Analysis 360° on bark
360° Blog
Case Study - How we Helped this Business Grow & Improve their Profit
Overview
A new Small business client came to us for Accounting and Income tax Help. They were a local Edmonton Renovation Company. We were very happy to sit down and work with them to grow their business and increase their profit.
The complaint they brought to us, was that the previous Accounting firm did not educate them, and did not encourage the adoption of technology to grow their business.
We started by introducing new Cell Phone Apps:
To start with we demonstrated we are a virtual firm. We utilize digital and cloud systems to efficiently work with our clients.
With that adoption of Software, and the use of the smartphone as well as an Ipad to conduct business. The Smartphone replaced many tasks that were taking up valuable time and helped to keep their files more organized.
Steps in the Success Journey
- No need to supply paper copies of Source documents such as bank statements, receipts etc.
- No need to provide paper copies of prior years Accounting year ends.
- Smartphone took pictures and emailed forms and receipts directly to Analysis360°.
- Auto-posting into a Document management system. The client could then login and confirm and view the document that had been posted. Comments could be left directly on that document by the client. For Example, they could state that a purchase was for a Cut-off Saw on the small tools account.
- Setup Accounting records on Quickbooks online. Provided training for the client to access his file online via the iPad. We also trained them on how to view reports and Finacial statements.
- Setup payroll within Quickbooks online, so that payroll costing would be done correctly.
- Six-month review. We identified that there was a need for planning. Embarked on Cash flow Enhancement, and Collections program. Setup Electronic billing to the Clients, Recording time by GPS (at the job site) used APP (jobber) to do job quotes and email to clients.
- Previous year /Previous year-end. The process was Shareholder draws, at year-end, we calculated the tax owing, and both the tax and accounting fee was payable.
- The client Reduced the year-end Accounting fee From $6000.00 to $2500.00
- The client Reduced the bookkeeping fee prior year of $12500.00 to $1250.00 as he moved to the DIY bookkeeping program (with a small coaching fee).
- 2nd year saw tax savings, bookkeeping savings, and planning savings. See Chart Below.
- Also as a result of planning, He claimed on CI Insurance for the protection of his company, when he got sick.
A change in business value and personal income does also incorporate savings on personal income tax. These are the steps we took to help this business refine their process so they could save and make more profits. Each business is unique so these steps may change depending on the goal and business structure.
Profit Chart.
Year end of March 31 2020
Prior Acct Firm Analysis360 Analysis360 Analysis360
|
Description |
2 Year Prior |
Last year |
Current Year |
Next Year |
|
Gross sale |
525,000.0 |
600,000.00 |
675,000.00 |
750,000.00 |
|
Operating Expense |
300,000.00 |
310,000.00 |
355,000.00 |
385,000.00 |
|
Direct Labour |
200,000.00 |
150,000.00 |
100,000.00 |
125,000.00 |
|
Total Expense |
500,000.00 |
460,000.00 |
455,000.00 |
510,000.00 |
|
Gross Profit |
25,000.00 |
140,000.00 |
220,000.00 |
240,000.00 |
|
Corp Tax (@ 12 % |
3,000.00 |
16,800.00 |
26,400.00 |
28,800.00 |
|
Net Income After Tax |
22,000.00 |
123,200.00 |
193,600.00 |
211,200.00 |
|
Less Dividends |
20,000.00 |
83 200.00 |
100,000.00 |
0.00 |
|
Net R/E after Dividends |
2,000.00 |
42,000.00 |
135,600.00 |
211,200.00 |
|
Non Taxable Insurance Proceeds (claimed On CI) |
0.00 |
0.00 |
500,000.00 |
0.00 |
|
Adj R/E |
2,000.00 |
42,000.00 |
635,600.00 |
846,800.00 |
|
Accounts Past due |
295,000.00 |
10 000.00 |
25,000.00 |
20,000.00 |
|
Bank Balance |
10,000.00 |
295,000.00 |
695,000.00 |
810,000.00 |
|
Other Assets- Auto - Rental Property |
10,000.00 |
10,000.00 |
100,000.00 |
100,000.00 |
|
Personal tax Personal Net Income |
35,000.00 All Salary 55,000.00 |
19,020.00 Mix Sal& Div 85,000.00 |
11,000.00 Dividend only 125,000.00 |
0.00 All income from Loans On Insurance Plan 200,000.00 |
Summary:
| Client Goal: | Year 1: | Year 4: |
| Client wanted to PAY Zero Personal Income tax. | 0 personal tax | |
| Increase Bank balance | $10,000.00 | $810,000.00 |
| Collect on Bad Debts AR | $295,000.00 | $20,000.00 |
| Wanted to have a New Company truck | 0 | $100,000.00 |
| Wanted an increase in Profit after tax | $22,000.00 | $211,000.00 |
| Wanted to increase sales | $525,000.00 | $750,000.00 |
Of course, transformation and improvement in Cash, bank, sales, required collaboration with the Accountants, Training the small business owner, Adoption of Technology and following Tax planning, financial planning, and utilizing targeted business services from Analysis360°.
We have only expressed the growth in the actual numbers without reflecting the various % increases and ratio improvements. Small business owners often are more interested in the basic business indicators of Growth, Gross sales, profit after tax, and disposable income.
Personal income could be an issue, if you could not live on a net income of 200,000.00 then that might mean further work on personal goals, personal budgeting and financial planning.
Peace of Mind for this client could be measured this way.
- Security- Assets, Growth in business, and Cash in the bank.
- Could the Owner Afford to pay his Brother to run the business for a year? Yes.
- Could the Owner Afford to take a 1-year sabbatical/vacation? Yes.
- Lowered cost of Bookkeeping and Income tax Preparation (use of Virtual Accounting Firm)
- Tax filing was compliant and up to date- Current filings (due to use of Technology)
- Monthly Financial reviews with His Accountant - always knew where he stood.
We appreciate the trust this client gave us to let us come in and work together to help them reach their goals!
If you would like support in reaching your goals, book a FREE Consultation here.
Comments