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Making Time for Planning

Business planning constantly gets bumped to the bottom of the to-do list. It never feels urgent, especially when sales are strong and you’re dealing with challenges like finding new staff or product shortages.

However, business plans are an important decision-making tool to help you get your priorities in order. What do you really want from your business in the short to long term and how can you achieve that?

Setting goals takes a lot of thinking

Pared back to its essentials a business plan identifies:

  1. Your goals – what you want and when you want it by
  2. How you plan to achieve those goals

Don’t be fooled by how simple this looks.

It can be pretty soul-searching to work out what your goals are as a business owner, because they’re not simply related to growth and market share. They’re also about your personal goals; do you want more money or more time? Do you want to step up or step back? From a business perspective you need to think about whether to expand your products or services, or become more profitable within your existing specialty area.

If you don’t manage to do any other business planning, simply thinking about your goals and jotting down a few on paper can crystallise your ideas, giving you valuable insights into which direction to take next.

A plan for achievement

Once you have goals in place, figuring out how to achieve these usually requires a multi-faceted approach. It will include some or all of the following:

  • Reviewing current and potential products and services
  • Pricing, target market and competitor comparisons
  • Sales and marketing
  • Assets and equipment
  • Systems, automation and outsourcing
  • Financial forecasts
  • Cash flow forecasts
  • Possible funding for investment
  • Your team

Give us a call

We love talking to business owners about how to achieve their goals – seeing our clients succeed is one of the most rewarding parts of this job. We can run the numbers on various scenarios, do cost-benefit analysis, cashflow forecasts and ideas for growth.

Give us a call, we can help.

What is Personal Services Income?

Personal services income (“PSI”) is income received as payment for individual personal efforts and skills. It applies to many contractors who provide services as their means of earning an income. PSI rules can apply to individual sole traders and other types of business entities, but not employees. If PSI rules apply, the entity is called a personal services entity (PSE).

The PSI rules ensure the income is attributed to the individual who performed the services and not apportioned across other entities.

There are several tests to work out if your income is PSI or if you are instead conducting a personal services business (PSB), which means the PSI rules don’t apply. If a personal services entity qualifies as a PSB, the ordinary tax rules apply for that financial year.

At least one of these four tests must be satisfied for an entity to be classified as a PSB.

  • Results test: the individual must be paid to produce a result, is required to supply their own equipment and tools to produce that result and is liable for the cost of rectifying defects in the work.
  • Unrelated clients test: the sole trader or entity must be engaged by unrelated clients and services must be advertised to the public.
  • Employment test: in general, a sole trader or other entity must engage one or more entities to perform at least 20% of the sole trader’s principal work. Entities other than individuals must not be associated with the sole trader.
  • Business premises test: the entity must maintain and use business premises to conduct personal services. The business premises must be exclusively used by the PSE and physically separate from private premises and customers.

If more than 80% of income in a financial year is derived from one customer, the PSE must satisfy the results test to be classified as a PSB.

If none of the four tests are met, the income is classified as personal services income, and the PSI taxation rules apply. PSI rules restrict the type of allowable tax deductions made in relation to personal services income-earning activities.

If you’d like to know more about PSI, talk to us to see if the services you provide meet the tests for conducting a personal services business. We’ll make sure you are claiming the maximum allowable deductions and being taxed correctly.

What Value Can Automation Bring To Your Business?

Automation has the capacity to revolutionise your efficiency and productivity. But how many of the automation features that are available to you are actually being used? And could you be getting more value by building automated processes into your operational framework?

Removing the manual workload to streamline your processes

There’s a very simple mantra when it comes to making the most of automation: if there’s a manual task in your business that’s taking up time, automate it now!

The more time you and your team spend on low-level administration, data-entry and form-filling, the less time you have available for actually running the business. With your software tools maximised, your automated processes can be chugging along in the background, doing the heavy lifting and freeing up your time to focus on client service, sales and strategy etc.

So, which elements of your everyday operations could you be automating? And which apps and software solutions can help you to achieve your automation goals?

Here are some areas where automation and smart systems can really help to add value:

  • Automated bookkeeping and digitisation of paperwork – apps like Dext and Auto Entry offer you the opportunity to automate your bookkeeping and record-keeping. These solutions let you snap a photo of a receipt or invoice, digitise the contents and then automatically create an expense claim or bill in your accounting system. There’s no keying in and the whole process is synced with your choice of cloud accounting platform.
  • Automated employee expenses – apps like DiviPay, Soldo and Pleo give you automated control over your employee expenses. Using either virtual or physical credit cards, your staff can pay for expenses and payments are then automatically synced with your main accounting platform. That means no late expenses claims, no need for petty cash and no wasted time keying in the receipts. All employee expenses can be tracked, measured and paid, with the whole expenses process automated from start to finish.
  • Automated payment collection from your customers – with payment gateways like PayPal, Stripe and GoCardless you can automate your cash collection. By using a modern payment gateway, you make it easier for clients to pay their bills. But you also automate the actual cash collection and bank reconciliation process too. Money can be instantly paid to your main business account and all the transactional data pulled across to your accounting platform. That means less admin, and faster payments too.
  • Automated POS, stock management and inventory – running a retail or hospitality outlet comes with a lot of operational admin. Apps like Vend or Shopify POS give you an all-in-one point-of-sale (POS), stock and inventory management system, automating your till sales and syncin g everything with your choice of accounting platform. The inventory system will also be automatically updated when an item is sold, keeping your records and stock listings completely up to date.
  • Automated marketing and social media posts – digital marketing is key to finding customers and growing your business. With tools like Hubspot Marketing Automation or ActiveCampaign you can automate a large chunk of your marketing work. These solutions let you create automated email cadences, target specific customer audiences and track your return on investment (ROI) in forensic detail.

Have You Changed Your Business Purpose?

Many businesses will have been through a tough and transformative period through 2020 and into 2021. In some cases, companies have had to update, change and pivot just to survive – and this means having to rethink the core mission behind your enterprise.

Journeying through the pandemic, your business is faced with a new kind of business reality. It’s a world where buying habits have changed, consumer expectations have evolved, online shopping has boomed and e-commerce is now a far more dominant force.

To cope with these changes it’s likely that your business has had to evolve. But do you know where you’re going and how it’s impacted on your underlying business mission?

Embracing the need to evolve and change

Being able to react to changing circumstances and to evolve your business is one of the key capabilities you need as an entrepreneur, business owner or CEO.

The ability to articulate your new business objective is a fundamental need. And having a clear outline of how you’re pivoting and why will help you to understand the evolution of your business and where you’re likely to go next.

Some key questions:

  • Have you changed your business purpose? Did your company change direction and pivot to move into new markets or new products? If so, do you have a robust plan for pivoting and continuing this evolution? Do you have the resources needed to back up this change in direction?
  • What is your new purpose as a business? What is your updated vision for the business and what do you want to achieve? Do you have this formalised in an updated mission statement or business plan? If not, you need to get this written down and communicated to your executive board, your team and all other stakeholders.
  • Who are your new customer audience? If you’ve pivoted, it may be that your target customers have also changed. If your sales, business development and marketing activity is now focused on a new customer demographic you need to update this in your sales and marketing strategy. Think about who you’re selling to, what their needs may be and how you can service these needs.
  • Are any operational changes needed? Can you successfully pivot to this new purpose using your current systems, processes and resources, or do these resources need to be updated? If you’ve increased your e-commerce footprint, then your production, logistics and delivery operations need to scale up to cope with this increased demand.
  • Do you have the right team on board? Do you need new staff to help you meet your goals? Or are some employees no longer required? If your purpose has changed, it’s likely that your talent needs have also changed. Reassess your key human resourcing requirements and think about the people you need on board for this next chapter.
  • Do you have enough funding? Do you have enough working capital behind you? If changes in equipment, plant or premises are part of your pivot strategy, it’s likely that you’ll need additional finance to fund these changes. Think about approaching your bank manager, business adviser or funding provider of choice. NOTE: Talk to us about government-backed recovery funding.

Talk to us about planning your new business direction

Nothing stands still in business, so there’s always value in taking the time to step back and reassess your business direction. However you’re fairing in the Covid market, taking the time to review your business purpose and planning is time well spent.

Talk to us and we’ll help you to update your mission statement, amend your business plan and get all the operational and financial elements in line for the next stage in your success story.

Six Reasons To Look at Your Financial Reports

Making time to look over your financial reports each month is an important task for any business owner. If you are not taking the time to do this, either because you’re too busy or perhaps you don’t really understand what you’re looking at and it doesn’t make sense to you, then here are six reasons we recommend that you should start to.

  1. Understand your business better – by looking at your Profit and Loss (“P&L”) report monthly you will get a good picture of how your business is performing month by month and it will provide a better understanding of what makes up your profit.  Looking at revenue and expenses clearly on one page in a monthly P&L or comparing periods, this will help to identify trends in your data and may also help to highlight anomalies in coding/categorising.
  2. Accurate information for lending purposes – if you are applying for a loan or an overdraft, the bank or financial institution will look closely at both your Profit and Loss report and the Balance Sheet as a lot can be learned about a business by looking at these reports together. If you are unsure what some of your balances are in your accounts, get in touch and we can explain them further.
  3. Get paid quicker and reduce bad debts – by looking at your Accounts Receivable Aged Summary each month you can follow up with overdue accounts promptly which often results in getting paid quicker. The longer an overdue amount is left unpaid the higher the risk of it not being paid at all, so it is important to keep on top of this.
  4. Better relationships with your suppliers – assuming you are entering your supplier bills into your accounting software (recommended for most businesses to get an accurate profitability figure) your Aged Payables report will alert you to any unpaid or overdue amounts. Supplier relationships are an important aspect of your business and paying on time is crucial to maintaining those relationships.
  5. Better cashflow – having an accurate understanding of how much money the business is owed and how much money the business owes, can help with cashflow planning to ensure that there is enough money when needed. Additionally, understanding the trends of your business, its profitability drivers, expenses, etc., can help to plan sales and marketing campaigns so that the revenue keeps coming in.
  6. Better business decision making – your financial reports tell the story of your business and it’s important that you understand the story that they are telling you. The better you understand what’s going on in your business the stronger position you will be in to make better business decisions that affect the profitability of your business and its financial viability.

Depending on the complexity of your business, at a bare minimum you should be looking at the following reports:

  • The Statement of Financial Performance, also known as the Profit and Loss report (P&L) or the Income Statement.  As the name suggests, it’s how your business is performing over a period of time, such as a month or a financial year. In broad terms it shows the revenue that your business has generated, less the expenses for that same period. In other words, it shows how profitable your business is.
  • The Statement of Financial Position, also known as the Balance Sheet.  This shows the value of the business’s Assets, Liabilities and Equity.
    • Assets include things like money in bank accounts, Plant and Equipment, Accounts Receivable balances
    • Liabilities include things like Bank loans and credit cards, Accounts Payable, and Hire Purchase balances
    • Equity is the difference between your Assets and Liabilities and includes Retained Earnings and Owner Funds Introduced
  • Accounts Receivable Ageing report (Aged Receivables) shows how much money is still owed to the business as at a certain date in time, and is usually segmented as to how overdue they are or sometimes by how far past the invoice date they are. Generally you will have Current, 30, 60 and 90 days columns.
  • Accounts Payable Ageing Report (Aged Payables) shows who the business owes money to as at a certain date in time and, like the Accounts Receivable Ageing report, is usually segmented by overdue period.

So why bother?

If you would like to know which reports are relevant to your business and you want to better understand what’s going on in your business, then get in touch so we can make a time to go through them with you.

Your business success is important to us and we are here to help you.

The Importance Of Having A Business Coach

There are many benefits to having a business coach and as the owner manager, the buck stops with you and that can result in all the pressures of financial management, people management, strategy and business performance ending up on your shoulders.

To ease this pressure and provide some clarity, it’s helpful to have a business coach. A coach can look at your business objectively as an outsider, will act as a professional shoulder to lean on and can help you to focus on and enhance your business ideas, strategy and longer-term tactics as an owner.

What a business coach can bring to the table

If you want to get the best from your business, you need to get the best from yourself, as the owner. A business coach helps you to work on your own progression, but by doing so also partners with you to improve the future path of your business ventures.

For example, having a good adviser and coach:

  • Allows you to get an independent viewpoint – when you’ve been running a business for several years, it can be hard to see the company in an objective light. A business adviser comes to your business model afresh, and helps you to step outside the day-to-day operations and see the company from the outside in. This is incredibly helpful when looking for improvement areas or new opportunities.
  • Helps you to spot the key issues in your business – with the help of an independent adviser, you’re far more likely to spot the flaws in your business model and the areas where you – the owner – need to work on your own management skills. By highlighting the problems, you can start the process of overcoming these issues and moving forward.
  • Provides business planning and strategy – a key reason for working with a business coach is to improve and polish your planning and strategic skills. Drawing on your coach’s experience, you will learn the benefits of proper business planning and how to utilise these skills to draw up a more robust plan for the future of the company.
  • Assists with goal-setting and targets – you can’t draw up a workable business plan if you haven’t outlined the key goals of your business. Working with an adviser helps you to narrow down your goals, set proper targets and create more momentum and drive in the company. With a clear set of targets for you and your team to get behind, it’s easier to understand your business purpose and measure your performance against these goals and targets.
  • Provides you with a mentor – working on your business is important, but working on your own skills and wellbeing is equally as important. A coach can act as both a mentor, sounding board and confidant, something that’s incredibly valuable when you’re entrenched in the business. Being able to share your worries and ambitions with a coach helps you to take care of your own mental health and wellbeing – all of which is good for both you and the business as a whole. When you’re less stressed, you’re a better leader, decision-maker and boss, so there’s an undeniable benefit to working closely with your trusted coach.

If you want to reach your true potential as an entrepreneur and business owner, we’d strongly advise working with a trusted business coach.

Tax Tips for Property Investors

If you have income from investment properties, now is the time to start gathering your records and reviewing your expenses for the 2021 financial year.

Income to Declare

All income earned from each property must be declared. If you have multiple properties, keep the records for each property separate to make the tax return more efficient.

  • Rent received, whether paid directly to you or through an agent or through an online management platform. Rent includes recurring regular amounts as well as any lump sum amounts paid in advance.
  • Rental bonds returned (eg. if the tenant caused damage or defaulted on rent payment).
  • Insurance payouts received as compensation.
  • Expenses reimbursed by the tenant (eg. if they have caused damage and you have paid for the cost of fixing the damages, or if they have reimbursed you for water).
  • Extra fees received (eg. letting or booking fees).
  • Government rebates (eg. installation of solar utilities).

You will need statements or recipient created tax invoices from agents or management platforms and documents for all other payments received.

Tax Deductions

Deductible expenses for property are different for residential and commercial properties. Not all expenses related to owning a property are allowed as deductions, so it’s important to check what you can claim.

  • Advertising for tenants
  • Body corporate fees
  • Council rates
  • Water supply charges
  • Land tax
  • Cleaning, gardening, pest control and property maintenance
  • Insurance
  • Agent fees
  • Repairs and maintenance
  • Some legal expenses
  • Loan interest

Other Expenses

There are some expenses which need to be claimed over a longer period such as several years or decades. These can include borrowing expenses, capital expenditure, depreciation, initial repairs and capital works.

Some expenses cannot be claimed for. These include stamp duty, loans and repayments, some legal expenses and some insurance premiums.

Get Help to Simplify Your Property Records

Tax matters for property investors can be complex. The ATO keeps a close eye on tax returns that involve property investment, as it’s easy to make mistakes. There are other matters to consider such as the period of rental availability, private use of the property, capital gains tax, legal contracts and positive or negative gearing.

The 10 Ways To Lift Your Margin

Improvements can always be made at the margin. Small tweaks to your processes or systems can make a massive difference to the end result. It’s the same with your business margin – a 1% increase in your gross margin on $500,000 of sales is an extra $5,000 on your bottom line.

The best part about improving your margin is that you increase your profit without needing to lift your sales.

Here are 10 strategies to lift your margin:

1. Negotiate better prices with your suppliers.
As they say, ‘the squeaky wheel gets the oil’, so if you don’t ask, you won’t get.

2. Update your pricing model.
Make sure you’re using the most recent supplier prices and that all costs are included in your price.

3. Back cost jobs regularly.
Review exactly what you spent on 2-3 jobs each month and compare the actual cost to what you anticipated the cost would be when you quoted the job.

4. Get rid of slow-moving items or work that has a poor return.
Selling old stock at cost will drop your margin, but if you replace those items or jobs with higher-margin items, you’ll achieve a higher return in the long run.

5. Set budgets and targets with your team.
Give your team something to aim for. Celebrate success when the targets are achieved.

6. Report your results on a cloud-based, real-time system.
You can’t manage what you don’t measure! Regularly monitor your most important Key Performance Indicators on your dashboard.

7. Reduce wastage and re-work.
What processes need to be updated to help reduce wastage and re-work? Or, if the processes are correctly documented, what training do you need to provide to your team to ensure the processes are being followed to reduce wastage and re-work?

8. Review your sales process.
Does your sales team know which produces or services have the highest margin? Do they know how to upsell to those higher-margin products or services? Identify the sales skills gaps in your team and implement training.

9. Make a plan.
There are plenty of areas for improvement in your business. Unless you write them down, you’re unlikely to bring the correct focus to them. Make a plan to improve one area at a time.

10. Involve your accountant.
Not only to help you with idea generation and building a plan, but also to hold you accountable to do the things you need to do.

We can help you lift your margin – contact us today!

“To improve is to change; to be perfect is to change often.” – Winston Churchill

Super Guarantee Rate is Set to Rise from July – Are You Prepared?

The superannuation guarantee statutory rate has remained at 9.5% since July 2014. However, plans have been in place for some years now to increase the rate to 12% incrementally.

In July 2021, the rate will rise to 10%. From then on the rate will increase by 0.5% each year until July 2025 when it will reach the legislated 12%.

Prior to the delayed 2020 federal budget there was discussion about the possibility of deferring the rate rise because of COVID-19. However, the rate rise had been postponed from 2018 to 2021, so the plans to start increasing the rate each year remain in place – at least for now.

Prepare Now for the July Rate Rise

  • Review your current superannuation costs for all employees, both hourly and salaried.
  • Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
  • For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
  • Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July 2021. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
  • Discuss the super rate increase with your employees now. Let them know that this is the first year since 2014 that the rate has risen and that unless the law changes, there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12%.
  • Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.

If you’d like help reviewing payroll costs and employee agreements, talk to us now, and we’ll make sure you have accurate reports to make planning for the rate rise easy. Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.

Can Your Business Claim the Loss Carry Back Tax Offset?

As part of the Federal Budget 2020-21 the government announced a loss carry back measure to encourage new investment and work with the temporary asset expensing measures also announced at the budget.

The new law started on 1 January 2021.

Eligible corporate entities that previously had an income tax liability in a relevant year and have subsequent losses can claim a refundable tax offset up to the amount of their previous liability.

The measure allows significant tax losses which may then be carried back to generate cash refunds for eligible businesses.

Who is Eligible?

  • Your business must be a company, corporate limited partnership or a public trading trust in the income year you want to claim the offset.
  • The business must have had an aggregated turnover of less than $5 billion.
  • The entity had an income tax liability for financial years 2019, 2020 or 2021.
  • The entity subsequently made a loss in financial years 2020, 2021 or 2022.
  • Your business is up to date with tax return lodgement obligations for the last five years.

There are specific guidelines about eligibility, integrity and tax offset calculation. We can talk to you about whether you can use the loss carry back measure to benefit your business.

You can only claim the tax loss once in either the 2021 or 2022 financial year so it’s important to get advice about how and when to apply this measure for your business. To claim the tax offset the ATO must be notified before lodging the company tax return that year.

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