Financial Management
Next 12 Months Focus for SMEs
At the beginning of each calendar year, the Western Australia’s Small Business Development Corporation (SBDC) surveys a sample of small business operators to determine how they expect their business to be impacted over the coming 12 month period (Link to SBDC survey results http://www.smallbusiness.wa.gov.au/business-in-wa/what-is-a-small-business/business-expectations-survey-2015/ ). This got me thinking about, now that we are 3 months into the calendar year and with 3 months left to the start of the 2015-2016 financial year (to plan and develop strategies), what do business owners think the next 12-18 months will look like? – what are the impacts on Small to Medium Enterprises (SMEs) and what should SMEs be focusing on to survive and proper?
Here’s what the brain trust (that is the Albany Creek Business Contacts) discussed.
- Cashflow Management: there was general agreement that cashflow management would still be a high focus for SMEs ensuring that a long term management of expected cash in and cash out is managed.
- Price of Service/Product –v- price of materials/supply: with fluctuating fuel prices, increased electricity prices etc discussion highlighted the need for SMEs to monitor the price of materials and other services/products purchased to ensure margins are maintained in the supply of the SME’s product or service. Comments focussed on ensuring sound buying behaviours to ensure viability of the business.
- Service: generally, consumers will not haggle over price if they believe they are getting value for money and good service. Maintaining good client/customer service and relationships will continue to be a vital point of difference for SMEs. We all know what it is like dealing with large Telcos/large organisations – being smaller and more personable can be a significant advantage.
- Technology: technology will continue to be a focus for most businesses. With the continuous rapid change in technology, SMEs need to be constantly monitoring what is available, and what will cost effectively add value to the business.
- Change: the old adage that “the only things certain in life are taxes and death” has a new room-mate – change. All industries are under constant change and the challenge for SMEs is to keep on top of it and determine what to respond to, what not to respond to and, if appropriate, how to be the change initiator and/or leader.
- Diversity: SMEs need to continuously monitor their client/customer needs and diversify (if need be) to remain relevant. By way of example, with many businesses moving towards “paperless” stationery suppliers have diversified to offer broader “office supplies” such as cleaning products and safety equipment in addition to traditional stationery supplies.
- Overseas Outsourcing: SMEs need to be monitoring the growing opportunities to source services and products overseas. Again, SMEs need to understand and be able to communicate their point of difference to compete.
- Be a Hunter: the market is the market of the day. SMEs need to invest time, resources and strategies in continuously sourcing new clients/customers. Complacency will not win the race.
(Blog contributors – Leonard Whittaker (Action Cycle Learning) Rob Carmody (Australian Integrated Communications) Sally Balwin (Balanix Solutions) Kathy Patterson (Brendale Stationery Supplies) Matthew Fox (Brisbane hosting & Web Design) Kirsty Newbery (Caring Cottage) Brad Davies (Conquest Pest & Termite Control) Scott Deaves (David Deane Real Estate) De Wet van der Nest (Express Air Con Cleaning) Oriano Giammichele (GT Racing, Mobile Mechanic) Stuart Bywater (Bywater Design) Rhennen Ford (Streten Mason Lawyers) Tracey Carter (Scrub Mutts) Jason Matthey (Insurance Web) Bruce Hall (Wombat Electrical)
Albany Creek Business Contacts consists of local quality and reliable businesses who provide a wide range of services from home and residential services to B2B and commercial services. Our service areas cover primarily Albany Creek, Eatons Hill, Brendale, Aspley, Warner, Chermside, Strathpine, North Lakes. However many members will cover greater areas.
Albany Creek Business Contacts meet fortnightly on a Wednesday morning for a 7am breakfast and networking meeting.
Balanix Solutions – Taxation | Accounting | Business Advise.
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.
Call us today … we can help (07 3264 4783)
Is Your Investment Property Loan a Mixed Loan?
If you currently have an investment property or are looking to buy one and you have or will be borrowing money to fund the investment read on.
Sometimes investors get themselves into trouble by mixing up loans such that the loan has a private as well as an investment component. Where you borrow money to produce assessable income as buying a rental property then in most cases the interest associated with the borrowing will be deductible.
However, if you at some future stage decide to do a redraw on these funds and the redraw is not for the purposes of producing assessable income then you end up with what is referred to as a “mixed loan”.
An example of how this might happen is when Mr Jones takes out a $300,000 loan to purchase an investment property which he then rents out at the going weekly rental for the area where he purchased the rental property. A year after taking out the loan Mr Jones inherits $100,000 from his deceased uncle’s estate. Mr Jones then decides to pay down the investment loan with the $100,000 from the inheritance. Some months later Mr Jones decides to go on an extended overseas holiday and redraws $30,000 from the $100,000 he used to pay down the investment loan.
We now have what is referred to as a mixed loan. This can have significant tax implications going forward. If you pounce on this issue quickly then the problem can be resolved at a minimum cost, however, if left unresolved for a number of years and there are further redraws the problem can involve significant cost to resolve or worse, if the ATO conduct an audit with the potential of interest and penalties payments.
If you have an investment property and you have done a redraw we would encourage you to call us and check whether you have a potential issue. We can normally identify if there is a potential issue with minimum cost.
Should it be the case that there is an issue we will work with you to resolve the issue giving you confidence that you will not face an unwanted problem going forward.
David Balwin
FCPA | Registered Tax Agent | Business Advisor
The information in this blog is general in nature and should not be acted or relied upon. If you have concerns or are about to take out an investment loan you should seek professional tax advice in relation to the potential tax issues of such loans.
Balanix Solutions – Taxation | Accounting | Business Advice.
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.
A Tip on the Road to Financial Happiness
One of the biggest economic impacts on both business and private costs over the last 12 months has been the drop in oil prices internationally which has resulted in lower fuel prices. The price per barrel has dropped from over $100/barrel down to $47/barrel. Watching Sunrise the other morning Craig James from Commsec stated that the flow-on effect was the equivalent of a .25% drop in interest for a person on a $350,000 home loan.
Given that the Reserve Bank yesterday dropped the official rate by .25% we should really be making sure that we are taking advantage of the current situation.
The old saying of paying down non tax deductible debt as your primary goal is never more true. I have not in my 40 years as an adult seen an economic environment where the opportunity to reduce debt has been more favorable. Yes there are some concerns on the job front with the end of the resource boom in Australia but with home loans at their lowest rates for a longtime and petrol prices way down from when they were above $1.50 to now (the lowest I have seen at 97.8 cents) it really is a great opportunity to reduce personal debt and set yourself up for the future.
If you take the 50 cents per litre on petrol and the quarter of a percent interest cut on home loans and put this against your credit card or home loan you are on your way to financial happiness.
These opportunities do not come along every day and it is very easy for us not to realise just how much this saving adds up when you take into account how not only can you reduce your debt but in doing so reduce the interest you will have on your reduced outstanding balance. It is a win win situation.
David Balwin
FCPA | Registered Tax Agent | Business Advisor
Balanix Solutions – Taxation | Accounting | Business Advise
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.
Invoice Email Scam – Be on Guard
The Australian Competition and Consumer Commission (ACCC) is warning Australian businesses to beware of an invoice email scam seeking payment re-direction.
How it works is that the scammers pretend to be legitimate suppliers who contact businesses owners to advise changes to payment arrangements. Unfortunately, being scammed may not be detected until your real suppliers complain that they have not received your payment.
The ACCC outline the following process on how the scam works:
- Scammers hack into vendor and/or supplier email accounts and obtain information such as customer lists, bank details and previous invoices.
- Your business receives an email, supposedly from a vendor, requesting a wire transfer to a new or different bank account.
- The scammers either disguise their email address or create a new address that looks nearly identical. The emails may be spoofed by adding, removing, or subtly changing characters in the email address which makes it difficult to identify the scammer’s email from a legitimate address.
- The email may look to be from a genuine supplier and often copy a business’s logo and message format. It may also contain links to websites that are convincing fakes of the real company’s homepage or links to the real homepage itself.
- The scam email requests a change to usual billing arrangements and asks you to transfer money to a different account, usually by wire transfer.
It is so important that business owners operate with sound robust account keeping practices to minimise falling victim to scams. Make sure you have a clearly defined relationship with suppliers and double check with them if they advise change of banking arrangements. Here’s some more tips from the ACCC to assist to minimise being a victim to this scam:
- Make yours a ‘fraud-free’ business – effective management procedures can go a long way towards preventing scams. Have a clearly defined process for verifying and paying accounts and invoices.
- Consider a multi-person approval process for transactions over a certain dollar threshold.
- Ensure your staff are aware of this scam and understand how it works so they can identify it, avoid it and report it.
- Double check email addresses – scammers can create a new account which is very close to the real one; if you look closely you can usually spot the fake.
- DO NOT seek verification via email – you may be simply responding to the scammer’s email or scammers may have the capacity to intercept the email.
- If you think a request is suspicious, telephone the business to seek verification of the email’s authenticity.
- DO NOT call any telephone number listed in the email; instead, use contact details that you already have on file for the business, or that you have sourced independently – for example, from a telephone directory.
- DO NOT pay, give out or clarify any information about your business until you have looked into the matter further.
- Check your IT systems for viruses or malware – always keep your computer security up-to-date with anti-virus and anti-spyware software and a good firewall.
If you are not confident your practices are sound, call Balanix Solutions today – we can help (3264 4783)
Report scams to the ACCC via the SCAMwatch report a scam page or by calling 1300 795 995. Also, spread the word to colleagues through social media, newsletters etc to minimise the impact of the scams.
Balanix Solutions – Taxation | Accounting | Business Advise
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.
Call us today … we can help (07 3264 4783)
Benchmarking in Your Business
David Balwin
A good thing about having this budget and getting this process going is that you can then start to benchmark. Benchmarking month to month is of limited value because you can get too many fluctuations over a short period of time. But once you’ve got two or three years of history you can look at what this was for the year, year to year, and what I do, the most common thing I do is, I use sales as a hundred percent. So the revenue from sales equals one hundred percent. Every single one of these, I put that cost over the sales cost and work out what percentage of one hundred percent that is. So I want to know for example, well take a common one, salary and wages, on average, it’s going to vary from industry to industry, on average, that’s probably going to run somewhere around thirty percent. If your wages are running around fifty to sixty percent you know you’ve got a problem – I guarantee you’ve got a problem. If it’s running around ten percent, it might look good, but the question is – are you really utilising sufficiently to generate revenue. So you can be too low as well. But, what we want to do over a two to three year period, we can actually use this information to do benchmarking year to year. And what we’re trying to do is make sure expenses as a percentage of sales are either static or going in which direction? We’ve got one going that way and one going that way – as a percentage of revenue do you want expenses going down or up? You want them going down. That’s correct, the more they are going down the more profit you make. And it’s why I use percentage as opposed to dollars, is because dollars can be deceptive. If my telephone bill went from three thousand to ten thousand, and I was simply looking at dollars, what would I think? Bloody Telstra – I’ve got a problem with the telephone bill. But what would happen if my telephone bill went from three thousand to ten thousand but my sales went from one million to fifteen million. Would I be too worried? No – correct, so that’s why you’ve got to look at it as a percentage. That’s why I like percentages as opposed to dollar value. Because percentages will tell you, particularly over a two to three year period or a three to five year period, it will tell you a lot more facts about the business than straight dollar figures.
Audience
Will, David, will MYOB give you that which you’ve got there?
David
MYOB will give you that, yes. There is a budget which will do exactly that for you on a month to month – you can print it out in one spreadsheet over twelve months. What MYOB will do will let you take last twelve months figures and just bring them straight over and then you can play with them. And it will actually allow you to vary it by ten percent or vary it by percentages too – so you can play around with it. If you don’t know how, give me a yell during the week and I’ll give you a quick demo on how to do that.
