Nova Business Plan FAQ

Question: I am having trouble calculating my sales. What is realistic? Where do I start?
Answer: The Sales Mix Table 1 is the hardest table to complete. Some of our customers prefer to leave the Sales Mix to last. Instead of tackling the Sales Mix, firstly, estimate your personal drawings, then your business expenses and you will then be able to see from the Viability Table 8 exactly what sales need to be generated.

If the sales figure needed from the Viability Table appears realistic then by dividing that amount by twelve will give you an approximate monthly figure.    

Generally speaking, it is conservative sales forecasts that are usually what results for most businesses.

Question: I am not sure whether I should operate as a sole trader or a partnership?
Answer: Seek professional advice on this matter. There are advantages and disadvantages to both types of business structures. A partnership for tax purposes needs to be a “genuine partnership” where technically both partners (or more than two) can perform the “ principle duties” required of the business.

Question: Should I register for GST or not?
Answer: If your turnover is expected to exceed $50,000, you have to register for GST. 

Other factors to consider are: Is the business selling more to other businesses or more to private consumers? Will the business have a lot of GST paid? I.e. will it have a large amount of inputs credits? Will I be exporting or providing a GST free product or service?

Will not registering affect the status or prestige of the business?

If you have answered “yes” to these statements this is further reason to consider registering for GST. You need to get advise on this matter.

Question: Can I provide both a product and a service?
Answer:  Yes. I good business moves with market demand and by offering more than just the one business product or service it can sometimes be advantageous.

Questions: My terms of trade are 10 days? But the table won’t accept this. What can I do?
Answer:  The Nova Business Plan Version 6.1 has only the four options (“0” days, “14” days, “30” days and “60” days. Choose the terms of trade that is closest to your credit terms.

Question:  Should I fill out the % costs in the Sales Mix Table 1?
Answer: The only time you fill that out is if your business makes or sells a product.

You can express the cost as a % of the selling cost (margin) or as a unit cost,

0therwise put all your business costs in Table 3 - Cash Flow.

93 Personal Drawings Table 2

Question: How are the tables different for a “company” verses a “sole trader”?
Answer: The main difference between a company and sole trader is that the company will generally pay you, the owner, a wage. When you indicate in the Set up area that you will be operating as a company, a net wage will appear so that the amount equals your drawings (Personal Drawings Table 2) i.e. what you personally need to live on.

The personal and company taxes will appear in the cash flow and other tables.

Question: Why is there an additional table at the back of the Drawing Table 2?
Answer: If the partnership consists of two separate individuals (not de facto or married) you will need to complete two separate Personal Drawings Tables – Table 2 and Table 2A located at the end of the tables.

The drawings can vary because of age; lifestyle and the income generated by the respective married or de facto partners.

94 Cash Flow Table 3

Question: What does it mean if the cash flow is negative?
Answer: It means that The Cash Flow Table 3 is showing you that you will be in debt by this amount based on these projections. You will need to analyse why this is happening and then prepare your business for this eventuality.

Question:  Where does the NEIS payment go?
Answer: In the set-up area for the financials. you need to indicate whether you are taking the NEIS allowance. If you are, this needs to be recorded as a cash inflow in the Cash Flow Table 3 and not in Personal Drawings.

95 Establishment Costs Table 4

Question: What depreciation rate do I use for the assets I am putting into the business?
Answer: This will vary. If you are using the Simplified Tax System (STS) then the assets are pooled and you would use 15% in the first year and 30% (reducing balance) for each year thereafter. Assets under a cost price of $1,000 can be written off as an expense.

If you are not using the STS system then there are various depreciation rates available depending on the asset. There is even a system whereby you self assess the rate of depreciation.

Question: Where do all my set up costs or establishment expenses go?
Answer: Set up expenses need to be entered into the Establishment Costs Table 4.

If they need to be paid for at a future date they should be entered into the Cash Flow Table 3. Future purchases of assets, which are entered in Table 4, will be automatically transferred across to the Cash Flow (they will appear in the last row). The tables will adjust for GST automatically.

Question: If I am putting $500 cash and a delivery van into the business where does this go?
Answer: The cash is put into the bottom section of Establishment Costs Table 4. Technically assets, such as a deliver van need to be recorded at their depreciated value.

If this value is unavailable then a conservative market valuation is permissible. The depreciation on some business assets will need to be reduced by the personal % that applies to that asset.

96 Business Loan Table 5

Question: Should I fill out the Business Loan Table 5, when I am receiving funds from a relative or family member?
Answer: No, the Business Loan Table 5 is for monies received from a lending institution such as a bank, building society or credit union. The calculations automatically adjust the Cash Flow, Profit & Loss and Balance Sheet. Monies received from a relative/friend can be entered near the bottom, “cash to start the business” in Establishment Costs Table 4.

97 Statement of Personal Net Worth Table 12

Question: What is the purpose of the Statement of Personal Net Worth Table 12
Answer: If you will apply for a bank loan or bank overdraft, you will need to prepare a similar statement. It does show movements over time in your own personal net worth.

98 Balance Sheet Table 7

Question: My Balance Sheet won’t Balance - Help!!!! 
Answer: The major reason for an unbalanced Balance Sheet is that a formula has been accidentally lost. Check formulas particularly where you have made large changes.

Look for the $ difference between Assets and liabilities through the Profit & Loss and Cash Flow. Check Establishment costs and that the assets and depreciation have been transferred into the Balance Sheet Table 7 correctly.

98 Break-Even Table 5

Question: When should I break even?
Answer: This will depend on how strong and realistic your sales forecasts are and your margins (if you sell a product) as well as how realistic your business expenses are. Many business breakeven point falls between 4 – 8 months. However, much after eight months means that your business viability should be strongly reviewed.

Question: My Viability Table shows the business is unviable. What can I do?
Answer:  This is a very important table. If the business is unviable review your sales mix, (can I offer additional services or products?) check your pricing, costing and expected monthly volume in the Sales Mix Table 1.

After that, re-examine your business costs to see if they can be reduced in the Cash Flow Table 3.  Lastly, review your personal drawings to see if they can be trimmed in the Personal Drawings Table 2. 

Question: Why are the costs in the Profit & Loss different to the costs in the Cash Flow? Shouldn’t they be the same?
Answer: If you have registered for GST a number of expenses that appear in the Cash Flow Table 3 will be transferred across to the Profit & Loss without the GST paid (input credit).  (These are estimates of the GST paid component).

Question: How accurate are the tax rates calculating my tax?
Answer: The tax calculations are a general estimate only and don’t take into account different thresholds, tax offsets, family tax benefits, low income and other rebates and past debts eg HECS. Further the GST and PAYG are monthly estimates even if you are paying quarterly. It is impossible for us to estimate when you will enter the PAYG Instalment tax system. The tax estimates are generally conservative in their calculations.

Questions: Why doesn’t every expense appear in the Income and Expenditure Graph Table 10?
Answer: Expenses under 3% (of total expenses) are not recorded because it was thought they were too small in magnitude to warrant appearing on the graph.

Question: How do I know how much stock I will have at the end of the first year?
Answer: This is always difficult to estimate because a lot will depend on the sales that are actually generated and what cash you have left to reinvest after payment of business expenses and drawings. You need to provide your best estimate.

Question: Can you explain the break-even graph to me?
Answer: The Breakeven Table 9 shows at what point in your business projections of sales and costs, that total income is equal to total expenses. The purple line graphs your actually monthly sales. The yellow line are the costs (mostly fixed costs) from The Cash Flow Table 3. The blue line will only apply to your business if you make or sell a product. This line is your cost of sale or variable cost.

The weekly amount is what your business needs to generate in sales to cover all your expenses and then lower down on the table, the weekly amount of sales needed to cover expenses, drawings and taxation.

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