Sunday Feb 05, 2023

Basic financial foundations every successful CEO should have – The CEO Magazine

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As a financial adviser, I suggest that every individual builds wealth using five basic financial foundations.
For CEOs and business leaders, it is not just themselves and their families to think of, there is also a company.

These five financial foundations will help both your personal wealth and the business you lead grow strongly and sustainably.

Separating business and personal affairs

Work and leisure time, activities and connections are blurred like never before. However, when it comes to finances, and tax in particular, those distinctions remain important.

Pay particular attention to things like:

  • Depreciation of home office furniture, equipment, electronics and so on.
  • Depreciation of home office furniture, equipment, electronics and so on.
  • Expenses incurred while working at home that aren’t supplied or reimbursed by the company: For example, utilities, mobile phone, stationery, parking and printing.
  • Expenses incurred while working at home that aren’t supplied or reimbursed by the company: For example, utilities, mobile phone, stationery, parking and printing.
  • Education and professional development: Job-specific training, professional and industry memberships and relevant subscriptions.
  • Advisers: Accounting, financial advice, legal and managerial services.
  • Maintaining separation of business and personal affairs not only meets your compliance obligations, but also has tax benefits (such as claiming company GST credits) and avoids you being left personally out of pocket for company expenses.

Avoiding common mistakes

Common mistakes are common because people keep making them. Lots of people. Don’t become one of them! Avoid, for example:

  • Poor cash flow: Ironically, those with lean revenues perhaps appreciate that more than those with massive capital inflows. Largesse often breeds complacency: both for companies and high-income earners.
  • Underpaying yourself: Business owners often don’t pay themselves properly, income or superannuation. “The business is my retirement plan!” they claim. All good if it becomes the next Google or Facebook. But if it fails? They’re left with nothing, or devalued. Extract value while you can.
  • Legal quagmires: Especially pertinent when relationships breakdown: marriages or business partnerships. And disputes can erupt among beneficiaries/relatives when a business owner dies without proper estate planning. These situations inevitably affect the business’s value and future as a going concern.

Mitigating your risks

Risk mitigation is just as important personally as it is in business. Conduct a financial risk assessment to identify your vulnerabilities – everything from natural disasters destroying assets to ill health or redundancy unexpectedly interrupting your earning capacity.

  • Examine what protections you have over your assets and your ability to generate income. Are your insurances – property, life and disability, income protection, professional indemnity and so on – current? Do they offer enough cover and the best value? Do you have an emergency cash fund to draw on?
  • Examine what protections you have over your assets and your ability to generate income. Are your insurances – property, life and disability, income protection, professional indemnity and so on – current? Do they offer enough cover and the best value? Do you have an emergency cash fund to draw on?
  • Examine what protections you have over your assets and your ability to generate income. Are your insurances – property, life and disability, income protection, professional indemnity and so on – current? Do they offer enough cover and the best value? Do you have an emergency cash fund to draw on?
  • Establish contingency plans. What if you can’…….

    Source: https://www.theceomagazine.com/opinion/ceo-financial-basics/

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