Oct 18, 2007

Malaysian Tax for Employees - Tips

If you are an employee and has the misfortune to be asked to leave for whatever reasons, the compensation you received is exempt from tax, as follows :

1. Tax exemption of RM6,000 for each completed year of service with the same employer / or companies in the same group

2. If loss of employment is due to ill health, the full amount received is exempted from tax.

Oct 15, 2007

Good Cash Flow Management

Managing the cash flow of your business is very important for business survival.

If your bank balance is always on the low side, it means that your cash is flowing out faster than they are flowing in. You need to look into the possible causes of this happening :

1. Are you paying your supplier earlier than you collect from your customer?
2. Are you holding too much slow-moving stocks
3. Are you fully optimising the resources - staff, office space, office location?

To avoid a cashflow crunch from happening to your business, here are some PROACTIVE steps you can take:

1. Collect your accounts receivable. Yes, this may look silly on paper, but I have come across business owners who are too busy going round trying to to get more customers and more sales, not realising that the cash is in the receivables.

You must track what is owing by your customers and don't allow the invoices to go unpaid beyond the agreed credit period. Once the invoice goes 'stale', there is a probability of that debtor-company going out of business, and you will never be paid for the services or product sold.

Remind the customers of what they owe you, by printing the words 'Pay in 30 days' or 'Due upon receipt' on the invoices you send. And follow up closely by phone, fax, or email, when the invoices are due for payment.

2. Collect money upfront. Collecting some money upfront will secure the sale. I practice 50% payment upon confirmation of order, and full payment before commencement of services rendered. Some customers may object, and ask for varying terms of payment. But if you remain firm, and explain the rationale for it, your customer will comply with your terms. My rationale is that I want to concentrate on delivering quality service without having to worry about administrative matters.

Once my prospective customer said that his company's standard operating procedure is to pay suppliers only after 30 days. I replied by saying that it's my company policy to collect upfront and we don't make any exception, whether the customer is big or small. The customer relented, and we waited for 3 days for the cheque to be prepared before we deliver the product.


3. Negotiate with the suppliers. Ask for longer credit period to settle the amounts due. We once negotiated with one supplier to pay our debts in proportion to the sales of that product. This was the time when we mis-read the market condition and ordered stocks way beyond the demand. The alternative is to return the stocks which the supplier was not in favour of.

4. Sell your inventory! Have a closed door sale and offer great discounts to your existing customers, to liquidate the stocks and convert to cash.

5. Cut fixed costs. Sit down and find out areas where you can reduce costs as this will generate extra cash for the business. Areas to look into are telephone bills, and rental agreements.

6. Take drastic action . Look into the viability of moving your business to a smaller office where the operating costs are much lower. However you need to work out the moving-out costs (rental deposits, renovation cost) versus the staying-put costs, and the cash savings from the relocation.

If the credit squeeze prolongs, the business (and the owner) may face one of the following consequences :
1. Company lose out on business opportunities
2. Suppliers will harass you for payments, and may impose cash terms for new orders.
3. You feel stressed out, and this may affect your health, and your ability to think and strategise.
4. Your staff will lose confidence in the company's ability to continue as a going concern, and may leave you
5. Eventual closing down of business


Just remember, profit is merely a book entry. Cash is king. Take time to understand the cash flow cycle (sale-debtor-cash-stock-sale). Managing your cashflow is made easier if you have an accounting software, like MYOB Accounting, to assist you.

Oct 11, 2007

Are you too old to use accounting software?

Age is just a number. Last month, I had the privilege of training a 65 year old man to use an accounting software to keep the books of a clinic. The clinic belongs to his daughter and he has been using Microsoft Excel spreadsheets to track the cash inflows and outflows. He wanted something simple to help him prepare the Income Statement.

I introduced the entry level range of accounting software (MYOB Business Basics) for the clinic, which in my opinion meeets his requirements very well.

Initially he was quite worried about using an accounting software because he said his knowledge of accounting is "very basic". But I assured him that using MYOB is just like entering data in Excel spreadsheets. After he has entered the data, MYOB will do the rest - "post to the ledgers", and generate the Income Statement and Balance Sheet, without any need for him to master "debits" or "credits".

After 2 lessons, he is now happily generating other reports on his own. His next project is to teach the clinic assistants to enter the data, and he will review their work.

So, age should not be a reason for not learning something new.

By the way, this same man earned his MBA at age 64 - he only told me at the end of the training. He said he could learn up the software by reading the manuals himself, but he wanted to leverage on an expert's advice, so that he can start on a correct footing.

Oct 1, 2007

Top 10 tips on choosing Accounting software

Top 10 tips for Choosing Accounting software

If you are thinking about implementing a new Accounting software for your business, then you should gather all the facts before you make the decision as to which accounting software to buy, and more importantly, which service provider to buy it from.

Nowadays, accounting software performs more than just book-keeping functions. As a decision maker, you should consider the impact of implementing the software in the purchasing, receiving and sales department, besides the accounting department.

If you are a small setup (with less than 5 employees), then you need to consider also whether the system can be operated by the existing staff under your employ. It will save you much needed resources.

Top 10 Questions to prepare your Business for the new software

Before you evaluate the features of the new accounting software, you should spend more time evaluating your own business processes.

1. Identify tasks which are routine in nature, tedious and is time consuming to perform. These tasks can be automated easily. Eg.preparing customer statements

2.Identify the tasks or activities that causes the highest error, or produces inaccuracies that can affect your business operations.For example, errors in invoice computation

3.Identify the information that, if become easily available, could have boosted productivity and profitability. For example, analysis of gross profit by salesperson .

4.Identify the accounting and non-accounting information that flows through the different departments in your company. Separate the must-have information from the 'good to have' information.

5.Make a list of requirements that is unique or special about your company or its operations, for example, do you require serial number tracking

6.Identify the number of users that will be using the system simultaneously

7.If you have branches, is it necessary to have remote access?

8.How much are you willing to invest in the whole project

9.Assess the level of accounting and computer experience of the users.

10.Besides delivering financial statements, what else do you need your accounting software to do :
Create Invoices for Goods / Services
Purchase order
Track Inventory
Handle foreign currency transactions
Job Costing & project management
Budgeting
Tracking Accounts Receivable
Tracking Accounts payable
CashBook


When you meet your consultants, you are prepared