Finance: Minimum deserves maximum attention

By Jeremy Tauri

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Politicians often argue about the minimum wage. Some want it raised to $15 an hour immediately. Others say anything over the existing $13.50 is too hard on businesses.

But a huge segment of the population works 40-hour weeks for much less than the minimum wage. No one advocates for them to earn a "living wage".

Who are these people? The self-employed.

There is no minimum wage for self-employed people.

I have completed financial statements for many people who have worked a full-time stint, only to be shocked by their accounts.

A quick calculation to work out that their hourly rate shows that they have, in effect, earned less than the minimum wage - and in some cases a negative hourly rate. In most cases this surprises and shocks.

Educating the self-employed to understand their financial statements is the accountant's obligation.

It needs to be done with emotion and enthusiasm.

We know this stuff inside out, can read a set of books with ease, and can smile and frown wisely upon the results at a glance.

However, we should not soften the blow if we see that the results are dire. We need to tell you, sternly, that earning an income less than a minimum wage from your business is a problem.

When working out your hourly wage - by dividing your average weekly profit by the hours you work in a week - you do need to consider the perks.

You may need to add back that phone that's paid through the business, that car and its fuel, that entertainment account, that use of home office.

Remember that we also get GST back on some of these things - (those things that seem 15 per cent cheaper to a GST-registered person). And don't forget that we can, in many cases, choose when we want to work, there are no annual leave forms to fill out, no sick leave to request, no medical certificates to provide, although this for some may be a mixed blessing.

Remember the more that you can earn in your business now can mean if you take it to market you can command a higher price in terms of goodwill.

Would you buy a business that was making its owner a minimum wage?

- Hamilton News

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