state of the
economy?
3. Purchasing A Business cont’d...
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3. Purchasing A Business cont’d.... Monthly Sales Dissection Review Debtors’ Ledger –
any large credit notes? Credit Worthiness Report
on the business Social behaviour changes Technology changes Town Planning
Regulations Customers – who are
they? – demographics?0
10
20
30
40
50
60
70
80
90
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
MenWomenChildren
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Review the operations of the business
Employee work specification
Does the business have the right product mix?
Any patents, trademarks, licenses, copyrights?
Order Book Partially completed
contracts – check!
Creditors’ Aged Analysis
Check the bank reconciliations
Quality control Check suitable
systems and policies for GST
Check on stock buying patterns
3. Purchasing A Business cont’d
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Remember, what you are looking for are clues that the business is not what it is being built up to be!
The buyer must beware – check, double check and cross check everything!
Once you sign the contract, it is very difficult to renegotiate
.
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4. Registrations Required
Business Name Australian Taxation
Office:- Withholding Tax- Public Officer
(Company)- Australian Business
Number- GST Registration
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Work Cover Payroll Tax Government Bank Accounts Insurance Directories/
Associations
4. Registrations Required cont’d........
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Business Objectives Business Mission
Statement Accounting and
Management Information System
Internal Control System
Types of books and records
Business Plan, Budgets and Cashflow Forecasts
Regular accounting reports
Board of Directors/Board of Advice
Employees’ Agreements, Conditions and Contracts
Key Performance Indicators
5. Accounting Work/Advice
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6. Other General Matters
Location Layout of premises Does the market
exist? Estimated expenses Break-even level of
sales required Break-even point,
including your salary Credit Policy
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Bankcard, Master Card, Visa Card
Other cards – Diners’ Club, American Express etc
Government and Council requirements
What are the potential risks?
Can you handle the work?
Communication facilities Traffic flow Off season planning
Local events register What is happening in the
local area? Do you need all the
assets? Buy carefully Listen to experienced
employees Develop an ability to get
on with people Staff Manual
6. Other General Matters cont’d...