Case Study: Costs for starting up a second, related business
A LOT OF BUSINESS OWNERS branch out into related fields when their flagship business becomes successful enough (just look at Jim’s Mowing). However, this can be a bit dicey if the business owner doesn’t properly forecast all the start up costs. Not doing so can not only have an adverse impact on the new venture, but also on the existing business.
Depending on how many employees work for you, the repayments on a business loan are typically smaller than all of your payroll obligations — this includes superannuation and PAYG — combined. If you get a loan to fund 12 months of your business, payable over a 24 or 26 month period, the repayments will be far easier to manage each month.
Interest is usually a tax deduction
Businesses are able to claim the interest from any business loan as a tax deduction, so even if the annual percentage rate (APR) adds a few additional thousands of dollars to your capital amount over the period it takes to pay the loan back, the interest will still go towards reducing your taxable income.
This is a more favourable option to delaying payment to your employees (illegal) and delaying payment of PAYG and superannuation withholdings, which could incur a Failure To Lodge (FTL) penalty, plus a general interest charge (GIC). Note: Fines and penalties cannot be claimed as a tax deduction and are therefore dead money.
Do your sums first
Don’t forget that, while a business loan to cover payroll for 12 months will be easy to repay initially, your business’s profits will need to improve substantially over the next year so that you can continue to meet your loan repayments AND your payroll obligations for that year.
Using Excel to work out your PAYG and super obligations is a great way for small businesses, with a small number of employees, to save money. It saves you having to purchase this extra module in MYOB or Xero, for instance, when you may rarely use it. Saving money for small business is crucial as often it’s these same small businesses that have trouble making payroll payments each week, fortnight or month — and then wind up incurring further fees from the ATO when they’re late with their reporting and payments. It’s a vicious cycle.
Get financing. There are lots of ways to do this, but a common method, particularly if you need access to funds quickly, is to get a short-term business loan. Many short-term business loans don’t require businesses to have a great credit score, and will offer funding of as little as $5,000 right up to $500,000.
You’d have between 3 and 36 months to pay back the loan, but you need to be aware — the annual percentage rates (APR) are usually high. Most lenders require the business to have been active for a minimum of 9 months, and have revenue of more than $75,000 per annum. However, if paid off quickly, these can be an alternative to incurring penalties — it will obviously depend on your business’ individual circumstances.
Keep on top of bookkeeping
If you stay on top of your bookkeeping, you’ll either reduce the likelihood that you won’t make payroll, or as a worst case scenario, be able to foresee the periods when you won’t be able to, and be able to arrange finance in time to cover it.
You Can Use the Calculation Fields in our Excel Exercises as Often as You Like!
DESPITE THE POPULARITY OF cloud-based accounting software applications like Xero and MYOB, Excel still remains one of the most indispensable software programs for businesses and individuals alike. That is why we always make it a priority to constantly update our Microsoft Excel Training Course.
You can apply Excel to so much
Accounting software, even robust packages like MYOB, only allow you to perform a finite number of functions that relate to business accounting. However, Excel can be used for a multitude of different purposes — both business and personal, merely one of which is to develop a financial forecast for an investment.
But even though, with the current property booms in our major cities, granny flat construction has become more common, it is not so common that every person taking our Excel courses is planning to build a granny flat for their next investment. That’s why we decided not to lock our course content.
What does this mean? It means that all the calculation fields in the exercise files of our Excel training courses are unlocked, so that your education remains unlocked too. You’re free to play around and replicate them as you need, so you can get a proper handle of how to use Excel in business or for work.
Visit our website for more information on our Microsoft Excel Training Course, with its new granny flats case study. We provide a range of online Excel training courses for beginners’, intermediate and advanced students.
For businesses that only withhold up to $25,000 each year, you’re supposed to make PAYG payments and file a withholding report each quarter. You have 28 days from the end of the quarter to do so, after which time, you may incur a Failure To Lodge (FTL) penalty.
As with PAYG payments and reporting, you can also incur a FTL penalty for not lodging or paying your employees’ superannuation contributions in time. All businesses, regardless of size, have to make superannuation payments each quarter — the ATO sets out the due dates for each period on their website.
Lodging late PAYG and super payments
The ATO only applies penalties for failure to lodge reports or make payments for each period of 28 days (or part thereof) that a document or payment is overdue. Each period incurs one penalty unit for each document, up to a maximum of five penalty units.
From 2015 onwards, the value of a penalty unit is $180 (previously it was $170) for small businesses, which are defined as entities with an assessable income or GST turnover of no more than $1 million a year.
The maximum penalty a small business will pay is $900 for each document or payment that is overdue. Note too that FTL penalties will also incur a general interest charge (GIC), applied on top of the penalty.
Managing late PAYG and super payments
Use the Ad Hoc Payroll Guide, a new case study that is included in our Intermediate Microsoft Excel Training Coursesto determine the rate of PAYG tax to withhold and the required super contribution amounts in Excel. Once you’ve worked out the required amounts (visit the ATO website for tax tables prior to 2017), lodge the necessary PAYG payments and reports to the ATO; pay super contributions using the SuperStream super clearing house.
The ATO will write to you if you are required to pay a penalty — sometimes they are waived for first-time offences, or if the amounts are small.
Create brilliant presentations and graphics for all kinds of business purposes.
Gone are the days of excruciatingly dull PowerPoint slide presentations. Nowadays PowerPoint is the hidden gem used to generate animations, videos, movies, advertising and graphics. It’s a great ally to the marketer or social media person in your organisation.
Using Excel to Financially Forecast the Viability of Your Investment
When you are planning to invest in a project, you naturally have to weigh up the risks. One of the chief ways of doing this is to complete a financial forecast to determine the viability of your investment. One type of investment that has been exceedingly common and popular with the current property boom has been the investment in a granny flat.
Many homeowners and investors who own a property with adequate room and the right conditions, have chosen to build a granny flat on their existing property as a means of earning extra income.
Of course, you need to consider whether you’re legally allowed to rent out a granny flat, which in some Australian states — Victoria, South Australia and Queensland — you aren’t. If you’re found renting a granny flat in any of those states, your local council can ask you to remove the granny flat from your property.
You may determine that a granny flat will earn around $12,000 a year in rental income, but it could take up to 10 years to break even on construction costs. Although some of those costs can be deducted as expenses and the dwelling depreciated over time, depending on where the property is located, property values may not increase by that much. This is amplified if you’ve just purchased the property, compared to a person who’s owned their property for 5 or 10 years.
Granny flats can reduce your rental return
Depending on how the granny flat has been constructed, its proximity to the main dwelling, and whether there are any shared or common areas, there’s also the potential to reduce the rental income on the principal dwelling. If the property has been previously tenanted, the shift from single to dual occupancy will reduce the rent of the principal dwelling. This could be offset by the existence of the granny flat, however, it moves the goalposts for your break even date. You may also experience more tenant churn, which will see more of your rental income going to real estate agents in letting fees, and greater wear and tear on the dwellings. You may also experience longer than average vacancy rates.
At EzyLearn we are constantly refreshing the content of our online training courses. Where possible, we draw on real-life case studies as examples, to help you learn, and apply your skills, in a relevant way that makes sense. Visit our Micro Courses page to learn more.
Excel Will Help You Work Out the HOW of Depreciation
We recently updated our advanced Microsoft Excel Training Course content. It now contains a case study, by way of an extra exercise workbook, using a granny flat building project to create a financial forecast.
We chose a granny flat building project for our case study because it’s an investment decision quite a lot of people with or without a business have made. It’s also a capital asset that can be depreciated over time. Therefore it has the potential to affect your taxes in lots of different ways.
Your bookkeeper uses Excel to calculate depreciation
When you build a new structure, such as a granny flat, which you intend to rent out or use for businesses purposes — i.e., it’s an investment and not for your own personal use — the building can be depreciated along with some of the fittings and finishes (floorings, curtains, paint, etc). That’s despite the value of the land upon which the granny flat is constructed increasing in value over time.
Excel will calculate the depreciation amounts for you, which you should then enter into Xero. We cover how to deal with depreciation in our Xero Bank Reconciliation Course, because lots of businesses own, or will own, a capital asset at some point.
However, this doesn’t tell you how to determine the depreciation amounts, which most business owners have to get their bookkeeper to work out for them. Most bookkeepers work this out in Excel based on the depreciation rates provided by the ATO. However, if you have already created a financial forecast in Excel, you won’t need to get your bookkeeper to do this for you.
Individuals can claim depreciation too
Even if you’re not a business owner, but you’ve still built a granny flat that you intend to rent out, you can claim depreciation in your tax returns. Instead of entering the depreciation into Xero, you’d include it on your annual tax return, so it’s really important that you work this out in Excel first and regularly update it.
Once you know how to use Excel for financial forecasting, you can use the same formulas and modelling for any financial forecast — be it for a granny flat project, business investment, anything that requires you to make a financial decision. Visit our website for more information on our advanced Microsoft Excel Training Course, with its new granny flats case study.
Do you want to brush up your Xero skills? Or perhaps you use MYOB but want to get a handle on Xero? Check out our suite of Xero training courses — all available for one low price.
Choosing between a one-bedroom and two-bedroom granny flat is a decision you’ll need to make early on in the project, and it’s largely a financial one.
EzyLearn’s Microsoft Excel Training Course includes a new case study, “Investing in a Granny Flat”, which uses the construction of a granny flat as a real life example to help you to better understand how to develop a financial forecast for an investment.
Determine construction and ancillary costs
How much it will cost to construct both a one-bedroom and two-bedroom granny flat is the first step. You need to work out how much it will cost to get each granny flat constructed to the point that someone can move in, as well as any ancillary costs, like council fees and levies, real estate management fees interest rates and so forth.
Determine rental income
Some granny flat companies will give you rental income estimates, but you’re encouraged to investigate this yourself. Rental incomes are heavily dependent on your local area and the demand for that type of property. In Sydney, the demand for rental property far outweighs the demand in regional NSW. Take into consideration vacancy rates in the area and the types of property that are in demand. Areas with high vacancy rates and low demand for one-bedroom units could indicate there’s little demand for a permanently rented one-bedroom granny flat, which will put the rent down.
Determine depreciation amounts
Both granny flats will be subject to the same depreciation rate, however the amounts will differ due to the differing value of each dwelling. In addition to an annual depreciation rate on the dwelling, consider other elements of the granny flat that will also be subject to depreciation. Floor coverings, for example, can be depreciated over time. Carpeting is typically depreciated at a rate of 20 percent, where tiles are depreciated at 2.5 percent because the latter has a longer lifespan.
Determine the best investment
Add all of these costs into Excel to determine the average annual rental yield, expressed as a percentage of the property value. Rental yields are used to show the return on an investment. The higher the rental yield, the better the return is. Taken in combination with your own personal circumstances and plans for the future should help you to determine which option represents the better investment.
At EzyLearn, we’re committed to helping students of all our courses find better employment opportunities, become their own boss and upskill. To this end, we constantly update our courses with new, highly relevant content — it’s why we provide you with the option of Lifetime access you can always refer back to our courses as you progress in your skills’ development.
We’re thrilled to announce our new Micro Courses which are be added to our existing courses, or can be purchased alone. These are based on real-life case studies and relate to real people in genuine, real-life scenarios. Subscribe to our blog and be alerted of updates.
Third Quarter is Looming; Are You Up to Date with Payroll?
Most businesses using an accounting program like MYOB or Xero will use the included payroll package to manage their employees’ payroll. For businesses with only a few employees, however, the additional payroll function is an unnecessary expense.
Every Australian business with employees who are each paid more than the tax-free threshold has a legal obligation to withhold tax on their employees’ behalf. This is known as the PAYG System (or Pay As You Go), where amounts of tax are withheld from each employee’s wage payments.
Businesses that withhold up to $25,000 each year only need to make payments to the ATO each quarter; businesses withholding amounts greater than $25,001 may have to make payments to the ATO each month or as regularly as each week.
At the time of writing, the tax-free threshold is currently $18,200, which is equivalent to:
$350 a week
$700 a fortnight
$1,517 a month
Again, any business that pays its employees more than $450 each month must also make regular superannuation contributions on their employees’ behalf. We’ve written in the past about the government’s clearing house called SuperStream, which allows you to easily make super contributions — for free.
But first, you need to work out how much super you need to contribute for your employees. The superannuation guarantee is currently 9.5 percent of your employees’ gross wages, which is payable on top of their wages — not deducted out of.
Using tax tables to calculate wages
Each year, the ATO produces a range of tax tables to help you work out how much to withhold from payments you make to your employees. In our Ad Hoc Payroll Micro Course, we’ve already added the most current tax tables to the accompanying payroll spreadsheet, as well as the superannuation guarantee tables.
We’ve recently updated our Microsoft Excel Training Course content, because it remains one of the most indispensable tools for small businesses — and we’ve included a new exercise workbook which takes you through all the steps involved in developing a financial forecast for an investment.
3D formulas are one of the other many wonders of Excel. A 3D formula is basically a reference to the same cell or a range of cells within multiple Excel sheets. They’re a convenient way to reference several worksheets that follow the same pattern, with cells that contain the same type of data.
All functions work with 3D formulas
3D formulas can be used with all Excel functions — SUM, AVERAGE, PRODUCT, etc — which means that, using a 3D formula, you can easily create a financial forecasting sheet for any stage of an investment, and easily reference that data in another financial forecasting sheet. This is invaluable because there are very few projects or investments that can be contained in just one Excel worksheet.
A project like the granny flat case study in our online Excel Training Course, contains many moving parts — there’s the initial construction, then there’s the ongoing maintenance, and the rental income to manage. It would be impractical to keep all of this information contained within the one Excel worksheet.
3D formulas can be modified with time
The best part about using 3D formulas is that you only need to specify the start and end sheets (which for ease-of-use, you could just label ‘start’ and ‘end’) and the formula will reference all the worksheets between the start and end sheets, including those two sheets.
This means that, as your investment or project grows, once you’ve got the 3D formulas set up correctly, you can just add and subtract worksheets as necessary, and the calculations will update automatically.
Once you understand how to create and work with 3D formulas, you can use them for any project or investment that you create a financial forecast for — be it for a granny flat project, business investment or anything else that requires you to make a financial decision.
If you have the room, building a granny flat on your property can prove to be very lucrative. EzyLearn has recently created a new Microsoft Excel exercise, using the construction of a granny flat as a case study, which forms part of our online Excel Training Course.
It was created to help students understand how to use Excel for financial forecasting, but it’s also useful to those interested in constructing a granny flat on their property.
Costs that will be depreciated
In a recent post, we mentioned claiming depreciation on the property’s existing dwelling. If the existing dwelling on your property is rather old, it may not be able to be depreciated. Depreciation rates are determined by the ATO, while an quantity surveyor will be able to determine the value of your dwelling. The cost of the new granny flat will be depreciated over time. Keep in mind that individual elements of the granny flat, such as the floorings, can also be depreciated in addition to the capital structure.
Most expenses can be deducted
The ATO has a long list of expenses relating to rental properties that can be deducted. If you visit their website, you’ll find that most expenses relating to a rental property can be claimed as a tax deduction, depending on the type of rental property. If your granny flat is intended as a long term rental, as the granny flat in our case study is, then nearly all expenses, including the demolition of the old garage and other capital works can be deducted right away.
How you treat these expenses and depreciable assets is covered in the granny flats case study of our Microsoft Excel Training Course. Visit our website for more information on our full suite of training courses.
In our Excel training Course there’s an exercise workbook on granny flat investments, which takes you through all the steps involved in developing a financial forecast for a granny flat. It can also be used to determine the financial forecast of any investment, not just granny flats.
Even though lots of cloud-based software applications have come along in recent years — Xero and MYOB and CRMs like Zoho — which have made it possible for lots of business owners to keep track of their financials and customer sales history without ever needing to open an Excel spreadsheet, Microsoft Excel is still the software used by accountants and analysts in nearly every profession.
Excel is flexible
Microsoft Excel may be difficult to master — indeed, it’s probably one of the most difficult in the entire suite of Microsoft programs — but it’s also the most flexible. The formulas sitting behind nearly every cloud-based accounting software can all be replicated and modified in Excel, where in MYOB or Xero, they can’t.
You can’t enter the details of your granny flat project or other investment into Xero and MYOB and create a financial forecast, even though near similar formulas are being used each time you run a profit and loss statement.
Cloud software is Excel plus PLUS
Before computers and Microsoft Excel came along, accountants used a pen and paper to keep track of their clients’ business financials. And before that, before the numeral system was invented, the abacus was the main accounting tool used by merchants and traders to keep track of their finances.
You probably have no use for an abacus anymore — although in some parts of Eastern Europe and Southeast Asia people still do — because, as an accounting tool, it’s too basic. But the same cannot be said about Excel, which is capable of handling complex formulas and rendering an answer.
Export accounting data into Excel
Because cloud-accounting software is essentially a very user friendly version of an elaborate, however inflexible, spreadsheet, it means you’re able to export your accounting data into Excel. Financial analysts and accountants do this when they need to carry out further analysis on a client’s financial data, and you can too.
Once you know how to use Excel for financial forecasting, you can use the same formulas and modelling for any financial forecast — be it for a granny flat project, business investment, anything that requires you to make a financial decision.
Critical Office Skills and Job Seeker Confidence with Microsoft Office Essentials
A HUGE PERCENTAGE of EzyLearn students complete an online course with us because they are looking for a new job. However, many people lack confidence because they are not competent using Microsoft Office software programs.
At EzyLearn, we have always included Beginners to Advanced-level training content for our software courses; we don’t want students wasting their time worrying about whether they should do Beginners, Intermediate or Advanced. That said, we’ve consistently had requests for a combination course.
One of the most powerful internet based applications that we use everyday is Dropbox. It’s powerful because it enables you to automatically backup any files you save into your Dropbox folder AND it enables you to access your files from any computer. When you delve deeper into Dropbox and start using it on your Smartphone you’ll also discover that every photo you take on your phone (and screen shot) can be automatically saved into your “Camera Uploads” folder within Dropbox so no matter how much phone storage space you have you’ll always have a copy of images in Dropbox.
I personally use Google Apps for emailing, contacts, calendar etc because many years ago when I made the switch it was free and Google’s email program (gmail) had the best SPAM filtering on the market so I was guaranteed to only receive the emails I wanted and not all the rubbish — before then I used Microsoft Outlook for many years. Our Microsoft Outlook courses will teach you how to:
Manage your emails
Manage your calendar and meeting appointments
Manage contacts and use Outlook as a CRM
Manage tasks and checklists
Our Microsoft Outlook training course is not available separately but is included as part of our Microsoft Office Beginners Essentials training courses. With a confident knowledge of all of these Microsoft Office Productivity programs you’ll perform better in any job interview and who knows maybe even be able to help other people in the organisation!
Would you like to be an EzyLearn Trainer?
We’ve beefed up our EzyLearn Partner program — if you want to earn a couple hundred dollars a week OR make a living out of using and teaching people how to use computer software, Internet services, accounting software and online marketing, then take a look at our EzyLearn Partner page.
Learn MYOB and Microsoft Excel and get Microsoft Word Course for free
One more rest for Australia Day before the year REALLY gets under way and it’s a great time to set your priorities straight for 2016. Our two most popular online training courses are our MYOB Course and our Microsoft Excel course. They’re complicated programs and most businesses need them for their financial management, reporting and forecasting so they’re great skills to learn if you are looking for a new job.
If you’ve followed this blog you’d also be aware that despite significant growth in the number of enrolments for our Xero Cloud Accounting courses the dominant player in the Australian market is still MYOB and MYOB accounting software also has cloud-based capabilities that make it more and more powerful. I recently wrote a blog about a service technician who uses Servicem8 as an Ad-on to the MYOB accounting software that his wife uses in the office.
Software Skills give you confidence to apply for jobs
Having confident software skills in MYOB, Excel and Word will give you a real advantage when applying for a position you really want because is gives you tremendous confidence. Sue from Yarra Junction was helping us with our forthcoming Quickbooks Online Training course late last year and although she knew Quickbooks very well she learnt a LOT about Microsoft Word and writing long documents. Even just going through the beginners courses in Microsoft Word she learnt about common terms and fundamental ways that text and paragraph are managed on each page.
For a limited time we are offering our Microsoft Word course for free to everyone who enrols into the MYOB and Excel course with 12 months access and a certificate.
How to get the Microsoft Word Course for free and Career Academy Membership
click the Microsoft Excel course with 12 months access and certificate
You will see the FREE BONUS course offer
You’ll have the option to register for our Career Academy also
Not only will you have new skills and confidence but you’ll have some resume templates and dozens of exercise files to create long and complicated documents, reports, proposals, sales letters and more using Microsoft Word.
Corporate Training Discounts
Remember too that if you are a small business with up to 5 employees you’ll find that all of them can learn MYOB and Excel, PLUS Word, WordPress and PowerPoint (and even Xero) for under $1300 for 12 months. You could literally run the software programs to take care of admin, accounting, financial management, sales, marketing and more with all these software programs. Check out our current Corporate Training discount offer.
The small business course we renamed can give you all the software skills you need as well as templates, structure, financial forecasts and all the software and soft skills you need to start that business and become and independent contractor working from your own home (or for local small businesses if you don’t have the right setup for a home office). Check out the EzyStartUp Course.
$197 Beginners to Advanced Microsoft Excel Course includes Exercise Files
One of the best ways of learning how to use a program is to use that program during your training. Some people can sit with programs like Microsoft Excel and learn by trying something out and making mistakes and then trying again.
[box type=”tick”]We’ve discovered that Microsoft Excel course students want to work with real world files in a logical step-by-step method that uses the exercise files for the basic skills and then keep using that file for the more advanced skills.[/box]
By the end you’ll have a powerful Microsoft Excel spreadsheet using advanced skills and because you learnt in a logical and methodical way, using gradually more complicated tools, you’ll have learnt most of the Microsoft Excel skills you’ve wanted and won’t even notice the time go by.
Real World Use of Microsoft Excel Spreadsheets
The main uses for Microsoft Excel are as a:
Worksheet that enables you to lay out information in a logical fashion and then perform calculations with that data
Database that lists all of the information in a tabular format that can then be filtered and manipulated into a format that can be used in mail merges etc, and
Charts and graphs that visually present the information in a worksheet or table so that we humans can make sense of the information
Here are some of the ways that we use Microsoft Excel for our training business.
Present information for use in newspaper ads
In Microsoft Excel Course 303 we look at formulas and formatting and one exercise file we share with students and an example of what’s possible using Excel is the artwork we created for the newspaper ads for our courses at our training centres in Sydney. The table structure of Excel enables us to lay the information out precisely and if we need to change the dates
What costs us the most money
Yes, you can see the costs of running a business in a simple table, but when you put it in a chart you can visually see the differences in costs and in our 305 course on charting we’ll show you how to create the various different types of pie, line and bar charts as well as many other types. You’ll learn how to format the charts to make certain areas stand out and you’ll learn how to demonstrate trends.
Budgets and forecasting
It’s great when you have historical information to work with because you can spend a lot of time working out percentages, margins, budgets etc to try to figure out how you will go in the future. We include many exercise files in Microsoft Excel Course 306, including files to help you:
Maintain a household (or business budget)
Calculate sales margins and commissions for sales people (we have several different versions of this file to demonstrate how the file should look at the various stages of creating it).
Create a price list (including all wholesale product costings – that will be hidden from view)
Making the right decisions
When we operated our training centres in Sydney we spent a lot of our time scheduling courses. We had to allocate training rooms, roster on our great trainers, print training materials and we needed to know when people where coming to courses. We discovered that most people who wanted to learn Microsoft Excel did a night class. We had these variables to work with:
What days people had come to these courses in the past
The time of the day that students had enrolled into these courses: morning, midday, evening or weekend.
Different training methods (class-based and Flexible Learning)
By discovering the best days and times that students had enrolled into courses from the past we were able to better schedule our courses to get the most students. It means we didn’t need to cancel courses.