Cash is King
Just recently I had the experience of having to go to my bank and have my credit card changed due to a number of small suspect transactions showing up on a regular basis. First it started with one or two $2 to $3 dollar transactions a week or so apart, then a couple of days apart and then the amount increased to around $10 per transaction.
A little bit of detective work confirmed my initial fears. I simply copied the wording from my credit card statement for a suspect payment and search on the internet. And yes surprise, surprise one of the transactions showed up a common suspect transaction. With this ammunition I headed off to my bank to have things checked out in more detail.
In reviewing my account some of these transactions went back close to 12 months.
Gone are the old days of gangs taking high risks and robbing banks for $’000s which the authorities took seriously. Today, the criminals are not seen and very hard to identify and steal small amounts from thousands of people. Why this is so appealing to them is that they can operate off-shore with little chance of detection let alone conviction and reap millions on an ongoing basis. Funnily enough they often don’t see themselves as criminals as they don’t believe the individual they are “stealing” from lose out as the bank refunds them the money.
They seem to conveniently forget if the bank has to take out insurance that cost is eventually borne by the customers of the bank or the shareholders of the insurance company. In reality there is no such thing as a victimless crime.
This type of crime is unlikely to go away as banks have heavily committed to the internet as a way of reducing costs by having customers do the work that tellers use to do. Also banks may be reluctant to be open about the cost of this type of crime as it would highlight potentially just how big the issue is and as a consequence lower customer confidence in the internet.
The lesson for small business is to ensure that you regularly check your accounts for unusual transactions and report them to your bank.
Remember the old saying “look after the pence (cents) and the pounds (dollars) look after themselves”.
Balanix Solutions – Accountant, Business Advisor, Bookkeeping.
Situated in Strathpine on Brisbane North, we partner with our clients to assist them in their accounting, business management and bookkeeping needs. Our clients vary in industries from professional services (such as law, vet and dentist) to the trades (mechanic, bricklaying, plasterer etc), hospitality and retail. Are clients are located in the Pine Rivers area (including Brendale, Lawnton, Albany Creek and Eatons Hill) through to Kallangur, Petrie, North Lakes and Caboolture, as well as Brisbane South, the Gold Coast and various other parts of Queensland.
I was listening to the radio while driving to a client last week when there was a discussion about receipts that fade due to the low quality paper and ink used – which is fair enough for retailers to use to cut costs. The discussion centred around the need, by law to keep receipts, and businesses’ difficulty when they fade and in some instances are very small. The law only requires that businesses registered for GST provide a tax invoice, it does not state that the receipt must be of sufficient quality to last five years – the length of time businesses are required to retain receipts in general for tax purposes. But there are other good reasons to keep the receipts, not just for the Taxman:
- Insurance Claims: The length of time required to be held is for the life of the item covered unless you can provide proof of ownership by other means e.g . motor vehicle registration.
- Claim on warranties: Normally need to hold receipt for length of the warranty or extended warranty, however recent court cases suggest longer periods where the court viewed the good should have operated for a longer period of time without fault occurring arising in a claim.
We all know the types of receipts I am talking about – petrol stations, major retailers such as Coles & Woolworths, carparks and just about any business that prints a receipt through an EFTPOS machine. These receipts are particularly prone to fading when left in strong sunlight or placed in certain types of plastic sleeves. Even when they are not they have a habit of fading within a relatively short period of time.
So what are some solutions to this issue. At Balanix we scan all receipts relating to the business as it is easy to store in terms of costs and space (no more files or boxes full of receipts stored in the back room). Computer memory these days is pretty cheap compared to ten or twenty years age so it is easy to hold onto the receipts for as long as required.
But the discussion on the radio introduced an alternative way of storing those small receipts. Simply take a photo of the receipt on your mobile phone (either android or iPhones) and use an applicable App to store the information which can then be downloaded later in PDF straight to your computer. This appears to be a great device for the business owner or employee on the go all the time who does not have the time to keep and manage his/her receipts.
There are a number of these Apps which are free and simple to download. Examples are (there are heaps out online so these are just examples):
- Shoeboxed Receipt Tracker – https://www.shoeboxed.com.au/
- Smart Receipts – https://play.google.com/store/apps/details?id=wb.receipts&hl=en
- Digital Receipts – https://play.google.com/store/apps/details?id=com.proximiant.receipts&hl=en
We at Balanix are happy to discuss with you how you might go about this process and what you need to make sure that you comply with relevant legislative requirements.
I am forever hearing small business complaining about the tax they pay and asking how to reduce their liability. I find this very interesting as if these business owners spent as much time focusing on increasing revenue then the tax issue would not be such a focus.
I agree … No one likes to pay tax … but at the end of the day Government needs taxes to fund services to the community like police, education, health, roads etc.
The point a lot of small business owners forget is that the main focus of any business decision should be based on the return that the investment is going to provide. If the investment does not stack up then any potential tax advantages are not worth considering.
I suggest that the first criteria when considering making an investment is – does the opportunity provide a suitable return for the risk you are taking e.g. if you were to invest $100,000 purchasing a business what return would you want to make on your investment. A simple starting point in considering the return on investment is to look at what would one of the big four banks offer you to invest the money with them – (somewhere between 3% and 5% depending on the period the money was invested for etc).
So, if the bank was offering say 4% with minimal risk, then what is the risk/return you should be seeking from a business that does not have a credit rating, may have little management skills and lack policies. Maybe a 20 to 30 percent return would not be unreasonable, for if you were not to achieve this type of return would you simply invest your hard earned money in one of the banks or government bonds where risk is low.
Same applies if you are looking to invest in, for example, property. For example, if you were considering purchasing a commercial unit in Strathpine on Brisbane’s north for say $250,000 you would need to consider the return on investment, tenancy trends, out-goings etc and see how it all stacks up well before considering tax benefits.
Having said this, once you have determined whether the investment is sound from an economic return perspective, then look at how tax can be minimised within the boundaries of the legislation.
The bottom line to any business decision should therefore always focus on expected returns for risk first and only then look at the tax consequences before making a final decision.
With 30 June fast approaching, now is the time for Business Owners to prepare for the next financial year. Here are the four main activities you need to be doing right now to position your business for another successful year.
1. Tax Planning
Make an appointment TODAY with your Accountant for Tax Planning. Tax Planning looks at a financial situation or plan from a tax perspective with the aim to align financial goals with tax efficiency planning. Basically, tax planning looks to discover how to accomplish all of the other elements of a financial plan in the most tax-efficient manner possible. However, a word of caution – while tax planning is an important element in any financial plan, it is important not to let the “tax” tail wag the financial “dog.” As most financial actions have some tax implications, decisions on financial actions need to be made having regard for all matters and should not be avoided solely on the basis of tax.
Undertaking tax planning now can look at any actions to be undertaken before 30 June as well as actions for the next financial year. As planning can be a bit involved depending on individual circumstances, give your Accountant a bit of time to do the best job and don’t leave it to the last minute.
2. Setting Next Year’s Goals and Targets
Now is the time to start reviewing your business plan. If it is sitting in a draw (or on the computer) and hasn’t seen light of day for awhile, get it out, dust it off and have a look at what was planned for the business this financial year and what was achieved. Did things happen as planned? Were goals and targets met (or exceeded)? Did projected costs occurred or did they blow-out or result in savings?
Looking at this information, it is now time to update the business plan for the next 12 months. What goals and targets need to be set? What timeframes need to be identified for actions to achieve goals? What research and reviews need to be undertaken in relation to improvement of costs (eg, can you get a better deal on telephone accounts or stationery/office supplies)?
Planning is a vital exercise for all businesses. It underpins decisions and behaviours as a road map to achieve what you have set out to achieve.
3. Setting Next Year’s Budget and Cashflow Projections
CASH IS KING – the mantra for all business owners. If the business is not making money then it shouldn’t be in business. But more than that, the business needs to make enough money at the right time to cover expenses. Now is the time to use the information at hand to set the business’s budget for the next financial year and look at cashflow projections so you know how much money needs to be in the bank and when to pay the bills.
4. Ensuring Pricing of Goods and Services is Right
This is also the perfect time to review the revenue side of the business. Look at the pricing of your goods or services and see if any changes need to be made over the next financial year. Are you competitive with your prices compared to your competitors? Does CPI increases need to be factored in? Are your prices positioning you in the market where you want to be?
No matter how hard a business tries, if it has increasing costs and is not able to increase price, then no amount of increased sales will lead to increase profitability – in fact, the business maybe simply increasing its loss. For more information on this topic, refer my previous Blog – Increase Price –v- Increase Sales – what to think about.
Call the Balanix Team (3264 4783) today – we can help!
Welcome to the final blog in which we look at 8 money habits business owners should make sure are NOT occurring in their business.
Funding Tax liabilities at the last moment.
All business owners are certain of two things …. Cashflow will have ebbs and flows and there is always a tax liability in some shape or form.
Depending on the nature and size of the business various tax obligations and liabilities may apply. There is company tax, goods and services tax (GST), payroll tax to name but a few.
Unfortunately, some business do not plan for these liabilities and find themselves stressed and unsure where to find the money when the taxman comes knocking.
Like all good business practices, plan the business’s tax obligations and set up a process of putting the money away on an ongoing basis so it is there when payment is due. If need be, set up specific bank accounts for GST and long term liabilities so the money goes out of sight thereby reducing risk of spending by accident.
Saving what’s left after paying everyone else.
Debts have to be paid. Businesses need to establish good credit profiles in order to maintain good suppliers and financial arrangements. With cashflow in and required cashflow out not always dancing in harmony, business owners need to save along the way to ensure adequate funds when needed. Set a percentage of income to be saved on a regular basis and don’t rely on scraps if and when there maybe some. Also, manage the payment of bills ensuring they are paid on time but not necessarily the minute they come through the door. Budgeting and forecasting is another tool to stay on top of cashflow and the financial health of the business.
Need help – Call me today – 07 3264 4783