Cashflow

I already owned a good sized and well located pharmacy that was trading profitably.  However I didn’t have any available equity in my business to fund future growth and acquisitions. When the opportunity presented itself to me to buy into a greenfield site I was concerned I didn’t have enough security for the banks to lend me the funds for the acquisition.

Guild Accountants worked with me to prepare 5 year forecasts for both my existing and new business. These gave a clear picture of expected revenue, profit and cashflow and measured these against the bank covenants. We presented these to the bank who took comfort that although we exceeded their covenants on day 1, they could see that we were working to strengthen the position considerably in the first couple of years and on this basis they were prepared to fund the deal.

Guild Accountants then broke the forecast down into a detailed monthly profit and cashflow forecast as well as some simple daily KPI’s to help me monitor business performance and ensure I kept the bank happy. This really gave me direction in driving my business to achieve my goals.

Business structuring

I approached Guild Accountants when I realised the size of my business and increasing investment in the pharmacy market was beyond my existing accountant. At our first meeting they showed me how I could restructure my business and personal affairs to save $40,000 per year in tax and strengthen my asset protection position without incurring transaction taxes. Their knowledge the pharmacy and tax legislation enabled me to take advantage of recent legislation changes– my old accountant had never approached these subjects with me!

As my pharmacy interests increased, Guild Accountants were able to introduce me to their key contacts in the industry. I then had a strong and dedicated team who were able to advise me on pharmacy specific matters such as lease negotiations, approval number applications and relocations as well as personal financial planning and superannuation.

I’ve been in the pharmacy industry for many many years and really enjoy managing the business but not the underlying but important administration. With this team of support to handle the technical advice and admin I had more time to focus on my business operations which is what I’m really passionate about.

Global Financial Crisis

My business really suffered when the GFC hit. I had just completed a refit and the GFC knocked customers confidence around.  Turnover slowed and with a high level  of debt, cashflow became tight.  To survive I started deferring payment of my ATO liabilities and in the space of 12 months I accumulated debts with the ATO of $400,000 which included $100,000 in interest as their rate has been over 10% while banks are at 50 year low!

Guild Accountants worked with me to establish a budget so I knew what my expected cash position would be for the year. This helped me identify what level of sales I needed to hit and where I needed to trim my expenses to generate enough profit to meet my bank commitments, stay on top of future tax bills, pay off the old debt and then have funds to live on.

They liaised on my behalf with the ATO to enter a payment arrangement which I knew I could afford and stick to and in the process negotiated 12 months interest free so I could focus on repaying the debt rather than having my repayments eaten up by interest. In the end they saved me over $50,000 in interest and they saved me a lot of stress in having to deal with the ATO leaving me to focus on my business and meeting budget.

A successful retirement

I had owned my pharmacy for a number of years and was starting to think about retirement. I had no idea at the time how much my business was worth or how much money I needed to retire. I had always focused on superannuation and therefore knew that there would be some funds available for retirement – but the big question was – would this be enough.

My Guild Financial planner as well as my Guild Accountants superannuation manager helped to assess my retirement goals and needs. With these goals in mind, my investment strategy was changed and I had a clear plan was set for the next 5 years.

Like most business owners, the majority of my retirement funds were locked in the value of my business.  And also like most owners, I had taken my eye off the ball in driving the business.

Guild Accountants sat down with me and we worked through each aspect of the pharmacy, identifying where the weak spots were.  It soon became apparent that we needed to strengthen our business offer to leverage our dispensary success and get some returns from the front of shop.

Guild Accountants helped me to focus building the value of the business by helping me put in place a strong business offer, whilst at all times keeping an eye on the key performance indicators of the pharmacy.  This helped me fine tune the operations as the pharmacy grew in turnover.

Guild Accountants regularly reviewed my financial results pointing our key areas for improvement and more importantly suggested actions to improve these. They helped me to understand and focus on the impact that each decision I made in my business impacted my profitability and therefore my value

Over a period of 2 years, my business value grew by over $2m. At the same time, Guild Accountants reviewed my financial plan and looked carefully at my debt position.  As I moved towards retirement and began investing in lifestyle assets, Guild Accountants were able to ensure that at all times my borrowings remained tax deductible and that my cash flow was sufficient to meet both my business and personal needs.

Owning my pharmacy

I had managed pharmacies for many years but had never been a pharmacy owner. I was familiar with dealing with suppliers, customers and staff but dealing with the bank was a new ball game for me.

Before purchasing my pharmacy I had done all the normal things – had the contract reviewed, had a valuation performed and had my finance approved.

Once I was in the business, it appeared as though the pharmacy was not performing as it should be. Both I and my bank started to become nervous at this point and the bank was looking to me for answers that I just did not have. My previous accountant did not specialize in pharmacy and therefore was not able to provide the level of analysis that I needed during this time. It was then that I moved my affairs to Guild Accountants.

Guild Accountants was able to review my pharmacy and tell me exactly where the business was under-performing. They also dealt directly with my bank and put them at ease a little.

Over the next 18 months they helped me to focus on these areas, having me review stock lines for low performers and to staff my store at the right level. During this entire time GA was communicating exactly how I was performing – and improving – with the bank.

My business has now been performing at a comfortable level for 12 months and we are still working on it. Most importantly the bank is now much more confident – which is a great load off my shoulders.