How Well Do You Know Your Business?

The start of a new financial year is an appropriate time to take stock of the position your business is in at present.  This month you could ask yourself “How well do I know my business?”  To start this process, why not ask your employees what business you're in.  Then compare their answers to yours.  As part of the review of “How well do you know your business?” we have prepared a check list which we are happy to send you.  Some of the questions are:

Customers

  • Who are your customers?
  • How well do you know their preferences?
  • Do you know your ‘A’ grade customers?
  • Do you have special policies for your ‘A’ grade customers?
  • What are your policies to convert ‘B’ grade customers to ‘A’ grade customers?
  • Does your business exceed your customers’ expectations?
  • If you believe your business exceeds your customers’ expectations, how do you know that?
  • Do your clients refer business to you?

KPI (Key Performance Indicators)

  • Have you identified key performance indicators for your business?
  • Are they appropriate?
  • Do you share the key performance indicator information with your team?

Every business will have different KPIs.  Popular KPIs are:

  • Debtors’ Days Outstanding;
  • Stockturn;
  • Work in Progress;
  • Gross Profit Percentage by individual products or departments;
  • Sales/fees per team member. 

Team Members

  • Have you identified team members’ strengths and weaknesses?
  • Have you identified special training or development individual team members may need?
  • Are you conducting staff training and development activities for your team members?

Marketing

  • Is your website user-friendly?
  • Have you asked customers/clients whether they get the information they are looking for from your website?
  • Do your team members know what your customers/clients think about your website?
  • Are your team members using the website to fully supply information to customers/clients?
  • Have you got a growth strategy for the business?

Cashflow

  • Have you analysed your cashflow position?
  • Are improvements needed to cashflow?
  • Are credit terms clearly explained in writing to customers/clients?
  • Are tax invoices accurately prepared and sent promptly?
  • Are statements prepared and mailed?
  • Is follow-up action started as soon as the debtor exceeds your stated terms of trade? 

For more information contact us for a copy of the checklist “How Well Do You Know Your Business?”.

Tax Office Helps Small Businesses

The Australian Taxation Office has announced that they will offer a 12-month interest holiday on $6.5b in tax debt owed by SMEs and defer all tax payments by some SMEs.  The tax breaks will be available to small businesses with annual sales of less than $2m.  Eligible SMEs will be able to enter into interest-free payment arrangements with the Australian Taxation Office for the next 12 months.  SMEs with turnovers under $2m, who have cashflow problems, will be able to defer their July quarterly tax payments for two months.

These offerings from the Australian Taxation Office confirm that there has been a significant slowdown in cashflow amongst small/medium enterprises as a consequence of the difficult times being experienced by many business operators.

If you would like to avail yourself of the offer from the Australian Taxation Office, please contact us so that we can complete the necessary application for you.

Changes To Payroll Reporting

Recent changes in payroll reporting by Australian Government legislation has meant that salary sacrifice decisions now have to be recorded in more detail by employers and employers need to supply information on the salary sacrifice arrangements to the Australian Taxation Office.  The reason for these changes is that employees have been able to notionally reduce their income due to salary sacrifice arrangements.  This has made the taxpayer eligible for some other government programs, which they may not have been eligible for, other than for the benefit from the salary sacrifice arrangement.  The most significant salary sacrifice item is superannuation contributions. 

The concept of salary sacrifice is still legitimate and acceptable, however the flow on effect that, in the past, has enabled taxpayers to gain other government benefits, has been changed to ensure government monies are allocated where the government interprets the greatest need.  The government's view is that, if a taxpayer can afford to sacrifice a significant amount of his or her income into superannuation, then perhaps that taxpayer may not be eligible for other government benefits.  For this reason all payroll reporting will need to include new features effective from 1st July 2009.  If you are generating your payroll on your computer then your software provider will have to develop upgrades to ensure that you accurately record additional information from 1st July 2009. 

If you have any questions regarding the changes in payroll reporting, do not hesitate to contact us.

Investment Allowance Continues

The Investment Allowance continues, but there are changes for businesses with turnover over $2m.

Small Businesses – turnover under $2m:

The Investment Allowance for small businesses with turnovers under $2m is 50% for eligible assets ordered before 31st December 2009 and installed before 31st December 2010 continues summarised as follows:

 Ordered:  Installed by:  Investment Allowance %  Tax Year to claim:-
 13/12/2008 to 31/12/2009  30/06/2010  50%  30/06/2010
 13/12/2008 to 31/12/2009  31/12/2010  50%  30/06/2011

Other Businesses – turnover over $2m:

If the eligible asset is ordered prior to 30th June 2009 and installed before 30th June 2010 the Investment Allowance of 30% for expenditure on eligible assets applies.  For orders placed between 1st July 2009 and 31st December 2009 and installed before 31st December 2010 the Investment Allowance of 10% of eligible expenditure applies.

 Ordered:  Installed by:  Investment Allowance %  Tax Year to claim:-
 13/12/2008 to 30/06/2009  30/06/2010  30%  30/06/2010
 13/12/2008 to 30/06/2009  1/07/2010 to 31/12/2010  10%  30/06/2011
 1/07/2009 to 31/12/2009  30/06/2010  10%  30/06/2010
 1/07/2009 to 31/12/2009  31/12/2010  10%  30/06/2011

Effective Waste Management

Current difficult trading conditions have highlighted the necessity for manufacturing and trade businesses, in particular, to cut waste and minimise costs for the client.

Many manufacturers have adopted the 5 ‘S’ System: a structured systematic approach to housekeeping and the cornerstone of every world-class manufacturing operation.

The 5 ‘S’ System involves creating and organising the workplace using the following steps:

  • Sort - remove unnecessary items;
  • Set in order - a place for everything and everything in its place;
  • Shine - cleaning the work area;
  • Standardise - the rules and standards;
  • Sustain - maintaining the standard in a disciplined way. 

If you would like to receive details on Lean Manufacturing Practices please contact us.

Employees’ Tax File Numbers

A reminder that employers have a responsibility of submitting employees’ tax file numbers to the employees’ nominated superannuation fund.  If the tax file number is not notified to the superannuation fund, the Australian Taxation Office will impose tax at 46.5% on the superannuation contribution, instead of the standard 15%.  Also, employees will miss out on the opportunity of claiming the entitlement from the Federal Government's contribution scheme if the employee has made a voluntary contribution to their superannuation fund.

 

Research & Development Expenditure - Companies

If you have undertaken research and development projects exceeding $20,000 in aggregate during 2008/09, then you are able to register with AusIndustry prior to 30th of April 2010, to claim aggregate research and development expenditure at 125% and, in some cases, at the higher rate of 175%.

To be eligible to claim the research and development expenditure, the business entity must be a company, should have prepared a Research & Development Plan for each research and development project and to have kept cost records and manpower allocation records to substantiate the research and development claim.

Now is a good time to review the records that you have kept for research and development and ensure that your registration is lodged well before the due date.  If you are a small company (with a turnover under $2m, with expenditure on R&D under $1m and trading at a loss), then you are entitled to a tax rebate calculated at 37.5% on the research and development expenditure and, in some cases, that rebate can be as high as 52.5%.  The rebate will be paid by the Australian Taxation Office within 30 days of your tax return for the year ended 30th June 2009 being lodged.

For more information contact us for a copy of Paper 12.10 R&D Tax Deductions and Paper 12.13 R&D Tax Offset for Small Companies.

What's It Mean?

Times Interest covered by Profit…

is a test carried out by banks and lenders to ascertain the ability of a borrower to service the interest cost of a loan out of the business’ profits.  The calculation is as follows:

 Profit before tax and interest

= Times Interest covered by Profit

 

 Interest

 

Example:
Profit before tax and interest = $525,000, Interest = $106,000
 $525,000 = 4.95 times
 $106,000  

For more information contact us for a copy of Paper 05.01 Accountancy Terminology.

 

 

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