Be YTD results-driven
All businesses are now well into the 2017/18 trading year, which will be providing a mixture of real experiences based upon the sector/industry one is in and the sectors being serviced.
National statistics indicate that our local economy is currently rather flat, but SMEs are in a much better position than large resource-based companies because of their ‘flexibility’. Management should ensure that their gross revenue from either or both services and production is seasonalised to target 60% of annual sales by 31 December 2017. The balance of 40% should be achieved in the second half of the year, plus any extra-budgetary revenue earned which may generate some marginal profits.
Why? The answer lies in applying the old business doctrines of conservatism and materiality to your business planning. In our Southern Hemisphere location, it is accepted practice that one can motivate workers to achieve higher output in the six full months leading up to the festive season, as opposed to the six months that follow, leading down into 30 June and wintery conditions.
This second half year is also traditionally much shorter in actual working days due to public holidays, school holidays, staff leave, Easter and other significant dates. If you check your budgets and expense history, you may find that your operating expenses should flex downwards here with your lesser days worked. However, your fixed and overhead expenses including rent and interest costs will continue at a flat monthly rate, putting more pressure on the second half of your trading year.
Adopting the 60/40 rule will ensure full year performance security, and your more energised staff should concur and fully understand this workplace model.
Question the real value of life insurance
Recently there has been an upsurge in the volume of offers of life insurance via all forms of the media, with applicable rebates and discounts used as incentives.
Before the introduction of mandatory superannuation in Australia via the SGC legislation of 1992, many working adults took up life insurance policies as a means of financial protection for their dependents, if one passed away unexpectedly or at a younger than anticipated age.
While the premiums were usually fixed, the lump sum settlements obviously varied with age and the older one became, the less payout they could expect. This upset many people who believed that around retirement, they could take out a handsome withdrawal benefit to supplement any government age pension entitlement, but outside of an early death no large or indexed payments could really be expected.
Following 1992, life insurance (more correctly seen as ‘life assurance’ as there was never any risk of our lives ending) likely declined as a desired alternate form of planning for a reasonable retirement income. Employers were now forced to pay the minimum contributions on behalf of all employees, while the total balance eventually accruing and payable on retirement was always growing, rather than declining as with most life insurance.
If one is considering taking out any new life insurance policy under the current economic climate, be sure to first contact your superannuation provider, as they can normally attach extra life cover to your super account at a very reasonable age-based rate. Secondly, please seek the opinion of an independent financial professional and do not simply rely upon an insurance sales executive for such essential advice.
Being linked in is not such a new concept!
We have suggested previously that management should be well clear of the past trading year, and already operating within your newly adopted template, full of energy and new ideas. It is now time to reconsider your external contacts.
Your new year’s revenue/sales/profits will only get better if you plan to have some quality time away from your regular work sites and engage with:
- a) your current business critical external parties whom you either depend upon already, or
- b) those whom you only know of, who should be able to inspire you to greater heights with their expert knowledge and wise support.
The former group (a) will be all of your well known contacts who provide you with materials or services to maintain your current turnover, along with all your major customers who choose to engage with you as their preferred supplier. You must remain linked in with both sides of this group with regular personal contact (maybe backed up by email, phone or skype, depending on their locations), however in- person visits are essential and always recognised as the most rewarding.
The latter group (b) are those external professional and/or technical groups or individuals who usually stretch you out of your comfort zone via lectures, seminars and webinars, aimed at your business type from a strongly recognised base of higher learning. In most cases, this is where your future extra business or new products/services development will come from. Start with recognised industry groups such as Chambers of Commerce, AIM, Trade shows, and AICD in your local area.
Protect your business name and reputation
It is very important to protect the reputation you have built up over recent years and not let others imply that they are part of your business or working with you (often in a stealthy attempt to steal your customers, reputation or even staff). Be sure that all of your business premises and any vehicles are clearly named, along with reliable contact numbers displayed in prominent places for public recognition. It is vital to back up your marketing efforts, along with your essential security.
You should also back up your physical presence with properly registered business names within your state via your local government small business office, or through ASIC for larger national businesses. Most of this can be achieved online these days, but if you need some professional guidance in these matters then discuss it with your lawyers or accountants. The government offices will be able to offer you plenty of advice to back up the myriad of information on their relevant websites.
Local industry groups like the Chambers of Commerce will gladly discuss these issues with you and provide you with relevant advice and guidance, especially where it involves registration of your adopted business names on the internet, where many names are used multiple times over in a variety of contexts. Business names are inexpensive to register, while any move into the high cost arena of patents and trademarks should only be undertaken with support from your lawyer.
The clear presentation of what your business has to offer will be critical to your business success in the future; do not leave these important issues to chance.
Managers, well into the new business year with energy?
This is the perfect time of the year in your business life to reboot your success starting with a revitalisation of yourself. Over the past few weeks you will have completed your financial reporting for the 2016/17 year and in many cases will have passed them over to professionals for any due audit prior to completion of your business and personal tax returns.
With your current business plan, the right employees in place and appropriate stock levels etc, a quick audit of your own future capacity and abilities may be worthwhile. Such an act of personal reflection can in itself be very fulfilling and provide the opportunity for you to make any major and/or minor changes to your own business role and performance. Always take into account your work/life balance and ensure that you closely monitor the hours you dedicate to your business role, including a real provision for adequate holidays. From these actions you may choose to create a totally new personal template to guide you through the next business year, or perhaps review your existing one? These very personal actions will be so rewarding that you should feel exceptionally positive and ready to meet all new commercial challenges head-on.
Take advantage of all new global digital developments
There is a new acronym in our modern world which pops up regularly in articles on our digital revolution, it is “IoT”, meaning the “Internet of Things”.
Away back in 1999, British entrepreneur Kevin Ashton developed this terminology in order to refer to the interconnectivity of a wide variety of embedded devices, systems and smart objects for the introduction of automation in many fields. For example, it is a platform used for Smart Energy Systems, a Smart City or right down to the remote monitoring of any medical devices and domestic appliances. Future uses are expected to include perpetual inventory recording, controlling copyright restrictions on movies, discs, and the list goes on.
So the word ‘Things’ actually refers to a mixture of hardware, software, data and services which collect useful data from existing technology and which can then move such data among other embedded devices.
All business managers should keep their eye on these developments in the future as it is estimated that 50 billion objects may be on the IoT by 2020, while last year alone the UK Government allocated 40 million pounds into an “IoT Research Budget”!
What a start to our new year!
While all business managers, owners and sole traders will have been wrestling with all of our traditional year- end commitments it seems that the wider international and public sector world is striking us with tsunami type issues that can bewilder us, and seemingly stifle our commercial initiatives to move forward confidently. The two recent macro events are the social and economic impacts arising from our recent unresolved general election and the withdrawal of the UK from the European Union. For the wellbeing of all our customers, staff, families and communities at large we must all confront these issues in our own positive, personal and managerial ways in order to ensure that at a local level we do not give any ground to what is beyond our own immediate control.
Back down here at earth we trust that by now your bank statements to 30 June 2017 have all been reconciled correctly, and you know exactly what liquid funds you had to start with for the new business year.
Be cautious where uncertainty prevails
With a whole 12 months of trading ahead of us all and some negative winds around, some extra discipline can be applied to ensure that we are operating within our means, just like we would apply in our homes from time to time. In business we can achieve this by ensuring that we keep all of our expenditure modest and essential, strictly business critical and 100% tax deductible, in order to maximise one’s after tax income for 2017/2018. This naturally is further enhanced by maximising our sales and services revenue compared to budget, while only committing to essential expenditure regardless of what levels were adopted in your new year budgets.
For a good current business analogy of survival, resilience and continued performance one should follow the examples provided by four of our top female athletes who all wanted to partake in the 2016 Rio Olympic Games, viz. Meares in cycling, the Campbell sisters in swimming and Pearson in the hurdles. The energy and efforts of these four champions can provide us all with real inspiration!
Forward thinking with computers
There was a very interesting news release from the CBA in April which reported upon their move into the future via ‘Quantum Computing’, which does not mean much to most of us today!
However it is worth knowing that one of our own top banks in the world plans to launch a simulator to mimic working on quantum computers which have yet to be invented?? The CBA tech team is planning to develop applications away ahead of the first silicon based quantum computer yet to be built, which in brief reportedly works in “the realm of subatomic physics”, whatever that may be, resulting in the ability to solve problems almost instantaneously while incalculable algorithms will run in a flash. That sounds very fast but then it was reported elsewhere that one of these sophisticated calculations that may take up to 3,000 years to resolve on a standard computer, would take one to two, yes 1-2 minutes, on a quantum computer! Your author has no word to describe that kind of speed.
While our standard computers today process data in binary ones and zeros, quantum computers will evidently run on ‘qubits’, which can be a one and a zero at the same time (mathematicians’ language). The simulator that the CBA is developing along with the University of NSW and the USA software company QxBranch will not have the full speed of a quantum computer yet to be built, but it will have ‘quantum logic’ which is needed to isolate any related problems in advance. Unfortunately it has been predicted that the security of our banks and global financial systems could be threatened simply by the speed at which calculations could be performed on the quantum computers of the future. While major technology companies like Google already have teams working on quantum hardware and quantum cloud services our local UNSW team along with the CBA would like to have a 10-qubit computer built by 2020 to enable them to then scale up to a greater capacity machine. This should help Australia to be ahead of the new world as these developments roll forward providing us with a once in a generation advantage. We must therefore watch this space over the next five years!
Remember to call our EPIC Business Assist team on 07 3857 5085 for any assistance you require with Accounting or Reporting systems and financial records, including Website Development and Search Engine Optimisation (SEO) Services.
Some end of year reminders
Before we know it our financial year end balance date will be upon us all. That is how our fiscal performance will be measured and judged over the previous 12 months of business and service.
A few relevant ideas follow that may assist every SME manager and your staff to make this coming balance date your ‘best ever’ :-
1.. Prepare and print a good “To Do List” that suits your business, industry or sector in conjunction with your most senior knowledgeable employees and indicate areas of responsibility with due completion dates.
2.. Discuss all balance date topics openly with your team and delegate responsibilities clearly to ensure all are contented with their individual assignments. Avoid approving any non-essential staff leave over balance date and be ready to approve any overtime.
3.. Unless your business has any special circumstances to the contrary, plan to maximise your Cash at Bank balance on 30 June while you should minimise your working stock holdings without impacting on your daily operations and revenues.
4.. Similarly you should reduce debtors to their minimum level at 30 June by making an extra effort to collect all you can from those which have balances outside 30 days, and take up a reasonable provision for doubtful debts based upon your own history.
5.. Attempt to settle all of your creditors within your agreed credit terms and wherever possible take advantage of any early settlement discounts that may apply or that you may choose to negotiate with any special major suppliers.
6.. Your closing stock values may be a composite of raw materials, finished goods and/or work in progress. All valuations should err on the side of conservative as it is not wise to overstate your profits on incomplete or unsold work to calculate your overall EBIT.
7.. Any stocks that you have written off as obsolete, damaged or unusable must be quarantined and excluded from all stocktaking procedures, along with any unpaid for consignment stocks that you may be holding on behalf of a regular supplier etc.
8.. Ensure that all of your fixed assets have been depreciated in line with the commonly accepted accounting standards and where the ATO has published any special accelerated rates be sure to take advantage of these ‘one-offs’, or R & D, to reduce your taxation.
9.. Any intangible assets on your Balance Sheet,( eg. goodwill, patents, etc) should be carefully reviewed to ensure that they still represent some real future economic value to your business, otherwise writing them off should be considered with your accountant etc.
10..Your employee records should all be updated at 30 June for accounting and taxation purposes (corporate and individual) with full and correct accruals for staff statutory leave entitlements calculated on current labour rates based on days and hours.
11..Superannuation paid on behalf of your employees must be up to date and wherever possible your June employer contributions may be able to be calculated and paid just prior to 30 June to eliminate your liability and ensure accurate staff superann records.
12..Company taxation payments, both ATO and state taxes, should all be fully paid if due prior to 30 June, and ensure that you maintain copies of all your calculations which may be subject to later scrutiny by your auditors, accountants or the Tax Offices.
13..Further to the comments on superannuation in our March Business Briefs you may wish to explore the changes to personal superannuation limits applicable from 01 July as outlined in the latest <ATO/Small Business Newsroom> briefing on the internet.
We trust that these ideas will assist your approach to a successful 30 June 2017 balance date, but if you need any assistance with any of these components please use our team at EPIC Business Assist on 07 3857 5085, they will gladly help you out.
Succession and estate planning
As our financial and tax year moves towards closing on 30 June, all business managers and owners will become much more aware of what real values they will have in their balance sheets and how they intend to maximise future growth from such capital assets.
The immediate years ahead will probably raise the issue of succession planning to ensure that your SME/business maintains its momentum and continues to produce satisfactory profits from increasing sales revenue. Therefore for those with few employees, it is imperative to have a formal succession plan in place with one person from your staff or family designated to take over your responsibilities in the event that you fall ill or experience a mishap that may immobilise you for a short or long term. This should result in alleviating any sudden workplace issues that may arise when you do not have such a plan. Your good customers and loyal staff are not going to suddenly abandon you and your business, and financially you may want the business to function normally without you for any further period of time, say from two to twenty years, subject to your age and financial circumstances. Most probably for the first time in your working life you may have to hand over the reins of managing your business to your designated successor, with whom you will have already established a significant amount of trust.
The worst possible scenario to handing over one’s business to a trusted delegate may occur on the untimely death of the small business owner or manager. Quite often one’s estate at the time of passing may appear quite different to what one had envisaged, due primarily to what a family can legally inherit and following that to what may not prove to be genuine freehold assets of the estate. Superannuation as an example may contain a level of life insurance subject to one’s age and the total balance may pass either to the deceased’s death benefit nominees, or where there are no such nominees, to the estate. Without an estate plan nor a will this can result in some unexpected outcomes for all parties.
Secondly as an example, commercial property owned may be found to be held in a joint tenancy with others and until the last survivor dies, that property will not form part of the deceased’s estate. However, if the deceased was a tenant-in-common with other co-owners of such real estate, the portion of the property owned would form part of the deceased’s estate.
Therefore one must wisely consult a good legal advisor on wills and estates to ensure that you have the right documents in place for that unexpected time when you may need such security, otherwise your prospective beneficiaries may be disadvantaged in some way.
In the meantime as your financial year end approaches and you address these planning issues our EPIC Business Assist team on 07 3857 5085 is here to assist you with any financial reporting or accounting needs that you may face.
A good business brain?
We often hear this comment made especially in relation to those owning or managing SME type businesses where their success is very apparent.
Apart from many educational, commercial and market experiences and influences, one other factor that is essential for such success is usually a good brain, which must be maintained even while the areas of our brain relating to reasoning and memory will reportedly shrink with age.
The Harvard Medical School team have found that brain cells and their connections can still be expanded during one’s whole lifetime through some certain activities which can reduce the risk of dementia, and therefore may help to preserve our memory and reasoning.
The list of activities to achieve this is headed up by —
• Physical Exercise : Observational medical studies have linked regular aerobic exercise to reduced risk of dementia while clinical trials and studies have indicated that such aerobic exercise can also increase brain mass and improve our reasoning ability. The most positive results achieved were from those who undertook 30 minutes of aerobic exercise five times per week per annum. Sports or dance etc indicated better results than repetitive exercises, such as walking, for stimulating the respiratory and circulatory systems which is what aerobics target.
• Mediterranean Diet : No surprises here for anybody, reportedly our diet should be high in fruits, vegetables, whole grains and legumes; moderate in olive oil, unsaturated fats, cheese, yoghurt and wine; and low in red meats. Studies have shown that this diet is associated with a reduced risk of dementia along with cardiac prevention – a win/win for all of us!
• Social Connectedness : Since the 1990s studies have linked social connectedness with a reduced risk of dementia and rather than it being the actual size of one person’s social network, it has been discovered that the variety and satisfaction in social contacts is the much more important factor. Again it is a good ‘variety’ which brings the benefits.
• Mental Stimulation : Evidence displays that a challenge such as learning another language or how to play a musical instrument are more beneficial than repetitive exercises like crossword puzzles. However there are now many brain training programs on offer which have yet to be proven as means to improve our memory or reasoning ability, therefore playing cards with family and friends may be just as good for our brain cells.
Medical research is continuing to advance the knowledge on the impacts of these above factors on dementia and ageing. We can now therefore confidently expect your “good business brains” to become even better and last longer!
To allow you more time for your critical business developments refer any of your repetitive bookkeeping and tax reporting needs to our EPIC Business Assist team on 07 3857 5085.
Some updated superannuation news
Further to our previous March newsbrief there has been one other major service development recently reported which should be of some interest to both employees and employers, especially those based in Queensland.
For the past two years our national independent superannuation ratings organisation called ‘SuperRatings’ has named QSuper as their “Fund of the Year”.
Now and for several years all employees have been able to exercise a choice of super fund with their employers which has led to a marked rise in the number of major providers including co-operative NFP type funds, industry funds, business funds, bank owned funds and union based funds etc.
However one major fund that neither ordinary private sector/corporate nor charity/NFP employees could ever nominate to join was the very large QSuper fund that has traditionally serviced all public sector employees in Queensland for over 100 years, and very successfully as noted above. QSuper have now announced that they will welcome any new clients from outside of the public service/govt sector.
Therefore if any SME managers and/or your employees are not content with any current default superannuation service then it may be worth discussing your future needs with the giant QSuper which offers a variety of successful investment options for its superannuation members. (Contact QSuper on ph: 1300 360 750).
EPIC Assist has no current association with QSuper.
As always you are most welcome to discuss your financial reporting, payroll and any general accounting issues with our Business Assist team on 07 3857 5085.
A real ‘BUSINESS SUCCESS MEASURE’ is EVA!
Our wide range of SME businesses whom we service along with their owners may sometimes get to the end of a week and wonder what they have achieved and is/was it all worthwhile apart from occupying one’s time?
Sales Accounts, Trial Balances, Bank Statements and Balance Sheets reviewed daily, weekly, monthly, six monthly or annually may not always clearly disclose if one’s business is successful over the short or long term because these are all good numerical reports, but not readily interpreted in real life economic terms for critical decision making.
So welcome to ‘EVA’ which is a very much established measurement tool developed to determine if your business, big or small, is creating real wealth or not, via a simple formula as developed many years ago in New York by Stern Stewart & Co.
That magic formula is : “EVA = NOPAT – (Capital Invested x WACC)”; where EVA is Economic Value Added, NOPAT is Net Operating Profit after Tax, and WACC means the Weighted Average Cost of your Capital.
A very simple example for you may look like the case of a retail shoe store where your annual NOPAT is $60,000 pa, your Capital Invested is $200,000 and your Cost of Capital is 7.00 %. Therefore your EVA = $60,000 – $14,000 (ie. $200,000 X 0.07) = “$46,000 Positive”.
This simple formula can also be applied for any separate project or capital works being quoted, such as the construction of a new warehouse or medical centre. Any negative EVA you might arrive at will mean that your project will not make a sufficient return to cover the costs of your engagement, so you should not proceed. One could also apply the EVA exercise to a potential addition to your business, a new product line or franchise, or simply to any large trading divisions of a company if their returns appear suspect.
Unfortunately it is reported that EVA may not be a reliable tool in the area of technology companies where very often they are rich with intangible assets on their Balance Sheets.
Our EPIC Business Assist team are here to help you with all your bookkeeping and tax reporting tasks, just call us on 07 3857 5085 and discuss your needs with a professional team member.
Superannuation in the news, why?
In recent weeks there have been a lot of media reports about changes to our superannuation legislation which will become effective from 01 July 2017.
In the meantime it is worth noting by all of our SME business owners and/or managers/staff that as one ages it is extremely beneficial and tax efficient to be able to increase the total balance in one’s superannuation fund well before retirement.
There was a past and still often current practice when many people had a reasonable capital asset value in their SME company where they worked and often they were heard to say that their superannuation was embedded in their ‘shareholding or ownership’ of the business assets where they worked, therefore they had no real need for an independent superannuation scheme. Too many business people in this same situation have moved near to their retirement age and found that with minimal real savings they set up regular contributions to a superannuation fund account, but often all too late to get the best benefits from a longer term super fund account where constant contributions and compounding returns really do create positive economic growth.
Unfortunately this may often coincide with a marked drop in the valuation of one’s unique SME business and it may now become worth very little in market value due to product obsolescence, poorer product/service market acceptance and lower volume sales, excessive finance funding costs, etc. Therefore to avoid this scenario along with a potential retirement funded purely on the ‘aged pension’ one must activate a public or private superannuation fund for many years, or create a self-managed super fund with professional guidance, and deposit surplus liquidity (within our ATO rules) into such a fund on a very regular basis. Another advantage of any such external superannuation plan is that most of the investment choices, earnings accountability and reporting is handled by expert financiers to maximise one’s eventual returns and hence supplement or replace your future Cth Govt pension entitlement.
Concessional [pre-tax] contributions to superannuation include employer contributions, any amounts salary sacrificed, and any personal contributions whereby it results in your super fund paying 15% tax on such contributions.
In order to maximise your tax free income from superannuation after retirement the following tightening of the ATO legislation and rules will apply, in brief :-
1. From 01 July 2017 the concessional contribution cap for everybody will be $25,000 pa, whereas it is currently $35,000 pa for those 49 years and older, and $30,000 pa for all others.
2. Before 30 June 2017 one can arrange extra concessional contributions up to the above existing cap levels. Any contributions beyond these revised cap levels will be treated as Non-concessional contributions.
3. After 01 July 2017 one can arrange extra employer and/or salary sacrificed amounts up to the revised $25,000 pa, being the concessional contributions cap level.
4. After 01 July 2018 if your total previous year end superannuation fund balance is below $500,000 one will be able to access unused concessional contributions cap space on a rolling basis for five years before expiry.
If you do need some expert assistance with your superannuation matters before 30 June 2017 to take advantage of the above amended provisions you should without delay contact your accountants, tax advisors or superannuation fund advisors to ensure that you do maximise your contributions in the current financial year before the much tighter ATO restrictions apply from 01 July 2017. Keep in mind that the ATO staff are there to administer and interpret the changing regulations re income tax and superannuation contributions; they are not expected to provide appropriate advice on individual super fund cases, as each and every citizen is in a unique position with their financial planning, superannuation and retirement aspirations. ‘No one size fits all!’
Our team at EPIC Business Assist can assist you with all of your regular business accounting, budgeting, forecasting and tax reporting, etc, so please call 07 3857 5085 whenever you need some commercial support.
Low inflation continues
Most SME business owners and managers will have noted that recent public reporting reflects very low inflation figures, flat pricing in many industries and sectors and very little wages growth across our nation.
This makes it the perfect time for those in small businesses to search for innovative ways to focus on tighter cost controls and expenditure reductions wherever possible to enhance your efficiencies and raise profitability.
An easy point to start at maybe your mail boxes, inwards and outwards, digital and paper based. Much of your hard copy external mail coming through Australia Post will now have incentive prizes attached for ticking boxes in order to switch to digital mail, then once ticked most people never hear again as to who won those attractive prizes. However, your external mailer (e.g. a bank) has achieved what they desired and reduced their own outwards mail costs significantly simply by adopting the ticks from all of their addressees.
This is a win-win especially for our large corporations adopting this methodology to reduce their printing and mailing costs, but if you do need a hard copy of this particular mailing then you are absorbing some of their admin costs which have just been transferred to you in the form of extra printing costs. If you don’t need to print out this mail and can process from it what you need digitally, then it is a true win-win for all parties. You can then apply this model to your own SME business and probably reduce your own outbound mailing costs.
Some other examples of achieving a “Profit Improvement Project” outcome from your own internal efficiencies may include the consolidation of several bank accounts where not required or hangovers from the past, reduce any financing costs by consolidating any business loans taken out at varied times or from different financiers, randomly review the detail on your phone accounts to detect any patterns of abuse or mis-use , audit the disposal of waste materials from your premises to ensure maximum recycling advantages, inspect your invoices from your major suppliers (probably 80% of volume may come from just 20% of your suppliers) in an effort to lower your core operating costs based on market prices, loyalty, increased volumes etc, and consider your workforce to ensure that they are all content and fully productive while there is a movement in society for many workers seeking shorter regular hours and or part-time/casual opportunities. Most companies thrive on these developing variable arrangements as they find such workers may avoid fatigue and hence provide better customer service, eg our giant supermarkets.
If you require any commercial, accounting or reporting support, short or longer term, our EPIC Business Assist team of professionals is always ready to assist you on 07 3857 5085.
Fraudulent email scams abound!
Most SME Business Managers will have been subject to some type of external digital risk simply through your constant use of the internet for emailing, and so on. While most of us will have plenty of security software on our business and home computers, there are always some fraudsters out there, in many countries of the world, who have the ability to track down our email addresses and attempt to dishonestly extract some money from our business or personal bank accounts. Many current scams appear as genuine requests for payments to be made to third parties going so far as to including contrived commercial invoices with detailed payment instructions.
To assist you to avoid these scams our major CBA bank has provided five good tips :
- Watch out for warning signs such as bad grammar or spelling on forms, and beware of strange invoice formats.
- Question any unusual phone requests or emails that do not comply with your own timeframes and adopted regular procedures.
- Follow your regular processing so that purchase and payment details are verified and ensure that account details and BSB references are validated before settlement.
- Ensure that you have clear procedures adopted to check any requests to change payment details and verify any alterations by phone calling, and not email.
- Practise restraint when publishing any details about your staff and/or your business on social media or websites.
If you need any further assistance on this subject then please contact your own bank manager and/or our EPIC Business Assist team on 07 3857 5085 who will be able to assist you with any accounting, financial reporting or analysis support.
Maintaining a sharp memory
There is one negative that most of us in the world of commerce will face as the years go by so quickly, and that is our ability to remember some things! As people approach the age of 60, up to 50% will have some concerns about their memory, usually being the result of normal changes in our brain structure and function rather than anything of a more serious nature. While memory lapses such as forgotten names or appointments can be frustrating, thanks to the many years of research as published by the Harvard Medical School and other universities, they have provided us with several strategies that we can use to sharpen and protect our minds. In brief these are:
- Make lifelong learning our priority. Our brains need to be challenged with mental exercise in order to maintain brain cells and to keep them communicating such as in a mentally active job, or by pursuing a hobby or learning a new skill.
- Using all of our senses is important. The more senses we use in learning something, the more our brain will be involved in retaining the memory. Notice the smell coming from a new food dish, or painting, or rising from ceramics while sculpting.
- Believe in yourself. People who believe they are not in control of their memory function are less likely to work at improving their memory skills, and are then more likely to experience cognitive decline. Belief in improvement and practice should sharpen your mind.
- Economise your Brain Use. Have a designated place at home to place your glasses, keys, purse and other items. Keep routine information in one accessible place, with calendars, address books, planners and shopping lists. Now you can focus on new information.
- Repeat what you want to know. To remember something you have just heard, read, or thought about, repeat it out loud or write it down. This reinforces the memory which can be used also with a new name or a new spot to place your belongings.
- Space it out. Repetition is a great learning tool, but it must be properly timed. Do not repeat anything many times in a short period, but re-study essential facts after increasingly longer periods of time, e.g. hours to days, such spaced rehearsal improves recall.
- Make a Mnemonic. A creative way for remembering lists is by using sentences with specific meaningful words, or using an acronym such as ‘FAST’ to recall four medical steps for stroke identification: Face, Arms, Speech, Take action!
Do not hesitate to call our EPIC Business Assist Team on 07 3857 5085 if you are experiencing any difficulties or needs associated with your regular financial reporting, inhouse bookkeeping or taxation compliance reports and deadlines.
Transfer pricing- tread carefully
This term often appears in the media when the pressure is on our ATO to maximise our Commonwealth Government taxation revenues, especially from major international companies.
Transfer prices are used to determine ‘costs’ when divisions of a major corporate group are required to trade with each other for sound commercial purposes. Many components such as materials, freight and labour can make up such transfer prices.
However, there are many global regulatory authorities under the OECD influence which are charged with detecting the use of transfer pricing for tax avoidance purposes, especially related to international trade whereby the costs of intra-company bilateral trade can be moved between countries to minimise the final taxation liability as assessed in the lowest taxing countries.
The OECD and most developed countries have adopted in-principle a formula whereby any transfer price should match the seller’s price to a local independent customer, or what the customer would pay to an independent supplier of the same product.
All formal guidelines published on setting transfer prices should be based upon this “Arm’s Length Principle” as introduced in recent years around the world.
Any local businesses, big or small, should adopt this practice especially where moving products or contracting from a parent company to a subsidiary company or vice versa, or from one subsidiary to another subsidiary in the same taxable group.
For any specific cases and to ensure compliance with our ATO be sure to get the best and latest advice from your independent tax advisors.
Our Business Assist team can assist you with any accounting or business reporting issues right down to your source bookkeeping, so please call EPIC Business Assist on 07 3857 5085 whenever you need professional assistance.
Bartering is still alive!
To barter is basically to trade in goods and/or services with another party without using an exchange medium such as cash or a credit account. Further, neither party could be considered to be gifting the goods or services to the other party.
Historically bartering goes back to ancient Egypt, well beyond 5-600 years ago when this ‘silent trade’ was used by Russian and Scandinavian traders to conduct business and exchange goods where they could not communicate in the same language.
No wonder money became a universal method of exchange, but even now when money gets scarce people will revert to bartering through a limited modern exchange acting like a bank recording barter debits and credits.
In modern society a typical small domestic barter transaction would be having your lawns mowed regularly and meeting the cost on the day by providing eggs to the contractor.
At a current commercial level there are of course taxation implications which cannot be avoided and our ATO often refers to barter as “Countertrade Transactions”.
Under our taxation legislation where any entity exchanging goods or services for other goods or services without any exchange of money between the parties, these will be treated the same as cash or credit transactions by both parties.
Therefore in your business there would be some GST and Income Tax implications, the need to keep clear records and invoices etc, and check on any special ABN obligations. The ATO have a practical compliance guide (PCG) on their approach to Bartering.
Several limitations apply to a Barter System including measures of value/pricing, deferred payments, storing wealth, indivisible goods, and the need for a double coincidence of wants by both parties.
Therefore before entering any form of SME bartering arrangement be sure to get some good independent legal advice, and if you then need related accounting services, just call our EPIC Business Assist team on 07 3857 5085.
Natural Disasters, especially this Summer!
Since November 2016 many parts of Australia have been hit with sudden storms involving floods, high winds, wild fires, excessive rain, hail and lightning, all causing our homes and commercial premises unwanted damage.
With a focus on small businesses it is comforting to note that our business tax collectors, the ATO, can assist us to make work and life easier in these testing times. When one has many extra dual responsibilities in keeping an SME running smoothly while dealing with unwanted but essential recovery activities after storm damage etc, and the associated insurance reporting, claims lodgement and recovery follow-up, our ATO can offer extended times for resolving any of your current tax matters. This may include providing more time for lodging, paying and/or responding to any taxation queries.
If you find that you experience any of these difficulties at any time then do not be afraid to google the Small Business Newsroom of the ATO and seek assistance re natural disasters, which coincidentally also includes country drought affected taxpayers. <www.ato.gov.au/smallbusiness/newsroom/helping-your-business-survive-a-natural-disaster>
Further, if you need any help with the preparation of your taxation calculations and/or regular compliance reporting please do not hesitate to call our Business Assist Team on EPIC’s 07 3857 5085.
Considering vertical integration in 2017?
As our new calendar year gets up to full speed many small business owners may be considering different ways to expand their business in order to employ more staff and therefore increase their annual revenue and profits.
To achieve this goal one well-worn optional pathway to consider is ”Vertical Integration”. This business strategy can be used in both small and large companies (the latter being more obvious to the public), in the form of either forward or backward integration, or both, dependent upon the objectives set and the funding available to ensure a positive outcome.
‘Backward integration’ is the most common strategy whereby a business wants to take over one or more of its essential resource suppliers in order to increase its market competitiveness through lowering overhead costs, improving quality and delivery times, the security of raw materials supply and some margin free pricing without using third parties. One good common example of this strategy is ‘Starbucks’ who serve us their poured coffee while behind the scenes they are also growing, packaging and freighting their coffee beans around the world.
‘Forward integration’ is adopted less frequently whereby the manufacturers of any products choose to take control of their own sales and marketing rather than using general and often more widely spread distribution and sales outlets. Often this may follow a past successful backward integration process where a business already controls much of its raw material supply and manufacturing etc. One good example of this strategy is ‘Apple’ who manufactures its micro chips for iPads and iPhones in various countries, but also controls its global distribution and sale of its finished products directly to retail customers through its own exclusive properties being the well known Apple retail stores. Our major fuel companies also thrive on vertical integration as oil extracted by them from Alaska etc can then be refined, transported across the globe and sold to us at the local pump all via their own controlled assets.
For any assistance required with your small business planning, reporting or bookkeeping please call our EPIC Assist Business Team on 07 3857 5085.
Modern day Latin in today’s modern world
From time to time in daily business life we come across some strange terminology included in many commercial documents, terms and conditions of sale, warranties and guarantees, and lease agreements, where legal advice may be involved. Usually these foreign looking inclusions are extracts in Latin which have survived in common use for over 2,000 years since developed by the Roman empire. Many old landmarks, statues and structures around Italy still display their early signage in Latin while modern day terminology used in medicine, biology and theology is also often based on Latin roots.
The most common examples of the current use of Latin in the global business and international diplomacy world are ‘Caveat emptor’, ‘Ultra vires’ and ‘Quid Pro Quo’.
Let us explore what these phrases really mean in today’s commercial world as most of us in the workplace or at home will have one or more of these terms lurking in an important document:
This the most common one of these phrases in English, which means “let the buyer beware”. It is most commonly used in the real estate industry where the principle under contract law is that after the closing date of a contract, the buyer of a property cannot recover damages from the seller for defects that made the property unfit for its purpose. This scenario can also apply to the sale of any other goods. It is commonly accepted that defects in properties, goods or services may only be known to the seller at the point of sale with such defects hidden from the buyer. If a seller deliberately conceals defects from a buyer or misrepresents what is being sold then a case for fraud may be established. The only reliable solution to improve the buyer’s position outside of real property was the introduction of binding guarantees or warranties as attached to commercial assets and domestic appliances that we all regularly purchase.
If you have concerns in this area consult first and quickly with a lawyer or your local Consumer Affairs Department.
This Latin term means “beyond the powers” and is most often seen and used in the world of government owned entities and some businesses where commercial undertakings or agreements might be made outside of the area or level of authority as stipulated by the memorandum, objects clause and/or articles of association of an entity. It is seen as an accepted doctrine that holds that if any corporation enters into a contract which is beyond the scope or purpose of its corporate powers then such a contract is illegal.
Further, shareholders cannot ratify any ultra vires business transaction even if they agreed upon it retrospectively.
Ultra vires acts by any company or registered organisation have in the past been considered invalid and may be void or voidable. The Courts have adopted and preferred the view that such acts should only be ‘voidable’ and the facts would determine whether such a corporate act should continue to have effect. Subject to what one’s formation documents authorise, examples of ultra vires acts may include such acts as loans to employees or directors, donations to political parties, guaranteeing personal loans, excessive employment severance payments, unauthorised bonuses and/or other fringe benefits.
Quid Pro Quo
Our third often used Latin term simply means “something for something”. When commonly used in business and financial circles it describes a mutual agreement between two parties where each party provides goods or services in return for goods and services.
Often such agreements sound simple but are viewed negatively as one party may be exchanging something with a real known value for something that does not have a true/valid value, but could also be subject to different market forces when liquidated.
The term has also been used historically to mean that one good turn deserves another, that is when you perform a kind act in return for somebody who has done something for you in the past.
In a more modern interpretation this ‘quid pro quo’ could be used to represent the introduction of the Barter system of trading without the use of cash, whereby businesses exchange reciprocal services or goods with documentation only to record their theoretical values and balance of payments with their barter partner.
Again if you have any queries on this subject as it affects you or your business, especially related to your own income tax and GST considerations, please refer to your accountants or professional tax advisors.
Whenever you need assistance with your business reporting solutions or accounts management and recording you are most welcome to contact our EPIC Business Assist team on 07 3857 5085.
Glowing screens- Be on your guard!
As all of you have almost completed 12 months of concentrated working commitments to close down the old calendar year of 2016, while soon to kick off our new year to the best of one’s ability, many SME managers and your staff may need a real and distinct break from mobile phones and computer screens. Some recent publications out of the UK on the work of Dr Tara Swart may be a wake-up call for many of us! Dr Swart is now a leadership coach along with being a fully qualified medical doctor and neuroscientist.
Media watch groups have found that an average adult may spend more time daily using media and communication services than they do spend sleeping. With a very high percentage of adults having access to a mobile phone, tablet, iPad, and/or computer, most now also have a high digital diet. Dr Swart points out that our memory and concentration are the two areas most impaired as the glowing screens are reportedly replacing our need to remember, as we are bombarded with excessive digital information.
One UK report noted that millions of adult internet users were going on digital detox holidays just to avoid being online. The experts suggest that always being connected can be addressed by visiting places without technology and most people do need time for face to face contact and other human interactivity.
Escaping problems in life and disassociation from reality are also reported as possible causes for much screen addiction. A Professor Reed of Swansea University noted that while technology was very useful, it was also addictive, as his research discovered that one third of 16 to 30 year olds have a mild addiction to smartphones along with the internet acting like a sedative. Once the reasons for such addiction are identified he also recommends a digital detox breakaway as a first action.
Therefore to sum up and stay safe we must remember that we control the use of our digital devices and not vice versa.
For all your bookkeeping and monthly reporting needs call our EPIC Assist Business Team on 07 3857 5085.
Seniors Health Card
We recently provided a tip for those owning small businesses and/or still in the workforce at 65 years of age on how to negotiate your way around Age Pension eligibility, to ensure that one receives the correct entitlements from our Commonwealth Government.
It was also noted that there would be downward pressure on Age Pensions as the rules tighten under stricter limits based on the Assets Test and Income Tests applicable from 01 January 2017.
This now brings us to the special Commonwealth Government Seniors Health Card (CSHC) which can provide some relief to those who have reached Age Pension age, working part-time or fulltime, have a Tax File Number, and meet the income test and residence requirements.
The Seniors Health Card provides discounts on PBS prescription medicines, most bulk billed doctor visits, out of hospital medical expenses and various local government concessions. This CSHC is subject to an income test which is indexed annually on 20 September with no assets test applicable. From 01 January 2015 new applicants for the CSHC have needed to include tax-free superannuation income when assessing one’s eligibility.
In summary, annual incomes currently at 20/09/2016 should be under $52,796 for individuals, $84,472 for couples combined, with $639.60 added for each dependent child. Centrelink can assist you with any enquiries in person or one can claim a CSHC online, with partners needing to make separate online claims.
If you are in a SME and close to age 65 then our EPIC Assist Business team would gladly assist you by taking over any of your bookkeeping and financial reporting needs. Phone (07) 3857 5085.
Regardless of what industry or sector your business may be in, there is always some room to improve your results by assessing your services, products or processes against another business (or two) which is seen as the ‘best in class’ or ‘first in your industry’, commonly referred to as your target. This highly regarded and global performance measurement process has been known as “Benchmarking” since the early eighties.
Benchmarking when used as a tool to seek opportunities for your business will bring you benefits such as knowing your marketplace of customers and competitors better, acknowledging your strengths and weaknesses, improving your performance goals and assisting you to introduce essential change. Most SME businesses would benefit by benchmarking in their own industry through some early market research to determine what quantitative and qualitative data is available to them without breaching any general legislation such as that in our Trade Practices laws.
You will then find yourself looking at keeping abreast of all the latest trends in your sector, establishing new attainable business goals, listing the adventurous revised commercial steps you need to take, varying your corporate macro goals and adopting some new and bolder strategies for the immediate years ahead. You should then be moving towards a new threshold of best practice in your industry while maximising your market share at best prices to optimise your financial rewards.
Do not be afraid to study the latest literature on benchmarking practices for small businesses from your local Chamber of Commerce or the Small Business Development Dept of your local State Government.
As always your EPIC Assist Business team are always ready to help you with any financial reporting and/or accounting issues. Call 07 3857 5085.
Aged 65 years while still working, and receiving a part pension?
From 01 January 2017, there is a significant change coming from our Commonwealth Government in relation to the Income Test and Assets Test as they apply to all persons eligible to receive the full or part Age Pension, whether one is still in part-time or full-time employment, or involved in a self employed capacity/role in one of our normal SMEs. Our Income and Asset value ranges are usually subject to indexation twice annually on 20 March and 20 September to maintain relativity for aged beneficiaries.
Firstly the Income Test has effect if the claimant of 65+ is earning income from actually working or from passive business investment, allowing our aged persons to supplement their age benefit by working, but with a sliding scale so that the more one earns the lower is the pension entitlement. There are various prescribed ceiling levels available at Centrelink for singles and couples, home owners and non-home owners, with or without dependent children, whereby the Age Pension benefit ceases (see below).
Secondly, the above groups are also recognised under the Assets Test framework whereby applicants are eligible for a full Age Pension at the base asset level, but their entitlement tapers off as the value of their non-housing assets increase, eliminating any entitlement to the age pension benefit where the value of those other assets reaches the specified ceiling levels. From 01 January 2017 the base and ceiling ranges under the Assets Test will change along with a doubling of the entitlement tapering rate from $1.50 per $1,000 to $3.00 per $1000. This change will impact all people of 65 years and over in a variety of ways, ie: some will lose all of their Age pension, some will receive a reduced benefit, some will receive an increased benefit, while some may qualify for the Age Pension for the first time.
The full Age Pension will apply to those in the assets test free area from 01 January 2017, with assets valued at or below :- $250,000 for singles with a home, $375,000 for couples with a home, $450,000 for singles with no home, and $575,000 for couples with no home.
All of these figures are well ABOVE the 2016 levels.*
The part Age Pension will stop from 01 January 2017 for all those with assets valued at or above :- $542,500 for singles with a home, $816,000 for couples with a home, $742,500 for singles with no home, and $1,016,000 for couples with no home.*
All of these figures are well BELOW the 2016 levels.*
*(for assistance with definitions and our source of figures go to https://www.humanservices.gov.au/customer/enablers/assets)
Please be sure to contact your local Centrelink Service if you need to have your personal pension entitlements clarified as they will be strictly applied from 01 January 2017.
Again your EPIC Assist Business team can be contacted on 07 3857 5085 for any small business support.