Episode 334: Tim Kemp and Estella Tang of MJA Accounting
In this episode, Fiona chats with Tim Kemp and Estella Tang from MJA Accounting. They share the importance of financial literacy and building a strong relationship with your accountant. Tune in to understand how overcoming fears of sharing financial challenges with an accountant can help your business!
Topics discussed in this episode:
Introduction
Importance of understanding and embracing the role of accounting in business
Building a strong client-accountant relationship
The purpose of an accountant beyond tax time
Advantages and considerations for each business structure
Importance of asset protection and tax planning
Financial reports for small business owners
Overcoming fears of sharing financial challenges with an accountant
The importance of communication and building a strong relationship
Conclusion
Get in touch with My Daily Business Coach
Resources and Recommendations mentioned in this episode:
There's absolutely no judgment at all, no matter how your business is going. In fact, to those who are listening to the podcast now as a small business owner or seriously preparing yourself to start a business, you should just be proud of yourself. That you have the courage and the perseverance to run a business with something you're passionate about. It may not go in as well as you wish right now, or you may feel you have no clue what to do with the financing side of it, but that's why we're here for you, not to judge you.
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Welcome to episode 334 of the My Daily Business podcast. Today is an interview with a small business owner and somebody that works at that small business as well. A little different, but we're also going into a particular element of business that every single person who's in business has to get comfortable with, has to embrace, and has to connect with this type of business. I thought it was so important to bring somebody in from that sector and talk about what is involved so that everyone can get a little bit more comfortable with talking about this stuff. I know this sounds very mysterious.
Before we get stuck into that, I want to acknowledge the traditional owners and custodians of the land on which I'm coming to you, and that is the Wurrung and Wurundjeri people of the Kulin Nation. And I pay my respects to their elders, past, and present, and acknowledge that sovereignty has never been ceded.
The other thing I wanted to mention is that Group Coaching has officially closed. Thank you so much to everyone who applied. Check your email because we are in contact if we have not been in contact already. And also I wanted to say that around this time, we always get questions about Marketing for Your Small Business. The course and coaching program will be kicking off in September. If you want to be part of that, you can head on over to marketingforyoursmallbusiness.com. If you already have the Marketing for Your Small Business course, then look out for an email because you can upgrade for a very small fee. Let's get into today's small business interview.
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This is an interview that I have wanted to put out for ages. We had some tech issues on my side, Zoom crashing, and then the recording not happening, but we got there in the end. I have to say a massive thank you to my guests because not only did they come on once to be recorded, they came on again to be recorded and they've done extra work as well around this. I just appreciate it. Who am I talking to? I'm talking to Tim Kemp and Estella Tang from MJA Accounting. Tim is one of the directors, together with the four partners that own the business. They have 26 accountants working for them and they are an incredible accounting firm. One of those incredible accountants is my accountant that I work with mainly who's Estella Tang, but I also work with Tim.
Tim was the reason that I found out about MJA. My family member had been working with MJA for years and years. During Covid, I had worked with an accountant on my small business for six years and I thought they were doing a great job because I didn't know any better. I didn't know what an accountant could do for your business. I'd worked with them. I only talked to them around tax time. If I wanted to have another check-in with them, I could. It was a paid thing and often they didn't have much time. I would go in, and I would have to travel physically into the city, go into a boardroom, and have a conversation, they were fine, but I never felt like they were proactive in helping me. I felt like I was a number to them.
I was a small business and I wasn't a huge priority to them. I did have a good relationship with my accountant. I want to put it out. The first people I worked with, I did have a good relationship with them. I thought they were pretty helpful at times, but at other times they'd just be way too busy. It was almost like the systems went there to support things. When Covid kicked off in 2020 and like everybody else, I was like, "What are we going to do?" I was incredibly fortunate that I had enough business coming in, but I didn't know how I was going to work on that business when I had a child that was seven months old and was not going to daycare. But no one could come and look after him either, like family members because of Covid and the restrictions.
Then I had a child that was starting grade one and wasn't able to go to school. There was a homeschooling baby, trying to run a business from home. My husband also had to keep working from home. It was just this madness. I think accountants were one of the first people that everyone rushed to like, what am I entitled to? Are there any payments? How am I going to keep paying my staff? How's it all going to work? What are the legal obligations that I have? All of these things. Accountants were unbelievably busy in that period the whole way through. But I think at the start when everyone was panicking, I contacted my accountant and set up a meeting and that meeting got cancelled twice in a row when I was ready.
I was looking forward to it, I had organized everyone to be quiet for the 20 minutes that I'm going to be on the phone. Twice that was cancelled. I remember talking to my sister and she said, “Why don't you talk to my accountants? They're brilliant.” I did and they gave me a full hour of their time despite them being incredibly busy. We went on, I think it was Zoom. And they just explained all these different things, not just about the current situation and government initiatives and everything else, but they also talked to me about my current company setup and what I could be doing better. And had I thought about this and how does that even work? And none of my questions were seen as stupid.
I didn't feel like an idiot asking anything. They were so kind. Tim was just great at explaining complex ideas to me, things that had not been explained to me before. And even when he questioned a few things, I was like, I haven't thought of that. It's quite confronting as well, being a business coach. I work with people with their money all the time, but I'm not an accountant. I don't know the ins and outs of all these different things. I don't know all the legal ins and outs of stuff, all the different company structures, all the different scenarios that you can have and go through when you are talking to an accountant who knows what they're doing. I changed accountants and that was a lot of work to change accountants when you've worked with somebody to reconcile things, to have the wonderful Estella Tang who is my main accountant that I work with and have been working with now for years.
She went through my Xero and found a lot of things that could have been done better or things that were incorrect or things that hadn't been reconciled properly. There was a moment of like, this is so much work, but also these people are going to see every little in and out of my business. You also are talking about your home life and your partner and all the things that are going on financially in your personal life as well. It was just an incredibly wonderful start to that relationship. I thought I would love to have Tim and Estella on the podcast today to talk about what a good relationship between a small business and an accountant look like. What do accountants do aside from getting your money back at tax time, and how can they help you on your small business journey?
MJA Accounting is not just your typical accountant, but they help people with tax time and all of that. But they also are proactive. They do business mentoring. They look at your financials, they have financial planners there, they have bookkeepers there. They look at the whole scenario of how does your money come in, where is it going, and how do you get more of it back? And how can you be proactive in your life? As Tim talks about today, often they're hearing about things from a small business owner that that small business owner has not shared with anybody else. It could be health challenges, they talk about gambling addiction. There are lots of things that can go on behind the scenes in somebody's business or where that money is going that other people are not seeing.
It's an important conversation to have, I think whether you want to change accountants and I highly recommend MJA. As I say to everyone who I've recommended them to, I don't get a kickback. I don't get some discount or anything for recommending them. I just genuinely recommend them because they're doing such an incredible job. I've never ever worked with people like this where they feel like part of your team. There's no question that's stupid. They get back to every question. There's just a real support system there. I couldn't recommend them more highly. But whether you want to go with them or you just are thinking, I don't talk to my accountant and maybe that's something that I want to do more of, I hope that today's interview is going to help you figure that out.
Figure out the questions that you want to ask, figure out the reports that maybe you're not looking at in terms of your financial reports and which reports every small business owner should be looking at regularly. Just a reminder, we did have to cut and rerecord this episode, just bear with us if you hear a sudden change. But I'm sure Scott, my editor has done a great job. Here is my interview with the wonderful people at MJA Accounting and if you're interested in checking that out, you can find them at mjacpa.com.au. Here is my interview with Tim Kemp and Estella Tang from MJA Accounting.
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Hello Estella and Tim, welcome to the podcast.
Thank you. Good to be on.
Hello Fiona. Thanks for having us.
I'm so excited about this. How are you both feeling about life right now?
Life's pretty good. I think for us as accountants, we're just crawling across the line after a busy pre-30 June tax planning session. But other than that, we're travelling along pretty well I think.
We're just accounting down and getting ready to kick the start of the new financial year.
Does this feel like your end of year, do you feel like it's like New Year's Eve the mad rush most people have at the end of the year? At the end of the calendar year? Is that how it feels for you?
It's always wild for accountants. At the end of the financial year, we get to about nine o'clock on the 30th of June, we're all tired and go to sleep, start the new financial year all over again. We're wild and crazy accountants, so yes.
Yes, totally. That's what everyone thinks wild and crazy when they think about accounting. But we're going to be talking about accounting today. Tell us about where you work, which is MJA Accounting. How and why and when did it start and how are you both, what do you do there?
The practice has been around since 1950. We've been around for a little while now. We're a rural practice in Leongatha Victoria. But our span of clients goes quite wide over international, all around Australia. Darwin, Queensland, all sorts of places where I've been with the firm as a partner since 2003, Estela has been with us for five years.
Yes, Five years.
We're quite a diverse practice. There are 26 accountants or 26 on board as the team for business partners. We cover quite a fair bit in the way of tax and super business advice, succession planning, and financial planning, not just the typical do-your-tax return type accounting firm, but we're sort bit more holistic in how we approach things.
Wow. You are 20 years this year Tim?
I might even be a little bit more than, that's 20 years as a partner. I think I've been here for another 10 on top of that, I'm probably showing my age a little here. Certainly been involved for quite a few years.
That's huge. And you said that MJA does quite a bit. You mentioned business advice and other things and also financial planning. Just tell me if I'm incorrect. Financial planning, you have bookkeepers there as well, is that right?
We have bookkeeping on board. Servicing basses. Quarterly basses for clients or if not training them how to do them themselves. We do a lot of bookkeeping, we do a lot, basically completing tax returns. Oddly enough, everyone seems to think that as accountants we spend a lot of our time doing tax returns, but it's only a little bit of a small part in what we do from that compliance perspective.
How did you both get into finance as a career?
Mine was a TV show years ago called Family Ties. My favourite idol was, Michael J. Fox, he was a want to be wealthy I guess that is the best way to put it. I thought he wanted to head down the road of business. He was quite an idol at the time. I guess from 14 years of age or so I became I was going to be an accountant.
I love that. I loved Family Ties and Estella, what about you? How did you get into finance?
Totally different to Team. I had no idea what I wanted to be when I grow up. Then I selected finance as my uni subject because firstly I know that I'm good with numbers and I'd like to deal with numbers and also I am interested in learning more about investments, how to read and understand financial reports or those things. I was thinking that even if I ended up with a totally different area as my career, that knowledge could still be a useful tool to carry.
Massively. I just looked at, which might scare both of you, but I looked recently at accounting short courses because I think the knowledge that you have, I mean you like what you're doing, but you could also go into any business and be incredibly useful. Business, a huge part of it is finances.
Tim, you've already alluded to how we do more than what most people think accountants do. But what is the purpose of an accountant? I know that sounds like such a simple idiot question but for somebody reading who's like, “I've never thought about who my accountant is or maybe spending more time with my accountant.” What is the purpose of an accountant?
I think most people when they first engage an accountant, usually is when they're an employee starting out. They can do my tax refund every year and they give me my money back. But realistically it's just a very small part of what we do. We do plenty of tax compliance work, which many of your small business listeners will do basses each quarter and have to do compliance reporting, which is probably the frustrating part of running your own business. Because not only are you an expert in your field but especially those in the creative art, type industries, compliance and tax work are probably the best on the list of things they want to get involved in. But unfortunately, we're forced to have to know a little bit of that information.
But from our side, we look at it to get to that compliance work, we have to do a fair bit behind the scenes at converting source docs into a meaningful type of report. We can open up a review of your business. And then I guess from a business advisor perspective, we use the client's data to help them make some informed decisions, whether it be tax planning, succession planning, or a bit of wealth creation. And much of what we do is about creating wealth for our clients. At the same time, we're also trying to protect it from anybody trying to challenge it, people being sued. We try to make us get asset protection in place where we can.
We also do a lot with legal structures. I guess a lot of people say to me as an accountant, you must be good with numbers. Oddly enough, maths was my worst subject at school. I think a lot of my job involves law and dealing with the legal interpretation of laws as to how we can apply it to each person's business and through using those structures we can work with tax minimization as well as that asset protection. In addition to that, I guess sometimes we're counsellors psychologists, friends confidants, and we tend to often know a lot more dark secrets about our clients than what many of their own families do at times because people do open up and it's a, it's a trusted relationship or what they call the trusted advisor.
I'm probably going a bit red thinking about Estella and how many emails she has seen from me where I'm bearing my soul. That's true if it's a similar thing with a business coach, people will tell you things that they're not telling even their best friends. How do you build that relationship? I know we'll get onto this a bit further as well, but I work more closely with Estella. I would feel very comfortable pretty much telling you anything.
How do you build that relationship, especially when it may surprise people that I've worked with you for a couple of years, but I've never met either of you? I think I've met Tim accidentally just walking down the street. But I haven't met you face to face and I think people sometimes worry, well I need an accountant who lives near me or I can go in and go to an office. I know you've just mentioned you work with people all over Australia and internationally. How do you build that relationship?
One thing I've learned from the partners in our firm and my work colleagues is that we value our clients and always aim for building up a proactive and long-term relationship to achieve that. I'd say regular and open communication and good connection with our clients are important during the year. If we see things that may be worth bringing to your attention, it can be an update in rulings that's important and relevant to you. Or maybe just simply something needs to be fixed in your file, we actually on it or let it straight away instead of waiting till the end of the year or waiting till the client comes to us.
I believe with a proactive approach towards managing our client's file also makes both sides' lives much easier when it comes to the actual tax preparation stage. Other than that, also as a team just discussed us as accountants, what we could offer is way more than just the file in the tax return. We provide different levels of services to our clients based on your unique needs and to be able to understand what your need is and how can we help you more or better, communication from you is also important. Just to be assured we are happy to assist you with any tax or accounting-related matters throughout the year whenever it comes up. It doesn't have to be just the tax time.
Yes. You've just alluded to you saying more regular contact and we've talked about already a lot of people thinking that accountant just equals tax time and return on my tax. I would say that the majority of people I've worked with over the last eight years and even before that when I worked in employed roles and I'd hear from my colleagues and stuff and as of myself will only talk to their accountant at tax time. When I started working with you guys and I said this to you, I was so surprised in the very first meeting, I think we had an hour-long Zoom and you were explaining complex, well what I thought was complex at the time, ideas about business and what's the difference between a company and a trust fund and all these things in a beautifully easy way.
Somebody like myself to get their head around. It was exactly what you've just said, Estella taking an interest in my specific business and in what is suitable and applicable to what I specifically do as opposed to you are just another number in our firm and we're just going to crunch the numbers and get you a return. What is normal for accountants, because I have worked with people before you, I worked with them for six years and I thought they were amazing because I didn't know any different and before that, I worked with a woman and she was good, but what you don't know, you don't know. What is normal because I have never had the level of care that I've had from MJA and since I've recommended people to you and just a reminder, I get no kickback for recommendations. I'm just recommending it because I think it's a good thing. But what is normal? Is what you do normal? Do you think that that's what most people should expect from an account?
Many accountants are the same. Some people only want the vanilla service just do my tax and that's okay. That's all they want sometimes. A lot of the time things happen or they make transactions or make business decisions without talking to us first and it makes it hard because then we're usually cleaning up the mess afterwards if it's not done the right way. What, I guess we work on a bit of a philosophy of getting to know your client. We need to know our clients before making any decisions for them and the type of client we're working with. Some clients don't want more than the basics, some are scared of the costs of the accountant. Probably touch on that a little bit further down, but it boils down to if we know our client, what they're after, what their risk strategy is, and what they're aiming for out of their business, we can work towards them to help them achieve those goals. And without getting to know your client we really can't do our job and we make some pretty heavy decisions for some clients at times or give them some solid advice, but unless we know what they want then we can't make the best advice for all of them.
You do, I know I keep like singing your praises, but honestly you guys have just helped me so much and even recently, I was just talking to somebody on the weekend who owns a business and she was saying an issue that she's having to get a mortgage because when you own a business, and a lot of the time people pay themselves a bit less and all these things to help with tax and everything else, so then it looks like you're borrowing capacity is less. I recommended the mortgage broker that you guys had recommended when we had had the same thing, you run a small business, and getting a mortgage is not as straightforward as if somebody is employed and has payslips and everything else to go on. I feel like you're constantly really helping people from a holistic viewpoint.
Talking about when I mentioned before when I first started talking to you and I started my business as a company, it's still set up as a company that will potentially go to a trust fund but or a trust, sorry, not a trust fund. What is the difference between being a sole operator, a company and a trust? And obviously, we have readers from all over the world, if you're in the US companies like your LLC, and in the UK, they have different terminology for things as well, but what is the difference between those three and is one better than the other? If you are running a small business.
I might get Estella just to run through the sole trader side and I might cover off on the trusting company if you like.
All different entities have different benefits, but the key is assets, protection and tax. In general, trading is best for businesses with low stack-up costs and minimal legal requirements. It's relatively easy and inexpensive to set up and maintain. It doesn't require you to lodge a separate tax return for the business itself instead or was done with your individual tax return. However, because of that you are personally subject to profit or losses generated from the business under the individual tax rate and can't be shared with other people or organizations. The major downside to this structure is that it forces the owner's personal assets and financial status to business risks when things go wrong.
Just to be clear on that, if people are reading and thinking, I'm a sole operator and it's fine and I hear a lot from people going, I'm a solo operator or a sole trader because I'm not earning more than $75,000 or whatever the limit they've got in their head is, but also you've just said then that your other assets, could that be your house? Like if you work from home and you're a sole trader and let's say your business gets into some strife or litigation, is your home then part of it or what other assets would be potentially at risk? Because you're a sole trader, not a company.
Yes. If you are running the business as a sole trader, basically all your personal assets and your name are subject to risk.
Your house, your car, or anything else you may have.
That is usually in a case when you're sued. If you are sued or somebody's attacking your assets there and trying to get money out of you, the sole traders give or offer you the lease protection and a partnership's very similar, but when it comes down to if you're being sued by a bank, they usually have you all tied up completely anyway, they've usually got the directors, doesn't matter what structure you're in. But from a person running it as a sole trade, you're definitely wider open to scrutiny from that creditor coming to attack your business.
Interesting. You brought up partnership as well, I hadn't asked about that, but I think that's an important thing, especially when people are going into some business partnership. What is the difference between a company partnership or partner and a trust?
The partnership's got the same legal responsibilities as a sole trader. The only difference with it's, there are two people, and you have a partnership agreement between yourself or could be any number of people, it could be 30 people involved in a partnership. If you want it to be generally in small business it's one or two, it's often a mom and dad type structure and the income if both are working in the business, they can split that income between them and it's a way of using some splitting that the tax burden I guess to some extent with a company or a trust, we mainly advise that for the asset protection perspective and important asset protection as a company director or a business operator with a corporate structure. Whereas opposed if you're running a business on your own, then you've got a hat on your own personal life.
But there are also times when you are also a director and could be challenged personally on your assets as a company. Without trying to confuse that too much, the structure generally will be that if you've got a company or a trust, you'll have the business operating in that one of those structures or a combination of both. You'll be also personally operating it as a director and I'm sure everybody's said what's involved in being a director, but nowadays the ATO and a couple of other organizations are starting to get around that directorship and having separation of assets and if you do mess up, let’s say with your tax obligations, the ATO is actually able to start chasing down your personally. There's a little bit less asset protection than what we've had in the past.
Another question I think that people ask a lot or maybe also don't understand is which financial reports do you think that small business owners should be looking at regularly? I know in tools like Xero you can look at a range of different reports. Are there ones that you would suggest to your clients that they should be looking at pretty regularly?
There are two main reports definitely worth keeping track of. They are profit and loss and the balance sheet. Profit and loss show you the net profit or loss position of the business for a certain period. It summarizes the revenue and expenses for the selected timeframe and also allows you to identify which costs could potentially be reduced to improve profitability. Balance sheet details, the business's assets and liabilities. It provides a snapshot of what your business is owning and owing at a specific point in time. For example, by looking at how much money sitting in your bank account and how much debt you owe needs to be paid in the short term, you'll be able to quickly assess whether you have enough cash on hand to cover the current demands.
After all, cash flow is one of the most important things that to keep your business running. Other than that, if you use the software to issue invoices and create bills, the other two reports should be checked on a regular basis or trade data and a trade creditor report, or they might be called account receivable and the account payable report, depending on the software you are using, those two help you to keep on top of outstanding invoices and the bills, especially with those overdue ones, which also leads to improve your cash flow management.
It'd be fair to say with the invoices and create bills function in a lot of your bookkeeping programs that not everybody uses that function. You might be a small business not necessarily doing invoices, or you may be doing invoices and doing that side of it, in your bookkeeping program. But often people don't put in their bills and which keeps their accounts payable up to date. Sometimes this can be a very underutilized area. That might be a better way of keeping track of what expenses you've got coming up from another side of it. There's another report that quite often, well no bookkeeping program does offer, and from time to time I work with clients to prepare, what I call a wealth snapshot. Usually, this is not just for your business situation, it's usually for your whole situation. Take into account your personal assets, your business assets and everything else so that you can assess where you're at. It's quite easy if anyone's good at doing spreadsheets, you can simply list at the top of a spreadsheet all your assets and what the market value is.
Sometimes I actually like to have a separate column that shows the cost of what you originally purchased for it and then a market value besides that. And then you do the same with your liabilities and work out what your liabilities and then you work out basically where your net wealth is sitting at that point in time. Quite often we see people thinking they're not getting anywhere or not making enough money because my bank account doesn't have enough funds in it. But sometimes reducing debt, if you've got debt in your business or even personally or your assets are going up in value, they can actually contribute and show you a better picture of how you're performing and whether you've got assets behind you. We don't want it be going negative, but sometimes that will happen if the cost of your assets goes down a little bit.
The hardest part's trying to value what your business is worth. I think if you're a small operator and it's all to do with all the value in your business being centred around you, there's not a lot of goodwill you can value. But sometimes if you're building a business that can operate without you in it, you'll grow some value in that business as well. Just something fairly important, just to note, Estella mentioned the balance sheet. It's usually valued by your accountant at cost value. It's not a live timeline. Everything else seems to be fairly live with your debtors and creditors, but keep in mind that when you look at a balance sheet, all the assets that you purchased, so if you bought a property in there or something of investment value, usually they will be valued at your cost value. Sometimes you will have to review that to say, it might show on the balance sheet I bought it for $300,000 a property for argument's sake, but when you look at it, the property might now be worth 800,000. You need to take that into account when reviewing a balance sheet just to get that personal or that extra snapshot of where your wealth is actually sitting at that point in time.
Wow. In a company, can you have multiple directors as well and are all of those directors equally liable for things?
Yes, If you're a director in a company, you're liable for anything there. If you are working on a site somebody got seriously injured, work cover could certainly have a go on direct and negligence. It's important to structure that. We often have situations where, from an asset protection, we've seen where let’s say a couple might be working, running the business, one owns all the assets in their house and the other one is the director. If they ever do get sued, they will go to the director, but the person who owns all the other assets is not, and their assets are harder to get to. Sometimes there's a moral obligation in that some people think, I don't want to do that, that's not fair. And that's okay too. It just comes down to people's views on how they want to structure that whole setup. There's also with that shareholders, there's a difference between a director and a shareholder. Shareholders own the assets, if the business won't belly up, the shareholders lose their money. Whereas a director can own shares in that company, at the same time, they can also be sued if anything goes wrong in the business as well.
Okay. What is the difference between a trust and a company? Why would someone become a trust as a small business?
The trust. Just on a company from a tax perspective, it pays a flat rate of tax from every first dollar, which is about 25%. For most small businesses with a trust, you operate it and it's a little bit similar to a partnership in the way it can distribute its profits. A trust has a bit more flexibility in how it can get income and profits out of the entity into the individuals or what we call beneficiaries. A trust has a beneficiary that usually receives the profits each year out of the trust. In the past, we've been very keen to use utilize trusts with what we call a corporate trustee. And the reason for that is that we'd be able to split income amongst other family members as well as get asset protection. In saying that the ATO recently brought out a ruling which has made running a trust a lot harder and we used to be able to distribute to various families using children or parents or whoever might be available to take a distribution. The ATO’s recent rulings basically said that unless you're physically going to pay the funds over, it's going to be a lot harder for you to distribute to other family members.
Okay. It sounds like they're cracking down and is this where trust fund babies come from, that their parents used to be able to give a lot of money to them and it wasn't their money, it was just a tax deduction?
It used to be, it's been accepted for 40 years that that was the process where you could distribute to the children and all of that, but now they're saying unless you're prepared to pay them. I wanted to distribute to a child of 50,000 and they would pay the tax on that at their marginal tax rate, I would physically have to give the $50,000 and it's not allowed to sit there as a loan anymore. In the past, it has been a loan, which ultimately in many family arrangements, the kids will get that one day when we're not around. But that's not going to happen unfortunately from here on in. They've closed that loophole. Ultimately it comes down to paying the individuals involved in the business a fair amount. And certainly, if you've got kids that work in the business, they can be presently entitled to receive a distribution if there is the opportunity there.
Okay. If you're a small business owner and you're reading this and thinking, I just set up as a sole trader because that's what I used to do or what I didn't know that I could do something else, how does somebody decide which one is better for them?
Unfortunately, I think that's something you've gotta have a discussion with an accountant on. it boils down to everybody's personal situation looking at what their aversion to risk is. I've had doctors that need to set up multiple trusts and are scared of being sued and if you're in a high-risk zone, we should be having a chat if you are running a small business just ticking along. I know as Etsella alluded to earlier, sometimes if you're in a very small business starting off, they're looking at the cost of the structure. Basically setting up a company or a trust will be somewhere in the vicinity of $2,000 initially right from the get-go. Sometimes this influences decisions. One of the advantages or something that's come out in the last few years, which has been terrific, is the ATO has now accepted that we can do a small business rollover. If you are operating and starting out as a sole trader, we can now roll it into a company or a trust without any tax-adverse consequences of making that rollover. You're not necessarily boxed in once you have done it sometimes it's good just to start off as a sole trader with the intention somewhere down the track you'll roll over into a different structure as your business builds.
The other thing when you just mentioned about costs, and that could come into play when you're deciding which structure you want to have, there are costs, obviously having a company and as the employee in your own company, you have things like work cover and other such fees, which I think a lot of people don't realize that they have to pay. I remember having a conversation going, I work in my own business, I'm not going to sue myself and then I have to pay work cover and I get sent the little posters that I jokingly put up in the kitchen. I know I shouldn't necessarily joke about that, but what are the costs that people may not know that they should legally be paying?
Some of the hidden costs especially those involved in a company, if you want money out of the company, it's gotta come out to you as either a dividend or a wage. And if you do take out a wage, they're on cost, as you said, the work cover, you'll also have to pay yourself superannuation, you have no choice, you have to pay that under the superannuation guarantee scheme. If you choose not to, the ATO will actually still come at you and charge you superannuation guarantee penalties on top, which many small businesses say, well I'm paying myself, so what's the difference? Unfortunately, the legislation says that if you're an employee you must comply with work cover standards, and payroll tax, if you're becoming quite large, most small businesses won't have a payroll tax issue, but you'll definitely have those on costs of doing it. In addition to that, I guess there's the cost of the bookkeeping and a lot of the time you'll also have to pay yourself wages through a bookkeeping program, whether that be Xero or MYOB or QuickBooks, you'll have to have a program that will allow you to be able to do wages and pay for that. If you're in a company or trust scenario, trust is not so bad. You don't necessarily have to do it and pay yourself a wage because you can pay yourself as a distributor.
Interesting.
We've got heavy.
It is, but I think this is stuff people don't even realize that they have to do or that there are legal complications. I think this is one of the big learnings when I moved to you guys that you were like, have you been doing this? Have you been doing that? I think other people have the same idea, “I've got an accountant, surely they're looking at this stuff for me and I don't need to be proactive.” I think a lot of cases that is not happening. You've also gotta remember, I remember one accountant who was saying, “You are signing a piece of paper, it'll be the ATO coming after you, not me as an accountant.” If anyone's reading from an overseas ATO, it's Australian Taxation Office. Tim, you've been in this game for a long time and Estella feel free to jump in as well. What things do you think small business owners are fearful about when they're moving to a new accountant or just starting to work with an accountant full stop?
I think the cost is always the first one. Let's get the elephant in the room out of the way. The cost is always something that people fear. They look and go, how much is this going to cost me? In many cases we've looked at it, I know certainly the higher-end accounting firms and the big four and that type of thing, they'll always say, it's going to cost you, but what's it going to save you? That saving might be whether you've got where the asset is protected in. In times when things go wrong I guess. But when it boils down to it, the cost is certainly something that people look at and say, this is going to cost me a fortune.
We're not lawyers, we're not quite there, but when it and I'm not going to hide behind it, we have it's an expensive exercise at times to go through that whole restructuring or anything like that with your small business, at the end of the day you get what you pay for and if someone wants a vanilla service with not a lot there we can certainly tailor to that. But a lot of people get the advantage or the best benefit from their accountant by asking the questions and getting their answers, questions answered are probably the most important thing for them so that they can make better business decisions.
Totally. I think that it's very similar to business coaching. You get what you pay for if you want to go the cheapest possible route, then you may not get the experience that you're looking for. A lot of people are scared to show me their financials. I know that when we do business coaching, what would you say to someone who's thinking I should change accountants or maybe I should work with MJA or another accountant, but then I'm going to have to relay to them all the worst parts of my business. All the mess behind the scenes. It's very confronting. It's like almost people changing psychologists. It's like I have to start from scratch again and tell everyone all my problems. What would you say to that? Or people even that are thinking you're going to judge them somehow for the mess that they've put them that they've gotten into.
Well just to be assured that there's no judgment at all, no matter how your business is going. In fact, to those who are listening to the podcast now as small business owners or seriously preparing yourself to start a business, you should just be proud of yourself that you have the courage and the perseverance to run a business with something you're passionate about. It may not go in as well as you wish right now, or you may feel you have no clue on what to do with the financing side of it, but that's why we're here for, we're here to support you, not judge you. Also, I see a big customer service role in our job. Just let us do what we are good at, looking after your file, and providing the accounting side of support you need so that you can focus on doing what you are good at with your business activities and make it grow. I think the key here is that we work together.
And Tim, did you have anything to add to that or you?
Effectively we just see it all. Nothing surprises us, but certainly no judgment from our side. And we've certainly picked up things that someone could improve their business along the way or sometimes a clean set of eyes over the file can make a big difference to it. I think the other thing is sometimes when we're working in our business, we're not working on our business and sometimes we can pick up some of those things that, that you might miss because you're too close to the source. You'll often find from a relationship perspective with your accountant, often we know a little bit more than the real world or even some of our partners and everything we clients tend to confide an awful lot in what they do. We need to know that picture sometimes. And sometimes we would know about various things or health issues or other things that not the rest of the world doesn't know, but it's quite important in how we advise in the bigger picture and that relationship is really important that we build with our clients.
I always say to know your clients. Over the years we've picked up little things, even somebody with a gambling addiction and they didn't realize it and tried to help them there and we still maintain a relationship with that client 20 years on, which has been great. I guess we've all got the ugly part of the backyard that we never quite get around to cleaning up. The books are probably no different and I guess from our side it's just trying to make sure the whole house is in order and not just for the businesses but also the the operators. It's not just the if you own a company, it's not the company we're interested in. We're looking at the big picture of companies, individuals, families and everything else.
There's so much truth to that. I'm like blushing because you guys have seen all the mess behind my business too. When you're in that situation, and like I said, it's almost like a psychologist and like you said, from gambling addiction through to health issues, through to maybe just extra spending that they didn't want to tell their partner about or something else. How do you both stay engaged when you are dealing with these issues all day long or when people can be quite tense talking about their money or stressing about, I owe this much tax back? You have to deal with that, but you're also then under the pump yourself because it's tax time or it's a very stressful period. How do you both stay engaged in what you're doing?
Some days you feel you're taking on the burdens of the world that aren't your burdens to take on, but we often we're there for the ride with our clients a lot of the time. From my side of it, keeping engaged and just trying to stay on top of things. I'm just lucky I've got great staff in my business I've got some terrific accountants like Estella in our office and support crew and they help us get through there and we're a bit fortunate, we've got 26 odd people in our practice so that if one of us is struggling to be able to get through the work, we can get somebody else to assist. We've got a great range of knowledge right across the practice to be able to cover that.
But I guess from my side of it workflow management, prioritizing the work's essential for me to know who's most important, and who needs dealing with it. If I've gotta drop everything today to get a certain job across the line to save a client or help the client, sometimes we've gotta do that. You'd like to go to see a doctor if you're in line with something and the doctor in front of the person in front of you is bleeding madly, they're getting priority. Sometimes it's a bit like that for us but I guess while often it's quite stressful at times dealing with it, seeing our clients appreciate our efforts and improving the situations is quite rewarding for us.
For me, I think it's purely just the passion for my job and the care of my clients closely monitoring my workflows and prioritising the more urgent on the list that helps me stay on top of all my jobs and tasks.
You're very passionate. It's so nice like Estella because Estella is predominantly who I'm working with and yes, you are very passionate about money and numbers and stuff.
We do have outside interests other than just work, but it seems to absorb.
I mean what a great thing to be passionate about because you're helping so many people. What are you both most proud of from your journey in your careers so far?
I'm probably lucky. I own my own small business, we'll call it a small business for partners and 26 staff office. We work hard in the business and the staff work hard as well. Sometimes it consumes me, but in reality, the clients that I've met over the journey are something else. They're just some amazing people and you never know what you're going to see on a daily basis. You do build a big relationship with your clients, but sharing their journey is a big part of what we do and a lot of the enjoyment from what we get out of our job too.
That’s huge and Estella.
I came to Australia as an international student eight years ago and we serve English as my second language. I'm simply just super proud of myself for what I have learned, grown and achieved so far in my career. Also, I'm very grateful that I have such a supportive work environment with other work colleagues and partners in the firm. Also, the trust of my clients is the biggest accomplishment of my work and it motivates me the most. It makes me feel that I'm valuable and I'm doing something meaningful when they show appreciation.
Probably add to that and just say Estella is a rock star. The way she has taken it on and the way she gets things done is just amazing.
Thank you.
It is amazing. Both of you, the way that I came to you is through my sister who raised you Tim and considers you a real mentor and person in her life as well. I feel like then I met Estella and then I rave about Estella to everyone. You guys are doing such a good job in that whole relationship building and I think when people think of accountants, they don't always think of relationship building. They think of numbers and crunching and can you get me more money back at tax time? But it's so much more than that. If people are reading this and they're thinking I want to connect with MJA or I've got a question for you about my own accountant and should I swap, where can people connect with you? And then what's next for MJA?
If you're interested to talk to us just to search MJA Accounting, we have listed our office numbers and contact email on our website. We are based in rural Victoria, but everything can be done remotely now. Wherever you are based in Australia, feel free to give us a call or send an email for any inquiry you may have.
We also have plenty of clients on the international interstate. I guess with the modern world of technology, we can be anywhere working with clients and we do have a lot of clients outside of the state that we work with as well. Building relationships is the key to that.
I was just going to ask that. Because people will sometimes assume, if you're in the state of Victoria or this particular state in Australia, you have to work with an accountant in that state because maybe there are different laws or different things. But just to reiterate, you work with people everywhere and even outside of Australia.
Absolutely.
Awesome. Thank you so much and thank you for taking so much time out of your hectic schedule at this time of year in particular. But I appreciate it. I think this is going to help so many people on their journey and just even if they call their accountant and have an extra conversation that they wouldn't have had otherwise. Thank you so much.
Thank you for having us.
Thanks for having us.
Bye.
Bye.
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Talking about money can be such a confronting thing, but the more that we do it, the more we get comfortable asking for help around money, the more we understand finances and have some financial literacy, we understand which reports to be looking at, we just become better business owners. The more that you can do it as uncomfortable or as awkward as it may feel, the better you're going to run a business. I just want to thank again Estella and Tim for coming on from MJA Accounting. I took so much from that. I know that you'll get so much out of this regardless of whether you already have a great relationship with your accountant or if this is something you've never thought about, but now that you've listened, you're like, “That is what I want.” I want somebody who's on my team who feels like part of the team and is there to proactively help me with my money and with my financial literacy.
If you want to get in touch with MJA, you can Google MJA Accounting. You can find them at mjacpa.com.au. And like they say, they work with people internationally as well as all over Australia. If you are outside of Melbourne or outside of regional Victoria where they're based, please know that you can work with them wherever you are. I just want to thank them again. I would love to know what you took away from today's episode. What are the things that stood out to you? I'm going to highlight too, although there's so much more than that. The first is just how focused they are on relationship building and making it a safe space for people to get vulnerable and talk about not even just money issues, but also money hopes, what am I trying to do in the future?
What do I want from this business financially? How am I going to make this work? How much do I want to pay myself? Where's my superannuation at? Do I need to pay back a hex debt? What does that look like? Are there grants or other things that I should be going for as a business? They allow you that safe space to ask those questions and to do so in a way where you're not feeling judged, you're not feeling that somebody's going to be like, “You haven't paid your tax for five years.” Are you serious? You will never get that treatment with MJA. They're always open and warm. As I said at the start, when I first met them we were talking about different company structures and other things and Tim was just so kind and real and warm in the way that he answered a lot of my questions.
There was no, shouldn’t you know what? Or how are you not clear on that? Or any of that judgment. There was just a judgment-free zone. I think that relationship building is so important no matter what you are offering, whether you offer service like MJA or you are in a product-based business, the relationships are where you are going to nurture finances as well. To be real. The more people feel comfortable and confident with you and the more that you're having a genuine connection, the more likely they are to either work with you again or buy from you again or tell other people about it. Just as I'm doing now with MJA, when you can cultivate that relationship and look at how are you doing that, if that's taking time out to do a clear onboarding with a new client like Tim and Estella did with me, whether it is taking the time like Estella has done many times to answer my questions or to go over something three or four times if I'm not understanding it and being okay with that.
Also in a product-based business in terms of relationships, there are so many ways that you can use your point of sale system to write notes about people so that that person bought a candle they were selling they were getting it for their mother's 60th when they come back in. How was your mom's 60th? Did she like the candle? It takes two seconds to write that stuff into a note system or to create a CRM system that doesn't take two seconds, but you can create a CRM system even in Excel. You don't have to always invest in some huge tool like Salesforce but think about how are we relationship-building in every single part of our business. The second thing that stood out to me, and I think it stood out because I just know that so many people either feel scared about this or don't dunno where to start or maybe have like all sorts of money mindset limitations going on, but is just to educate yourself around money.
Tim and Estella talked about the different reports that people should be looking at, but also talking to people who know what they're talking about, like an accountant, a financial planner, and other people to ask for that help and to seek that out. I love that Tim brought out that sometimes when you are not so attached to the business because you are outside of it, so you're a business coach or you're an accountant or you're a lawyer or something else, you can see things that maybe the people in the business can't see because they're so close to it. I think that is such a good reason to seek out help and to ask. It could be an accountant or a business coach, but it could also just be another business person or a family friend who's got a business. Maybe not be asking them specific accounting questions if they don't have those qualifications, but be asking for help and to seek more knowledge, particularly around finances.
Many people go into business to make more money than they were doing in another role or to make the same amount of money and to get more time back or to do a bit of both. We have that goal and yet I know that a lot of people don't seek out help to better understand that goal or to better understand how they can achieve that goal. Money is a huge reason why people get into business, but it's also a huge reason why people have to shut down their businesses because there is no cash flow. There isn't anything happening to sustain the business financially long term. We spend so much time learning about Instagram or TikTok or Threads or whatever the latest thing is, and yet maybe we could spend just a bit of that time investing and learning about our finances from an accountant, from somebody who is qualified in this area, a financial planner, an accountant, even a bookkeeper.
But to be talking to these people and if you are already paying these people, see how you can catch up with them more regularly or see how you could ask them a couple of more questions. Don't be afraid to do that. I think sometimes in business people feel like, they should just know the answer. It's important to be like, “I don't know the answer to this. Can you please explain it to me?” Because the more financial literacy we can all have, particularly women, it's going to be better for the whole community and everyone else long-term and it's just a better business investment to spend your time looking at the things that are going to help you long-term as opposed to maybe getting caught up in things like social media. I know I always slam out social media, social media's fantastic, but I think if people took a little bit of the time they spend trying to analyze and figure out social media into trying to analyze and figure out their finances would be in a better position overall as business owners.
That is it for today's episode. If you wanted to find out the link to MJA or go through this in text format, you can find the podcast show notes over at mydailybusiness.com/podcast/334. Just a massive thank you again to Tim and Estella from MJA Accounting. You can find them at mjacpa.com.au. You can also just Google MJA Accounting. Thank you so much and I'll see you next time. Bye.
