Rebecca (00:00.97)
Welcome back to the Champagne Lounge podcast. I'm joined today by the fabulous Kate Kemp. Welcome to the show, Kate.
Cate (00:08.184)
Hello? Hi, so great to be here.
Rebecca (00:10.742)
So Kate, for those of our listeners and actually other members who have yet to meet you and know what you do, what is it that Kate Kemp offers to the world?
Cate (00:15.238)
I'm not sure if you've heard of it, but I'm sure you've heard of it. Today? Yesterday? No. It's sometimes a little bit hard to tell, isn't it? So, I'm a financial leadership coach. And, you know, I've sort of made that a little bit more complicated than maybe it needs to be. I could just go, I'm a coach, whatever. But what I find is that most businesses go, oh, you're a business coach, yeah.
I'm not, I'm a career bookkeeper. I've been working in accounting and finance and accounting for business, not tax. And so I've got this real focus on, it's about financial leadership that really drives businesses to perform. And so that's what I do. I help businesses perform financially by stepping up into that financial leadership position. Yeah. 100%.
Rebecca (01:02.57)
Which is so vital because we're wanting profits and successful businesses, right? Not just paying the tax man for the sake of it. So where did your career journey start? Like as entrepreneurs, I know you've been in a bit your business now for well over a decade, possibly. I can't actually, I don't know, possibly two. Where did it all start for you on your career journey and what's got you to where you are today?
Cate (01:12.006)
I was trying to find a place to live in for a while. A thousand years. A thousand years? True. I was trying to find a place to live in for a while. Yes. I was trying to find a place to live in for a while. Right. Well, look, I was all set up to be a financial planner after deciding that managing hotels was really not for me. But I then I accidentally got pregnant, as you do.
And from that point onwards, I continued to sort of work for myself. Originally, I was going to work from home with the baby and just do some bookkeeping. I mean, you can't ever be told, right? Crazy, horrendous idea. But yeah, so I had this tiny, beautiful baby and I thought working from home would be, be easy.
Rebecca (01:56.818)
Nope.
Cate (02:09.334)
As it happened, I just never went back to work and I continued to work for myself. I continued to grow. I can, I realized that bookkeeping is really shit and it didn't help businesses in any way, shape or form. Um, it helped the tax office heaps. And I sort of really got interested and into small businesses and then really interested in into business accounting and working with accountants on how to.
actually provide business accounting instead of tax accounting, which is what is primarily available to small business owners in Australia. It just went from there really.
Rebecca (02:42.474)
And what primarily is the difference? Like what is business accounting? Like what makes it different? And why is it so important for business owners to know about?
Cate (02:50.67)
Yeah, right. So, um, accounting for business is accounting for profit. It's, um, it's being mindful of active balance sheet management, which I'm sure everyone goes, Oh my God, stop talking now, right? But it's, this is like, it's a business hack and, uh, business owners, uh, rely on their advisors. They rely on their accountants. They rely on their bookkeepers and business owners think that accountants and bookkeepers are accounting for business. And bookkeepers and accountants sort of...
don't know that business owners just think that. And so we've got this real miscommunication and what happens there is business owners are abdicating management and leadership to the bookkeepers and accountants who are primarily working for the tax office. They're accounting for GST, they're accounting for income tax, they're doing really good payroll and there are fantastic bookkeepers and accountants out there, but they're not being managed and led. And so they are just doing what they know to do, which is tax returns and best returns.
When we say account for business, we're like account for profit. What's your minimum profit, right? Account for growth. That means knowing your balance sheet inside out. And the thing is to do a tax return. You don't need a really good balance sheet. You just need a really good tax return, but to get more out of your business, to really understand how your business makes money, how it works, your business model, how to tweak it.
how to get that extra 1% out of your cashflow, out of your profit, out of your metrics. You have to have that business accounting focus and it's a incredibly different skillset. And it's not a skillset that I see in mainstream accounting and mainstream bookkeeping for small businesses. Now, if you go up the ladder and you start working with PWC private clients or any of the big four accounting firms who work in management accounting.
You get this, it's a given, right? It just happens that way. We do a management accounting pack and then we do a tax return later. And we can get fantastic tax advice off the back of really good business or management accounting. But the reverse statement isn't true, right? We cannot get fantastic management accounts or business accounts from a really good tax return. And so it's business first, tax second. And if you think of it strategically,
Rebecca (05:00.611)
I'm going to go ahead and start.
Cate (05:10.906)
Your first strategy in business is profit. Your last strategy is tax optimization. And we have this arse about with small businesses. We're like, optimize the tax at the expense of profit, visibility, clarity, confidence, and knowledge. And so like my get out of bed is small businesses need access to business accounting and active balance sheet management is the quickest and simplest business hack known to man in my book.
Rebecca (05:41.134)
I would, I would agree now I know I've known you for a long time and know exactly what that's all about. Now I know a lot of business owners, small and medium business owners regularly and it baffles me still get blindsided by the tax bills that come in because they haven't got eyes on that right
Cate (05:56.994)
Yeah.
Rebecca (05:58.334)
anything and it's just blindsided. So it's as though it's not expecting to come, right? Like it's like, it just, regardless of the fact it's a cordy thing, it comes around and hits them like a ton of bricks. What are the things that business owners can be doing or asking or should be looking out for that could potentially be the red flags to, I could make more money here?
Cate (06:08.558)
Yes.
Cate (06:19.796)
Right. So like the number one business hack that I go through every single one of my clients go through this with me is called a bullshit assessment. And this is this financial leadership piece, right? You guys as business owners, you're really happy to manage your marketing team. You know, if they're doing a good job or not, right? Really happy to manage and lead your sales team. You know, if they could doing a good job or not.
You're happy to manage your operations team. You know that they're going, doing a good job or not. And so on and so on. And people and finance, we get to the, you know, the finance team. You're like, Oh no, my accountant does that. Right. You do not manage your accountants. You don't manage or lead your bookkeepers. So this, um, bullshit assessment is giving you the tools to know whether or not your accounting team are doing a good job. And it goes like this. It's super simple. You ask for your most.
recently reconciled balance sheet. So you're giving them a heads up already, right? And then you just go through that sheet and you start at the top and you go to the bottom and you go every line, you three exercises. So what is it? What does it mean? Does it feel right? And the third most important exercise is prove it. And I'm not gonna lie, this is a punish, right?
Rebecca (07:33.849)
Prove it. What do you mean by that?
Cate (07:38.446)
You need to prove that balance sheet item or the line on the balance sheet, you know what it is and what it means. It feels right to you and you can prove it. Now pro tip, if you don't know what it is or what it means.
Rebecca (07:55.558)
I think that's a good point.
Cate (07:57.67)
But the prove it part is the most important. Now the first line on your balance sheet is usually a bank statement or bank account. And so what is it? What does it mean? Oh it's my bank account and it means that on this day of the report there was $582.96 in it or whatever. Does it feel right? Yeah it probably was. How do I prove that? Hmm I'm gonna get my bank statement.
Rebecca (08:17.814)
Yep. What are some of the common ones that come up that people don't know what they are?
Cate (08:23.318)
And I'm going to see that there is $582.96 or whatever the number is. So that's my first piece of proof. And then I go to the next line and so on and so forth. And the minute I get to a line, I go, I do not know what this means. I go, well, I'm going to ask my accounts team what this means.
Cate (08:43.106)
There are many so GST people don't often know what GST means in relation to a balance sheet and if they go well that's a GST I know what it means but they don't know how to prove it and most business owners know most of the meanings on the balance sheets they might get stuck on things like goodwill or unexpired interest charges or formation costs or black hole expenses you know
Cate (09:11.758)
the understanding of what it means, but it's when we get to the proving it part, and this is where you go back into your accounts and we go, can I have the work paper that proves that this number is correct? Most often we get into trouble at the bottom of the assets or the, you know, the current liabilities, you know, and people go, common for me to go through this with a client and they go, that loan was paid out like two years ago. Why is it there?
And or, oh, that car lease that finished a couple of months ago, why is it minus? And the answers are, well, you know, because you kept paying it when it had finished and therefore it's a minus now. Um, or I'll say to someone, Oh, look, the ATO owes you a couple of hundred thousand dollars. We should go and get that back from them. Shouldn't we? And they go on. No, no, we owe the ATO money. I said, Oh, but your balance sheet says that they owe you lots and lots of money. So, you know, shouldn't we go and get that?
Rebecca (09:51.065)
Wow.
Cate (10:08.462)
And they're like, Oh, no, that's really wrong. And this is where we come unstuck. And so the next thing I say, if I'm not doing it with you, and we're maybe on stage or we're just having a conversation, I go like, if your accounts team cannot explain this to you in a way that hits home, and you are super confident that you know what it means, what the number is, and that it's correct, they're not the right accounts team for you because you wouldn't accept that from any of your marketers or any of your operations team.
Rebecca (10:11.747)
Mmm.
Cate (10:37.558)
Right? If, if, if one of your team members, um, delivered a product and you didn't know how they did it or why they did it the way they did, and you asked them and they didn't give you an answer, you understood you would actually, you would not accept that. And we do accept it from our accounts teams often. And that's the leadership piece.
That's the leadership.
Rebecca (10:58.195)
And so obviously, you're teaching these elements, right, to business owners, and it can seem really scary, like it can seem incredibly scary to start those conversations. And I know when I've done something
scary. I've kind of wanted to be in a group environment or surrounded myself by business owners that we can kind of all share the same experience. How are you seeing business owners connect with each other? When it, you know, are people opening up on your work, you know, in your groups that you're working in and sharing that because it's a very vulnerable place to be.
Cate (11:30.669)
Yeah, it can be. And I actually find that I get a really good response from business owners when we've actually had a few conversations around, this is not about you, right? You are not your balance sheet. You are not your business. And it's so much better to know.
what you don't know and then find a solution than to get blindsided by a huge tax bill that you didn't know coming or to not know what wiggle room you have when something goes sideways in your business because I mean business never goes sideways right it's always smooth bloody sailing. And that's you know again I'll talk to business owners and go look I can't see you know you've got 20 you've got 20.
Rebecca (12:06.602)
Always smooth sailing.
Cate (12:16.282)
permanent staff here and I can't see any leave liabilities on your balance sheet and in one particular instance which was a couple of years ago now when we went and looked into that balance sheet and we got it correct that poor business owner had $300,000 of annual leave and leave entitlements owing to staff. So if for some reason something went sideways and they had to close the business they were up for an additional $300,000 on top of
Rebecca (12:35.398)
Wow.
Cate (12:46.006)
everything else they owed. And they just didn't know. And it's not like they couldn't have gone found out. It's not like didn't know that leave liabilities existed. Everybody knows that. But it wasn't on their balance sheet. It balance sheet wasn't actively managed. It was managed from a tax perspective. And the tax office doesn't give a shit if you owe leave to your staff or not until they want to put you into a liquidation. Then they actually really care a lot about that. And this is the difference between tax focus and business focus.
Rebecca (13:10.242)
Yeah.
Cate (13:14.026)
a business balance sheet has every single liability and every provision in it. A tax one doesn't because it doesn't matter until it does. Does that make sense? Yeah.
Rebecca (13:22.019)
Until it does matter. Yeah, it very much makes sense. And why, it sounds pretty scary. And all the links to Kate's work, I'm gonna put in the show notes because I find it incredibly valuable to share those things. And I don't wanna make it too scary for business owners listening to the podcast. But what made you make this your mission to help? Like why is helping small businesses
understand this to this degree, why is it your mission statement? Because it is something that you are doing very differently to other people. Like no one else in your industry is talking through business accounting. There's all tax accounting. And most of them are probably wouldn't know what you were talking about. Right? Like, so why was this created as your mission and how did it come about as the driving force for how you're having impact on the world?
Cate (14:16.594)
Um, I think probably a bit, um, unknowingly originally, right? Um, I was just really into business and I'm a little OCD, so I was really into doing it right and, um, I was also really curious about a whole lot of things. And, um, then I started, you know, working with more and more businesses and more and more tax agents and accountants. And I think after about 10 years, I'd started to see people get really hurt.
like really, really hurt. You know, there was a low level chronic frustrations. So, oh shit, you've told me I've got a Bastu tomorrow for $50,000 that I just don't have handy right now. Right, so that's low level chronic annoyance type hurts. And yet if that business owner was really, had done this business hack and just got their balance sheet or their BS sorted out, they would never have been surprised by that.
So that was the first thing I really started to pick up on. It's just like knowing your next 90 days cashflow, knowing your next fast lodgment is all there. It's on your balance sheet. You can look at it every day if your balance sheet is actively managed, right? So that was the low level annoyance. And I think most business owners have been stuck in that position or shit, I've got to come up with money. Today, you know, this has been, you knew this was coming three months ago. How are you only telling me about this today?
Rebecca (15:42.468)
Yeah.
Cate (15:42.526)
Right? I think then I started seeing businesses get hurt in a bigger way. So that might be a key member of staff who's worked there for 15 years, loses their lollies, or some life stuff happens to them, and life stuff can happen to anyone, right? And all of a sudden, we're not only losing a key member of our team, with probably limited documentation and limited success planning, but we've also turned around with a $20,000 payout.
Rebecca (15:59.065)
Yeah.
Cate (16:10.99)
because they've been there for that long and long service leave has kicked in and even though they might not have taken it or whatever. And again, the hack there is fucking look at your balance sheet. But your balance sheet's only as good as the people who've put it together for you. And I'm really keen to give business owners the skills to know whether or not their balance sheet and their financial management is to the quality they need it to be so they don't get blindsided by $20,000 pay amounts.
last-minute basses and then more recently, particularly over COVID, you know what? I can't do this anymore. We need to wind it up. And in that wind up, getting blindsided by personal liability, by directors penalty notices, because superannuation was never properly managed or reconciled and all of a sudden there is an eight-year-old superannuation liability that's
Rebecca (16:48.966)
Yeah. It's big.
Cate (17:07.658)
you know, there's a direct penalty notice. Um, I've seen people lose their houses. I've seen people lose their families. And, you know, just due to that, that financial blind side, and I just believe strongly that if they had an accounting team that was really working for them, for their business, and it's not just the accounting team that's at fault here, that they took responsibility for the leadership of that team, that
level of hurt and that level of pain and you know, abject distress in some instances could have been avoided just by that leadership piece.
Rebecca (17:45.373)
Yeah.
Rebecca (17:49.872)
Oh, I don't know about any of our listeners, but listening to you talk that through gives me all the feels because it is one of those things that you're seeing in real life. And until you see it and actively have eyes on it or hear about it in real time from a real person, it's a scary unknown that you don't know scary until it's there, right? Which is a huge thing. And talking through that, you said you've obviously seen people impacted by losing their homes, losing their family.
Cate (18:08.494)
Yeah, 100%.
Rebecca (18:15.734)
blindsided by hundreds of thousands of dollars worth of liabilities, I didn't know were there. Who's supporting you in the running of your business? You've got your business, running a business on, normally is hard for an entrepreneur with the rollercoaster business. Where are you getting the support from for you, not necessarily your team and the runnings of your business, but for Kate? Like who's helping support Kate and how have you had that support throughout the years of growing your business?
Cate (18:43.145)
Yeah, it's a really good question, right? Because sometimes it gets really heavy. Sometimes supporting people through, you know, adverse...
conditions or events or a wind up or whatever it is in business and business can just be tough. So it can get really heavy. I think particularly over the last five to seven years, I've become very involved with some business networks. The Champagne Lounge is one of them. The Entourage is a network I really highly recommend and I sort of spend a lot of time in those networks, not only offering value and coaching and mentoring in a more informal sense, but that fills me up. Those people
Like a bit of a family right a business family and they get it they get the heavy And they get the struggle and sometimes it is a struggle and they also get the flow So when you're really in flow and there's that support and the cheer squad And that place to sometimes just have a little bit of a meltdown With other people and other business owners who get it right there. They're there they get it. They've been through it They've had their own little meltdowns
And I think those communities have been a savior for me, and a great value. So not only a safe space and somewhere to be really real. And honestly myself and vulnerable and I'm going, you know, I don't have all my shit together, nobody does. And I've totally fucked this thing up. And it's had a pretty negative outcome for some people. You know, those conversations are the conversations that take the heavy away.
with groups of people who've been there, they know it, they get it. And there's that no judgment, there's no professional facade, and it just gets really real in these communities.
Rebecca (20:27.145)
Yeah. It's fine. It's finding your tribe and finding that safe space, right? That support piece, because we can't do it alone. We really just can't do it alone. No. So Kate, the last.
Cate (20:39.075)
100 percent.
Cate (20:43.622)
No, no, and even if you've got, yeah, so even if you've got an extensive team, right, and I've got quite a large team now, that being the leader is still quite lonely sometimes and that those tribes and those communities are what really holds us up.
Rebecca (20:58.842)
Definitely, you've articulated that in such a way of, it's the holding up piece, right? It's the holding them up in the bad times and the good times and being that ultimate chair squad that you know hasn't got the judgment because they've been there, done that, going through the same things, similar things. So...
Community is something that we all require as business owners. You're obviously a huge part of the Champagne Lounge. Last question I ask on the podcast each and every week is how do you celebrate the successes in your business? And how often do you actually sit and acknowledge the achievements that you've done in your business? Because we do tend to strive and jump into the next thing and the next thing and the next thing. So Kate, it's your final question for you. How do you celebrate your successes in business?
Cate (21:45.478)
Um, yeah, so quite often I give you a call. And actually, since I've been sort of working in the champagne lounge, I've become more mindful of that. And I think it's a really great question to ask Bex, because I would have probably even two years ago, I've gone, what, what successes, right? And I'm sure I'm not the only one who goes, I've not, I'm not succeeding in anything. Oh my god. But
Rebecca (21:48.823)
Ha ha!
Rebecca (22:06.628)
Yeah.
Cate (22:13.15)
you know, particularly since the champagne lounge and its creation and Having worked with you a little bit more closely in a business sense over the last couple of years. I will actually put the tools down and go out to dinner with my partner or go for a bike ride or you know just Decide to have a morning off and give myself that little bit of space and in those spaces There is inherent creation anyway
So I do tend to do little acknowledgements more regularly now and I'm really grateful for that because it does just give you a little bit of a lift and a bit of space in your in your soul.
Rebecca (22:41.415)
Yeah. Definitely and we all need a little bit more space,
celebration in our world. Kate, thank you so much for joining me on the Champagne Lounge podcast today. I know it's been incredibly invaluable to all of our listeners listening to that and I have no doubt that you'll get inundated with reach outs to work with you and find out more and I'll make sure all those links are in the show notes. So thanks for joining me on the show today, Kate.
Cate (23:17.794)
Thank you. Really great to be here.
Rebecca (23:22.628)
Done.
