By David Sharp BEcon, ACA
Australia Day has come and gone, you are struggling to keep your new year’s resolutions, and you are
already engrossed in the day to day running of the practice. Before it is too late take some time
and space, and consider the following….you have already done so but put in the too hard basket,
hopefully the following will assist with that decision making process.
- Should I give myself a pay rise?
The short answer is yes, if you deserve it. It is important the owner takes a commercial market salary from the business for the work the owner does. If you are not sure what that is consider what you would be prepared to pay someone to do your job. After taking into account this salary what is left over is the true profit. Next process is to look at that true profit from the perspective of an investor/owner of the business. Does the profit reflect a good return on your investment? What should the profit be, are you under or over performing, what is the next step to build that profit further. Often business owners confuse profits and salary, the salary is for the work you do, the profit is the return on your investment. If there is no profit after paying yourself a market salary your Practice is most likely underperforming. Time to make some changes!
- Should I incentivise my staff with bonuses?
The short answer is that bonuses nearly always come with negative consequences. Employees will work
towards a bonus and may neglect those areas that are not affected by the bonus. Another likely outcome is that employees start to assume the bonus is part of their salary package and can become upset if the bonus is not paid.
One solution is to pay bonuses purely on a discretionary basis. A bonus may take into account extraordinary commitment to the Practice or reflect a strong financial result of the Practice for the year. If a bonus is not expected or taken for granted it becomes a very powerful way of saying thank you and acknowledging an employee’s performance.
- A final question to consider, how can my practice improve my life this year?
Certainly, as accountants we are asked this question by business owners all the time. Based on many years in our own businesses we believe there are 2 main ways:
Firstly, how can I spend more time doing the business things I enjoy the most? Secondly how can I have more time to spend with my family & friends?
The answer may be easy, but the implementation is always a real challenge. Identify tasks/processes in
the practice that you must be on top of and the tasks/ processes that you enjoy. Work out how to delegate the critical tasks/processes to employees you trust and then supervise and review these closely and frequently. You do not need to physically do the tasks/processes but you must make sure they are being done correctly and on time. This should create discretionary time to spend doing the things you love whether in the practice or at home. One word of caution; you will have to pay employee to do the work you are not doing so as per above, you may need to adjust your salary accordingly!
In summary, it is important you consider your practice in the context of your life. The practice must work for you – if you are a slave to your practice it is time to rethink how the practice is run. Invariably happy practice owners end up with profitable practices. If you need someone to bounce ideas off speak with your accountant; they should know you and your business, be a strong point of reference and source of good common sense business advice!