Perth, 18th September 2010
This is one side of the business that needs to be done but which not necessarily is something we excel at or enjoy doing… 🙂 Though I am relatively good with numbers (I am known to spot mistakes in accountants tabulations) I am always dreading the accounting side of the business. However it is an absolute necessity and today was one of those days that I spent time with my accountant to go through all the books and make sure that our figures are properly consolidated in the accounts. As a tax registered company we have to submit our tax returns like any other business for each financial year. The thing is that as a small practice we do not employ a full time accountant, so it comes down to discipline in recording and regularly updating the “books”. Each of our offices has a dedicated project administrator who keeps track of all invoicing and payments, but it still needs to be properly converted and reconciled in the official company accounts.
In Australia our financial year runs from July to June, but in China for instance it runs from January to December. That complicates matters at times when we consider our intercompany dealings, but in general each office (country) runs as an independent financial entity. Our professional lighting design business is an international business with projects all over the world and so are the accounts for our project income and expenses! We for instance have project fees in four different currencies (Australian, Singapore and US Dollars as well as Chinese Reminbi) which attract exchange rate issues, international bank transfer charges and withholding taxes and GST when applicable. Add to that project and payments received can be in one country (China for instance), while the design work is done in another country (Singapore or Australia) having to add intercompany reconciliation into the mix.
As I was going through all the figures today, I realize how important it is to keep things simple for our own sanity! Unfortunately due to the nature of our business and sensitivity to the economy (read: clients cash flow), our income is very inconsistent. Hence the importance to keep abreast of our own cash flow position and estimated financial outlook as much as we can.
One of my friends, an experienced company director himself, once told me, income may vary, but overheads are guaranteed!