The importance of goodwill in your business

Goodwill in accounting refers to the intangible value that a company can hold, above and beyond the pure financial value of its assets. This covers areas like brand reputation, intellectual property, and both external and internal relationships.

A business that can show its goodwill in the marketplace is actually worth more – both intangibly and financially. When a company is up for sale, the price a buyer is willing to pay will be greatly increased if the seller can demonstrate this quality of goodwill.

What do we mean by goodwill?

Goodwill includes the value of your business’s brand, your loyal customers, proprietary technology, reputation for great customer service and good employee relationships. It is the amount someone is prepared to pay for your business that is above your net assets at fair value. Building goodwill in your business is not only good for its market value, these aspects of your business potentially also represent a competitive advantage.

Five key ways to build goodwill in your business through relationships

In a business context, building goodwill is all about developing a trusted and benevolent way to work with your stakeholders that can increase the longevity (and value) of your business idea. In the long term, a business that’s part of a trusted industry network has great potential in the marketplace.

  • Make goodwill one of your core values – every business needs a set of core values at its heart. With the right values in place, you can put goodwill front and centre of how you operate. Be kind and thoughtful. Always be honest and upfront. And behave in a way that helps the business, but also helps your stakeholders, community and team. Living goodwill in this way makes it second nature for everyone on the team, and helps set the best possible reputation for your company.
  • Nurture your customer relationships and make them feel valued – a solid customer base is one of your biggest assets. So, treat these customers well and do your best to create long-term, valued relationships. The more you can do to reinforce this value, the more likely it is that customers will become proactive advocates for your brand.
  • Build long-term trusted relationships with suppliers – your supply chain is the arterial system that feeds your business. If you want to keep this supply chain stable and affordable, you need to be professional with your suppliers. Pay them on time and negotiate fairly over prices. Be reliable with your orders and work together if there are any supply problems. Treat these businesses as you would want to be treated.
  • Treat your employees well and make them feel engaged – be transparent and open with your team. Keep them in the loop with planned strategies and results. Offer them great benefits and time off. Make sure they are happy, healthy and loving their jobs – and do everything you can to create a great team spirit within the organisation.
  • Be truthful and honest in all your business dealings – Sometimes telling the truth won’t seal the deal, but it’s always better to demonstrate this goodwill and to be open and honest. Dishonesty is never the path to greatness and it could break the trust you have with your customers, suppliers, team or community.

Talk to us about nurturing goodwill in your business

Demonstrating goodwill in your business isn’t just one of those ‘nice-to-have’ goals on the CEO’s wishlist. It’s actually an intangible part of the value of your business.


Hiring employees who share your core values

At the beginning of your startup journey, you and your co-founders will be in charge of selecting and hiring the key members of your new team.

The people you choose will identify with your core aims for the business and will (usually) share your core values too. For example, if being green is a key value, the people you hire need to resonate with this. But as the business grows and expands, it's likely that the hiring process will move to your operations director, human resources director or people managers.

So, how do you ensure that you're still hiring people who share your core values? And why are these foundational values so important?

Why are core values so important to a new business?

Your values are the pillars on which the business is built. They’re the fundamental building blocks that will define what you believe in as a brand, how you treat your customers and employees and what your underlying mission will be for the company.

  • What's the advantage of having a team with shared core values? - A team that shares the same ethical foundations is a team that works well together. You know WHY you’re doing what you do, and you know the right path to take when operating the business.
  • How do you weave these values into your hiring process? - Make sure the initial job description clearly sets out the values you expect from an employee, and how these help to drive the company forward. You'll also attract the right talent. A Glassdoor survey found that 77% of respondents consider a company’s culture before applying for a job there. During interviews, swap outlooks and to gauge if this person is a good fit for the team.
  • What should you include in your onboarding for new employees? - It’s a good idea to have your company values written down in a format that can be shared with new hires. By formalising your core values, you create a solid bedrock on which to base your training and onboarding. New employees can read, digest and ask questions about your values, and can see how your existing staff apply these values in the real world.
  • How do you measure employee satisfaction and adherence to these values? - Having regular catch-ups with new employees is a must. Your managers should be holding 360 feedback sessions at least once every 6 months, so you can track progress, performance and employee satisfaction. Your core values should be part of these metrics, measuring how well your employees are hitting the right standard, and finding out what the business can do to make this easier.

Building a team that reflects your brand values

When a customer calls your customer support line, or a potential new client visits your offices, they expect these experiences to be consistent. This doesn’t mean getting rid of personality or the uniqueness of each employee. But it does mean having the same foundational values being lived and demonstrated throughout the company.

With a team of people who share your vision for the company, you’re ready to expand, scale and deliver the very best customer experience to your valued customers.


Understanding Your Breakeven Point

Understanding your business breakeven point is essential to know how much money you need to make to stay in business. It can therefore help you make well-informed financial decisions and practical business plans.

The breakeven point is the income or sales needed to cover all costs. Any earnings above this point generate profit. So your breakeven point tells you the minimum sales required to continue operating a viable business.

Understanding the breakeven point in conjunction with financial reports can give you valuable data to analyse fixed and variable costs and set sales targets for the business or individual staff members.

Fixed and Variable Costs

  • Fixed costs - remain the same regardless of how many sales you make. Expenses like rent, equipment lease repayments or full-time staff have to be paid whether you sell any goods or services or not. Fixed costs are often called overheads.
  • Variable expenses - (sometimes called production costs) fluctuate based on sales. For example, cost of goods sold, production labour, and commissions paid to salespeople will vary according to the number of goods or services sold.

It's helpful to work out an amount or percentage of variable costs compared to the sale price of your products or service. This may not be exact initially, but even if you get a rough figure to work with, this will help calculate your breakeven point. Over time as you analyse your financial reports, you’ll be able to refine the calculation and adjust your selling price accordingly.

How to Calculate Breakeven

You’ll need to know your fixed costs (overheads), selling price and production costs.

One common method of calculating breakeven is as follows:

  • Overheads / (selling price – production cost)

For example, let’s say overheads per month (rent, vehicle lease, administration staff) are $20,000, and you sell a coaching program for $3,000 with variable costs (coach fees, handout materials for participants, advertising) of $1,500 per program.

  • $20,000 / ($3,000 - $1,500) = 13.33

You would need to sell over 13 programs per month to break even, which equates to $40,000 worth of sales.

If the same program had variable costs of $1,800, you would need to sell 17 programs per month to generate $50,000 worth of monthly sales just to cover costs. Variable costs of $1,000 per program would mean you only need to sell 10 per month to break even.

With these examples, you can see how important it is to understand your fixed and variable costs. Then you'll know exactly how much you need to make to remain in business and the resulting impact on your financial position. Once you have a reasonably accurate breakeven figure, you can quickly calculate your profit before tax for sales above the breakeven point. In the example where variable costs are $1,500 per program, let’s say you sell 20 programs each month. This would result in an extra $10,000 in profit (before tax) after paying for overheads and variable costs.

Can breakeven help with your pricing?

Understanding your breakeven point can give you some deep insights into your selling prices, helping you understand if they’re realistic.

For example, if your variable costs are high, how much more income will you need to reach breakeven. Is there a fair price for consumers that covers your expenses in a reasonable time frame? Do you need to raise prices to account for fixed and variable costs accurately?

Talk to us about calculating your breakeven point

There are different ways of calculating your breakeven point to confirm the viability of your business, and the ideal pricing point for driving both sales and profitability.

We'd love to help you understand your business financials in more depth, so you can plan for long-term sustainability, enjoyment and profitability.


Get in control of cashflow

It’s a well-worn phrase, but cashflow really is the lifeblood of your business.

When your cash inflows are greater than your cash outflows, that puts you in a positive cashflow position – giving you the liquid cash needed to trade, improve and grow as a business.

But if costs start to outstrip your income, that can leave too little cash in the pot. This results in mounting debt, problems paying suppliers and (in the worst cases) the failure of your business.

So it’s vital to get proactive with cashflow management!

Fast ways to improve your cashflow

Cashflow is an ongoing process, where you need to constantly track, monitor and act on the numbers you see in your regular cashflow statements.

A negative cashflow position can be due to a number of factors, whether it’s insufficient sales, slow payment of invoices or poor cost management. The solution to these issues is to take a proactive and holistic approach to improving the company’s cash situation.

Some key ways to boost your cash position include:

  • Improve your sales and marketing – creating more sales and boosting income
  • Make it easy to get paid – using the latest in payment tech to speed up payment times
  • Track and manage debts – chasing any late payments to reduce your aged debt
  • Manage spending effectively – and start to track, review and reduce your costs

Talk to us about improving your cashflow

If cashflow is becoming a headache for your business, we can quickly help you get back in control of your cash position – and attain that all-important positive cashflow position.

Get in touch to improve your cashflow.


Build long-term customer relationships: improve your financial stability

We know that building long-term relationships with your customers makes good sense for your customer experience. But good relationships are also a key factor in making your business more financially stable and improving your bottom line.

The answer lies in nurturing the relationship, building a sense of trust and satisfaction that leads to regular sales and a boost to your revenue.

Nurturing customer relationships that drive your profits

A business with no customers has no future. But a business with a pipeline of happy, satisfied customers can rest assured that it has a more stable and successful future ahead of it.

This network of happy customers doesn’t appear overnight. It takes time. But once you’ve built these foundations, you’ll begin to see the financial and non-financial benefits.

To drive your financial stability through customer relationships, you’ll need to:

  • Build trusted relationship with your customers – Having strong relationships with customers helps to create loyalty. If you can succeed in building this feeling of trust between both parties, you’re onto a winner – and can rest assured that you have a receptive audience who will want to buy your products and services.
  • Aim for repeat business and increased sales – A trusted customer relationship can lead to repeat business. As the old saying goes, you only have one chance to make a first impression. But if you continue to make a good impression, time after time, sale after sale then your customers will come back for more.
  • Turn your customers into brand advocates – customers that see the value in your proposition, and repeatedly buy from your brand, become advocates for your brand. They’ll tell their friends, their colleagues and others in their network just how great you are – and that’s the best kind of advertising a company can buy. This leads to referrals and word-of-mouth promotion, creating another channel for enquiries and sales.
  • Learn from your customers – Deeper relationships also help you understand your customers’ needs in a broad and detailed way. Talk to your satisfied customers, listen to their feedback and use this information to develop and build products or services that truly meet their needs and expectations.
  • Keep the business competitive and agile – Closer customer relationships help you stay competitive in your industry by offering solutions that cater specifically to your target audience. If there’s a significant change in your customers’ needs, or a seismic shift in the market, you can pivot, diversify and take the business in a new direction.
  • Keep the cash rolling in – a satisfied customer base will spend more readily and will also spend more. These benefits deliver a more predictable level of sales – a huge advantage for any business. Predictable sales = stable revenue + positive cashflow. And that’s excellent news for your financial health and your end profits. This means:
    • You can accurately predict your income over a given period
    • You can easily cover your operational expenses and ad hoc costs
    • You have money to invest back into the business for development or growth
    • You have better end-of-period profits, keeping you and your investors happy.

Talk to us about improving the financial stability of your business

Long-standing, evolving and trusted relationships with customers are the bedrock of your business. If you get it right, these solid relationships can result in increased sales, income and profits – all of which keeps the business more financially stable.

If you want to know more about nurturing customer relationships, and how you can tie this into your financial stability, please book in some time for a chat.


Hiring employees who share your core values

At the beginning of your startup journey, you and your co-founders will be in charge of selecting and hiring the key members of your new team.

The people you choose will identify with your core aims for the business and will (usually) share your core values too. For example, if being green is a key value, the people you hire need to resonate with this. But as the business grows and expands, it's likely that the hiring process will move to your operations director, human resources director or people managers.

So, how do you ensure that you're still hiring people who share your core values? And why are these foundational values so important?

Why are core values so important to a new business?

Your values are the pillars on which the business is built. They’re the fundamental building blocks that will define what you believe in as a brand, how you treat your customers and employees and what your underlying mission will be for the company.

  • What's the advantage of having a team with shared core values? - A team that shares the same ethical foundations is a team that works well together. You know WHY you’re doing what you do, and you know the right path to take when operating the business.
  • How do you weave these values into your hiring process? - Make sure the initial job description clearly sets out the values you expect from an employee, and how these help to drive the company forward. You'll also attract the right talent. A Glassdoor survey found that 77% of respondents consider a company’s culture before applying for a job there. During interviews, swap outlooks and to gauge if this person is a good fit for the team.
  • What should you include in your onboarding for new employees? - It’s a good idea to have your company values written down in a format that can be shared with new hires. By formalising your core values, you create a solid bedrock on which to base your training and onboarding. New employees can read, digest and ask questions about your values, and can see how your existing staff apply these values in the real world.
  • How do you measure employee satisfaction and adherence to these values? - Having regular catch-ups with new employees is a must. Your managers should be holding 360 feedback sessions at least once every 6 months, so you can track progress, performance and employee satisfaction. Your core values should be part of these metrics, measuring how well your employees are hitting the right standard, and finding out what the business can do to make this easier.

Building a team that reflects your brand values

When a customer calls your customer support line, or a potential new client visits your offices, they expect these experiences to be consistent. This doesn’t mean getting rid of personality or the uniqueness of each employee. But it does mean having the same foundational values being lived and demonstrated throughout the company.

With a team of people who share your vision for the company, you’re ready to expand, scale and deliver the very best customer experience to your valued customers.


The benefits of automating your customer experience

Smart use of automation doesn't just help you scale up your business more quickly. Business process automation (BPA) helps you streamline your operations and save money by eliminating many of the repetitive manual tasks involved in your customer support and customer-facing processes.

Embracing the benefits of automation

Digital transformation has been a powerful trend in the business world over the past few years. And the next logical step for a business that’s moved into the digital realm is to embrace the advantages of software automation.

This means identifying and logging the complex, repetitive processes in your business, and then using software tools to automate these key operational steps.

For example, you can:

  • Automate your tier 1 customer support – keeping pace with customer queries and enquiries can eat into the time available to your agents. By automating your tier 1 customer support, you provide a fast and scalable way to take calls and respond to live chat enquiries. Digital workers, armed with Conversational AI technology, can respond to customers, offer resolutions and pass complex cases to your human team.
  • Automate form-filling and information capture – Business Process Automation can be used to automate the process of capturing information from your customers. Instead of relying on a human team, your organisation can automate the whole process of data capture. This speeds up the process and reduces errors, giving you faster, higher-quality data.
  • Automate your onboarding activity – onboarding new customers to your processes takes time. But with AI automation involved, you can quickly run customers through your onboarding process, so they’re familiar with how your operations function and what’s required of them. The same applies to onboarding of new employees, or suppliers that need to follow a set process when trading with your business.
  • Automate your customer outreach activity – staying in touch with your customers is a big part of nurturing those relationships. A digital assistant armed with voice AI can call your customers to run surveys or ask for feedback on your services. You can also contact customers to offer exclusive discounts, beta testing or special offers.
  • Automate your re-engagement of lapsed customers – if customers don’t check out their eCommerce trolley, or don’t renew their subscription, this can have a profound impact on your bottom line. Using automation, you can contact lapsed customers at scale and invite them to re-engage with your brand. This could involve automated emails, instant messages or outgoing voice calls, all with the aim of bringing these potential customers back on board and interacting with your products and/or services.

Getting on board with automation

Automation and artificial intelligence are evolving quickly. If you can build the benefits of automation into your operational and customer-facing processes now, you’re setting the foundations for an efficient, productive and highly scalable business model.


Digital Signatures and Cyber Security

Authenticated digital signatures can be a valuable part of your cyber security approach. They are more efficient than printing, signing and scanning documents and provide one-off encryption for the highest level of security. In fact, they are more secure than a handwritten signature.

If you have a lot of documents that require signing within your business, whether internally or externally, using a digital signature app will streamline your workflow and make managing the signing of documents more accessible. Documents are also secured against manipulation after they have been signed.

However, not all digital signatures have the same level of verification and cyber safety.

It’s important to understand the difference between electronic and secure digital signatures. For example, you can scan your signature, save it as an image file, and attach it to documents. This is an electronic signature but not an authenticated digital signature and is easily copied and hacked.

An authenticated signature includes unique digital verification that uses public key cryptography technology within the signature. So, the signature comes with encrypted authorisation embedded in it, and it’s virtually impossible to hack.

Digital signatures also provide an audit trail of the signature process – from sending the document to when it’s read and signed, and sent back to the document owner. Once you’ve created a document and sent it for signing, you can see outstanding documents at a glance and send reminders from within the platform.

There are many options available for authenticated digital signatures. Look at DocuSign, Adobe or Secured Signing to start with and ask others in your industry if they use a solution they would recommend.

Check their level of encrypted security and audit trail functions. Most are very simple to use, requiring nothing more than you opening an account, uploading documents and sending. The recipient may need to create an account, but some apps use a code sent separately to sign the document without the recipient needing their own account.

We’re committed to helping your business stay secure in today’s world of cyber risks. Digital signatures are an easy tool to help your business’s cyber safety, and there are many other simple tips you can implement. Talk to us if you’d like to learn more about how your business can stay cyber-safe and secure.


Tax tips podcast, image of microphone, laptop and headphones

Tax tips for small business [Podcast]: Solve 2 Evolve

Tax tips to keep small business owners in the black.

 

Get ready to stay in the black with simple tax tips for small business owners! On this podcast, Solve 2 Evolve shares expert advice and accounting insights to help you save money and grow your business.

In just five easy-to-follow episodes, the Solve Accounting team covers the most important tax and financial topics, including business structures, cryptocurrency tax management, and tax-efficient investing.

Listen in as they share their own experiences starting a business, and discover that accountants can do much more than just taxes! With practical tips and real-world examples, this podcast will change your mind about the role of accountants and the value they bring to businesses and high-net-worth individuals.

 

Watch all the stellar tax tips from Season 1 in the playlist below:

 

Prefer to just listen to your podcasts?

Check the episodes below: 

Episode 1: Meet the Solvers

Meet Phil Khao, Chris Bloxham and Jono Wilkes, three ambitious and passionate accountants who form Solve Accounting. 

Episode 2: The value of advisors

Accountants are much more than tax advisors. Discover the different specialty areas and knowledge of the Solve Accounting team and the value advisors bring to businesses and individuals.

Episode 3: Frequently Asked Questions 

In this special episode, the team tackle their most frequently asked questions.

Here, you learn about:

  • different business structures
  • how to transition from a partnership to a company
  • why cash flow is king when growing and scaling your business

Small disclaimer that this episode is a tad longer than the others, but we promise it is worth the listen. 

Episode 4: Investing & top tax tips

Nobody likes the taxman. In this episode, the Solvers share their tips on:

  • tax efficient investing
  • understanding Australia’s cryptocurrency tax regulations
  • keeping your business out of the red

Episode 5: Pesky problems & more tax tips

Interpreting tax law is like performing rocket science. Difficult.

The Solvers share their knowledge on how high-net worth individuals and businesses can overcome the most common tax problems.

 

Finally, did you find this helpful?

If so, share it with a friend on LinkedIn.

Or.

Get in touch with us today if you have any questions on what we covered in this series.


How can AI help your business?

It's important to be aware of new technology that could help your efficiency in any business. We're used to companies using cloud systems, integrated apps and online solutions to maximise efficiency and data integration. But what can artificial intelligence could add to the mix?

How does artificial intelligence work in a business context?

Artificial intelligence (AI) uses complex software algorithms and machine learning to create smart AI assistants and digital workers. And with a mix of different AI assistants on your team, you open up the potential to scale and grow your business in new and innovative ways.

AI has had a bad rep in recent years, being wrongly labelled as 'soulless robots coming to steal our jobs'. But this is a misconception of how AI works and the goals of any AI tool.

AI assistants are not coming to take your job – they're coming to take on the monotonous, repetitive tasks that most of us dislike. With the repetitive jobs taken care of, your human team has more time to think, innovate and collaborate. They also have more business hours available to get stuck in with higher-value customer-facing work and business development etc.

5 ways AI can help lighten the workload

So, how could an AI assistant help your business? And what are the main operational areas where AI can reduce the workload and make your team’s life easier?

Here are five areas where AI can take on some of the heavy lifting:

  1. Finance and accounting – cloud accounting platforms, like Xero, already have smart coding that uses machine learning to automatically match and reconcile your transactions. But that’s just the tip of the iceberg. Fintech-focused AI tools can be used to process incoming invoices, chase up late-paying customers or process complicated rule-based transactions in your finance system. It’s efficient, cheap and error-free.
  2. Reporting and analytics – AI can process data at a speed that would be impossible for any human. Using complex data-processing and machine learning tools, AI can devour your data and spit out variances, deep insights and long-term analysis of your business. If you’re looking for great insights, AI delivers amazing automated analysis.
  3. Customer support – having an AI taking care of your customer experience can make a huge difference. A voice AI assistant can make or take phone calls, and can do it at a volume that transforms the effectiveness of your contact centre. Customers get answers to FAQs and any complex queries can be seamlessly passed to a human agent. It speeds up your customer support and turns customers into long-term advocates.
  4. Operational logistics – AI excels at tasks that need logic and intense data-processing. Sorting out delivery schedules or picking goods from your warehouse in a logical order are ways to streamline your operations and make the most of this AI power. For example, AI has been used extensively in shipping to drive the loading and unloading of container ships, adding speed, efficiency and a reduction in human error.
  5. Project management – keeping on top the management of a busy project can be a nightmare. But with a project management AI solution in the mix, you can quickly sort through schedules, staff availability and project requirements to manage and resource each job in the most effective way. Let the AI do the planning, and leave the creative innovation and human skills to your team.

Start thinking about the benefits of AI

Managing a business can be tough. But by embracing the benefits of AI in your company, you reduce the admin workload, improve your data analytics and deliver a more streamlined, connected and efficient business.