SHAKE OFF THAT DEBT BURDEN WITH SOME COMMON BUSINESS TECHNIQUES

Every business owner struggles with competing priorities in a bid to keep their enterprise afloat in the increasingly complex world that is modern business. Not only are they keeping on top of cash flow needs, chasing bad debts, responding to customer demands, fending off competitors and managing staff, but they are also making difficult decisions about the ability of their business to grow without incurring an unserviceable level of debt.

Many successful businesses with quality products or services, solid market support and reputable trading methods can suddenly find themselves in a situation where they are being dragged down by a burden of unsustainable debt. If your business is in this situation, it is possible to turn it around with some quick action, hard decisions and good advice.

The first thing to do is to perform an objective assessment of the current financial position of the business. If you have the relevant skills, you could do this yourself, but it may be difficult to be objective, in which case you should speak to a business advisor. Comparing your budget figures with the actual results should highlight areas of concern. If you are trying to run a business without a budget, it is essential that you establish one.

Go through your list of creditors and prioritise those that must be paid now, those that you know will wait a little longer and those that may be willing to discuss a payment plan with you. At the same time, review your debtors and contact those that are outstanding. Give them a reminder and a payment date or negotiate a payment schedule. When these funds arrive, apply them to the creditors’ list that you have already prioritised.

You should have already contacted the major creditors and advised them of your position. Utilise any hardship provisions they may have, request an extension of time to pay or offer to make partial payments and start discussing a payment plan. They want to be paid without having to engage in expensive legal action, and if your business has a reliable payment record in the past, there is every chance they will assist you.

Now contact your bank and advise them of the situation, and the measures you have already taken to rectify it. Offer to provide a profit and loss statement and a cash flow forecast so they understand the issues that have brought your business to this position. You may be able to apply for an overdraft or some other financial measure to get the business back on track.

A business advisor will help you look at every aspect of the business and recommend changes. They may include staff reductions, new suppliers with better trading terms, an upgrade to management and accounting systems to give you quick and accurate financial reports, and a range of other measures.

By acting immediately, you will reduce the reputational damage to the business and return it to a profit-making entity. Close attention from that day forward to your budget, cash flow and market conditions should see you in a position to stay debt-free.

Many of these same business owners are also struggling with the regulatory requirements of managing their SMSFs (self-managed superannuation funds). They have chosen an SMSF as the vehicle for building wealth for their retirement rather than hand control over to a retail superannuation fund. They may not have realised it at the time they made this decision, but an SMSF requires a lot of time for administration and also for managing its investment portfolio.

More and more owners are now deciding to put all their efforts into managing their businesses and engaging companies such as SMSF Assure to look after their SMSF administration. If this is your situation, you may also want to consider this option. It will allow you to concentrate solely on your business and in the process, keep your eye on that goal of being debt-free all year round.

KEEP UP TO DATE WITH THE LATEST MANAGEMENT TOOLS

Every person who has turned their dream of running their own business into a reality is an entrepreneur. Most started small, trusted their business acumen, hired competent staff and most likely took advantage of the best financial management tools available at the time. Sound financial management is essential to business success and now, in our time of constantly evolving technology, there are all types of tools available to assist entrepreneurs and their staff.

Computerisation has revolutionised every aspect of our economic activity. Tasks that were once labour intensive, repetitive and slow to produce results are now completed in an instant, and the results of business and operational decisions are available for analysis almost immediately. The magic ingredient that allows this to happen is computer software and there is a program for every aspect of business activity.

Choosing which software is the best for financial management will depend on several factors including the size of the business and the types of products or services they provide, but as a general guide, there are three that many successful businesses use to process information and provide operational guidance to assist decision-making.

The first is Harmony PSA. This is suitable for companies with complex billing models and provides a consolidated system that supports the entire business cycle from lead generation to contract renewal. It is specifically suited to software and service businesses with all business functions automated on a single platform.

MYOB Advanced is the second choice. The original MYOB has been available for some years now and was a favourite of small business. MYOB Advanced is tailored for bigger businesses and includes accounting, inventory management, workflows, manufacturing, payroll and other functions. This software provides management with integrated data in real time for better decision-making, providing the opportunity for faster growth.

For the final pick, idu-Concept emerges as the ideal budgeting, forecasting and reporting system for mid to large-sized businesses. This versatile software is suitable for manufacturing, education, financial services and other sector businesses. The system also tracks spending and manages assets and equipment as well as other functions. It is also available as an outright purchase for installation on a company server for those organisations that prefer local control of their information.

Successful business owners should look at their operational software from time to time to make sure that what they are using is giving them the best value for money. What they should also be looking at is setting up their own SMSFs (self-managed superannuation funds).

Superannuation is one of the most effective and low-tax ways to plan for retirement, and most business owners have their own SMSFs instead of using retail or industry funds. Those who are too busy to look after the complex administration and reporting requirements of running an SMSF engage other companies such as SMSF Assure to look after these details for them, just like they hand over operational tasks to their own staff. Both approaches work well and give the busy entrepreneurs some leisure time to themselves.

A Good Accountant Is More Than Just Having A Qualification

As any successful business owner will tell you, their accountant is just as much a part of their success as product quality, marketing plans, reliable supply chains, customer service standards, experienced staff and every other aspect of their business model.

Many people successfully complete accounting qualifications every year and start working in their profession. Most of them will perform the technical parts of their job quite professionally, but only some of them will have that extra something that makes them invaluable to their clients.

Apart from the relevant qualifications, what are those extra qualities that make an accountant an invaluable asset to their clients, and a source of wise and relevant counsel? Depending on whom you ask, there will be a range of attributes put forward, but many experts agree that empathy, perspective and dedication will be in the top five.

Some would disagree and ask what use empathy would be in a profession renowned for mathematical and financial precision. After all, the goal is to ensure that the accounting records of client businesses are accurate and reflect the true financial position of an entity at any point in time and to correctly report on taxation obligations.

The value of having an empathetic accountant lies in their ability to understand the challenges and responsibilities of running a business, in addition to their financial skills. An accountant who can mentally stand in the client’s shoes and see problems affecting the business with the same emotional attachment as the client, will likely offer different solutions from someone to whom the business is just another set of figures.

Perspective is another quality that elevates the role from just lodging tax and BAS returns to one of a trusted sounding board. As someone with a thorough knowledge of the inner workings of the business, the accountant with perspective will be called upon many times by the client to validate their business decisions or alternatively, to offer a different point of view.

Every vocation needs employees who undertake their work with dedication and the accounting vocation is no exception. All business owners expect that their accountant would practice the profession with diligence and dedication. The best way to demonstrate this to clients is through ongoing professional development. New technologies and constantly changing laws and taxation rulings are part of the finance industry. An accountant who keeps up to date adds additional value to a client’s business through this dedication.

These qualities are not just necessary for accountants with business clients. They also enhance the services provided by companies administering self-managed superannuation funds such as SMSF Assure. The superannuation industry is also undergoing rapid change, so these qualities will be important to clients relying on external assistance to manage their administration responsibilities.

The Tax Deductions Many Business Owners Miss

At this time of the year, every small business owner and sole trader should already be planning how to optimise their tax deductions to legally reduce their tax obligations. There is still three months to go before the end of the financial year, so now is the time to talk to their tax accountants and finalise any transactions that could save them money at tax time.

Businesses large enough to have an administration team to track and record expenses have a distinct advantage over the micro business or the sole trader in this regard. Sole traders are especially disadvantaged because they generally spend their day sourcing and performing work, then have the burden of using their nights and weekends to keep their tax records in order.

In this busy and pressurised environment, it is common for legitimate tax deductions to be missed and records mislaid, so when it comes time to complete their tax returns, often they are overpaying tax. Identifying and tracking these deductions is critical to saving them money, but some of them are often overlooked. Here are five of the most common examples.

Mixed-use Expenses

Most small business owners are familiar with tracking business expenses, but often, business and private expenses are part of the same transaction. These should also be tracked as the business component of the expense can be claimed as a tax deduction. Personal phones and the home internet, for example, can have both business and personal usage. Keep a diary that records times and how a call or internet search relates to the business so that it can be considered at tax time.

Deferring Income and Prepayments

These are two strategies that may suit some small business owners. If it is practical, delay issuing invoices until 1 July so that the income falls into the next financial year and not the current one. Conversely, pay some expenses early so they count in the current financial year, reducing this year’s taxable income. Other annual expenses, such as insurance, can be prepaid for the same result.

Claim All Advertising Expenses

Most business owners claim advertising expenses such as newspaper classifieds, adverts in community newspapers, production of flyers for letterbox distribution, etc. What they often forget about are the adverts they place on Facebook or Google to get traffic to their website. They may be small at the time, but over twelve months they add up and can be used to reduce taxable income.

Update a Vehicle

The Instant Asset Write-off is a great reason to update an ageing commercial vehicle, or to buy new tools, replace computer equipment or any other asset under $30 000, regardless of whether it is new or used.

Make a Superannuation Contribution

Business owners who have employees are required to make all superannuation payments on behalf of these employees to the relevant superannuation funds by 30 June, in order to qualify for a tax deduction in this financial year.

Many business owners also have their own SMSFs (self-managed superannuation funds) with their own responsibilities as trustees, including reporting annually to the ATO (Australian Taxation Office). This is an additional burden to running the daily operations of their businesses, so they often engage the services of a company such as SMSF Assure to handle the administration of their SMSF, allowing them to concentrate on their business.

Does Your SMSF Investment Strategy Include Insurance?

As we go through life in our modern world, many of us choose insurance to protect us from a range of common loss scenarios. Vehicle insurance protects us against claims for damage in the event of an accident, home and contents insurance assists us to replace stolen or damaged items, and income protection insurance assists if we are unable to work for extended periods of time.

These insurances provide us with the security that, if we have an unfortunate accident or occurrence, our insurer will hopefully recompense us for some or all of our losses. We also need to consider what will happen to us if we are sick or injured and incur both hospital and medical expenses.

In Australia we have access to both universal health insurance and private health insurance. Most of us have one or the other, and many of us have both. Since 1984, Medicare has been the foundation of our health care system and is available to Australian and New Zealand citizens, permanent residents, and people from countries with reciprocal agreements.

The three major parts to Medicare are medical services, hospitals and medicines. It covers the cost of public hospital services should you need them, and some or all the costs of other services such as visits to GPs and other medical specialists. It also covers prescription medicines, which are available to Medicare recipients at much reduced prices under the Pharmaceutical Benefits Scheme.

Medicare is partly funded by a 2% levy on taxpayers (with exceptions for low-income earners) and further funding by the federal government from general revenue. People can also choose to take out additional private health insurance, which gives them access to private hospital services and a range of ancillary services not covered by Medicare.

As a result, Australians enjoy some of the best medical services in the world. The introduction of this scheme gave many Australians access to services they previously could not afford, and as a result, we now recognise the importance of health insurance as part of a modern and fair society.

Insurance is also an important consideration for trustees of SMSFs (self-managed superannuation funds. Once the SMSF has been established with the ATO (Australian Taxation Office), the trustees must by law finalise an investment strategy with a financial advisor. This includes consideration of the insurance needs of the members. Finalising an investment strategy is not the same process as engaging a company such as SMSF Assure to undertake all the administration and reporting requirements of the SMSF.

The ATO advises that an SMSF can provide insurance for members for an event that is consistent with several conditions of release of the member’s superannuation. These are death, a terminal medical condition, permanent incapacity and temporary incapacity. SMSFs generally cannot provide trauma insurance for their members. These events are not the same as universal or private health insurance but may be equally as important to the SMSF fund members.