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April has been a busy month for us at
EconoAccounting. We have had some great reviews in the media, and almost been
inundated with requests for our trial CDs. We have also given presentations on
EconoAccounting in Durban and Johanesburg. It is always nice to meet future
customers, and existing customers. You, our customers are important to us in
more ways than just your purchase! You help us in developing and improving the
software, not only by adding features but making it more user friendly.
How
EconoAccounting is Going to Make you Even More Money
I
saw an advert for a small business for sale. I called the business
broker, and he explained the business in more detail to me. The
turnover and profits seemed interesting enough to want to take further.
Then I asked the 64 million dollar question "Do they have financials or
management accounts?"
The broker laughed so hard I thought the phone was going to break. No,
he said, this is only a R400 000 sale. If you were going to buy a
business for R25 million, you could expect audited accounts. He said
that some of the money (this is partially a retail business) is put
straight into the owner's pockets. When cash is paid, the owner uses it
to pay wages every week rather than put into the bank one day and out
the next.
I asked how they could prove their turnover and profits, and he said I'd need to do my own due diligence (i.e. sit in the
business counting turnover).
I have instantly decreased my value of this business, and they are
automatically going to get far less for their business than they would
deserve had they got their admin up to date. They are only too happy to
allow me to sit in their business and show me their confidential
details, so they are not trying to "rip me off" by sellng a business
that does not exist.
The owner is going to lose a lot of money in the sale of his
business - only because he does not have financials.
The turnover figures that the broker gave me is now also suspect, and
certainly I'll query the profit. This I stress, is not because the
owner is deliberately trying to mislead, but because he has absolutely
no idea of what he is really making. He thinks he takes home about R30
000 per month, so that is the profit he mentions.
- Does he take into account tax? No.
- Does he calculate VAT correctly? No.
- Does he pay his staff accurately? No.
- Does he claim his expenses accurately?
No.
- Does he prepare any financials for
himself? No.
- Does he know which aspect of his
business is successful? He thinks so, but
NO.
- Does
he know where the business is weak.He's got a "gut-feel",
but NO.
- The business has great growth potential (it is in a
high growth industry), but does he know how to grow it?
No.
The business employs 7 people including the two owners, and operates
from a well-known high class shopping centre, so in effect it is not
that small.
What should he have done? He needs
financials for his own purposes. He needs financials to show potential
buyers and prove his performance. If he really is making R30 000 per
month, this is R360 000 profit per year. On a 3 times PE ratio this
values the business at R1 080 000. He is only asking R400 000 for the
business, incurring a potential capital loss of over R600 000. In the
end he will probably not even get R400 000 for the business!
How could we have helped him? By using EconoAccounting he could have kept his own accounts up to
date in just 5 minutes per day.
- Would he have sold for more money? Yes.
- Would it have been easier to sell? Yes.
- Would his business have been more profitable?
Yes.
- Would he have been able to cut his losses had he discovered some
anomaly in his business?
Yes.
As an EconoAccounting user, we hope this
story will motivate you to continue keeping your accounts up to date, not
only for yourself, your accountant, the taxman, your bank manager, but
also one day when you want to sell your business. I'd love to see the
business broker's face when you tell him, YES,
I do have accounts.
Recently Asked Support Questions:
Please visit www.econoaccounting.co.za/support.htm
for the answers to these and other questions.
- I cannot download my bank statements. When clicking on the download button, nothing happens.
-
How do I email an invoice?
-
My bank statements frequently show e.g. "interest rate change" and the
amount is "00" (NIL). I presume just saving such NIL amount is
appropriate?
-
I operate 2 bank accounts and regularly draw a cheque from BANK A and deposit in the BANK B account.
How do I do this ?
-
I have been a little hasty in creating accounts and now find that I
should now delete some of them. Maybe I could just use the "correct"
(fewer) accounts and ignore the 'superfluous' ones?
-
The 'default dates reflected when one wishes to prepare a report are
always 1.3.2004 . . .Is it possible to change these to a later date
(e.g. 1.3.2005 ) ?
-
We are really battling to download. We have tried many different ways
to download and when we go to the cash book and click IMPORT, nothing
comes through. Are there any check points we can go through to make
sure we have the done the correct thing?
-
How do I show payments to debtors if I do not have any invoices made out in the system?
- How do I Import Investec Bank data?
- I've made a mistake on an invoice -
how do I change it?
- How do I handle opening balances?
Contact
details
EconoServ SA cc
P O Box 41439
Craighall
2024
4th Floor Willow Grove - Grove City
196 Louis Botha Avenue
Houghton Estate
Tel 0861 11 3094/011 483 1190
Fax 011 483 1195
Email:
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www.econoaccounting.co.za
Support:
Support is available in various ways.
- Via the web site or email to
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.
This is our preferred method as it helps us formulate our answer for you.
- Via phone-in to the office 011 483 1190/0861 11 3094. Our office hours are
8-5pm, Monday to Friday, though we are often in the office until late. If
you leave a voice mail for us, please remember to include your email
address as well as we will reply via email.
You can even Skype us at EconoAccounting
Updates:
A new update (ver 2.0.9) is available at www.econoaccounting.co.za for
a free download.
BEE:
The Broad Based Black Economic Empowerment Act of 2003 is one that has
raised many questions, particularly as to how it affects small businesses
that do not really have equity to sell or give to other partners. We are
planning a one day seminar at which time an expert on small businesses and
BEE will provide the answers to your questions, and demystify the whole
process. We are currently gauging demand for this seminar. If you would
like to attend, please mail us (under no obligation) to
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Internet Resources
There are many web sites devoted to business and which provide useful
information for you.
Some of the sites we'd recommend this month include:
All the best
The EconoAccounting Team
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