Business Set Up and Purchase

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BEGINNING IN BUSINESS Business Set Up And Purchase www.lewistaxation.com.au Alan Lewis A A c c c c o o u u n n t t a a n n t t s s

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Beginning in Business series: Business Set Up and Purchase. Accompanying PDF is Paper 01.03

Transcript of Business Set Up and Purchase

Page 1: Business Set Up and Purchase

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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...