The sun is shining, the end is near, and we begin to look forward to celebrating with friends, family and coworkers. As your advisor we wanted to make sure that you are fully aware that the end of year celebrations that you put on for your employees may hit you with unintended tax consequences. This message is to provide you with information so that you are fully informed.
Christmas Parties
These are some common scenarios relating to work Christmas parties, and their tax consequences:
Party held on business premises
Where the party is for current employees only, there is no fringe benefits tax (FBT) to pay. However, there is also no income tax deduction or GST credits claimable.
If the party includes current employees and their associates or some of your clients, it depends on how much the cost of the party is per head.
If your party costs less than $300 per head, then there is no FBT to pay, but also no income taxdeduction or GST credits claimable.
If the party costs more than $300 per head, then the amount that is attributable to your employee’s associates (such as their spouse/partner) is subject to FBT. Any amount that is subject to FBT is claimable as a tax deduction, and you can claim GST credits as well. All the other amounts are not subject to FBT, but also are not deductible for income tax and no GST credits to claim.
Party held away from business premises
If the party costs less than $300 per head, then no FBT is payable. However, you also cannot claim a tax deduction and no GST credits are available to claim.
If the party costs more than $300 per head, then FBT is payable with respect to each employee that attends, as well as their spouse/partner. Again, if FBT is payable on an amount, then you can claim an income tax deduction as well as any GST credits.
If any clients of yours attend the party, and it costs more than $300 per head, then no FBT is payable, but also no income tax deduction or GST credits can be claimed.
However, if the party costs less than $300 per head, and at the party guests are provided a hamper (or other non-entertainment gift) worth less than $300, then the hamper is allowable as a tax deduction and GST credits can be claimed.
This is because the hamper is considered a gift which is separate from the party.
Christmas Gifts
If you provide your employees with a non-entertainment Christmas gift to thank them for their service, there is no FBT payable as long as that gift is valued at less than $300. Examples of non-entertainment gifts include a Christmas hamper, a bottle of wine or spirits, giftvouchers, flowers or other similar types of gifts.
If your are not sure where you stand with your holiday gifts and entertainment get in touch and we can help.
More than ever, cashflow is a vital part of staying afloat, whether your business is in recovery or growth mode. Revenue, profit and your bottom line all deserve your attention. But keeping everything running is the baseline.
Regular cashflow forecasts help you keep that in focus. Here’s why:
Cost control – If you can’t reach your targets for income, reining in your costs may give you a little extra head room to manage cashflow while you plan your next move.
Visibility on outgoings – Cost control can be a challenge when it’s hard to pinpoint hidden costs or where established ways of doing things cost more money than they should. You may also have been coping with unexpected expenses, as you’ve adapted your business for unplanned circumstances or increased costs.
Improving business practice – It’s more than only keeping an eye on outgoings (though that’s important). It’s about looking at each aspect of your business and business systems (or the gaps where there should be business systems) to see if poor practice is driving costs up unnecessarily.
It can be useful to break it down – You can look at cost centres such as office supplies or freight. Or you can look at what those costs do for your business. It can help to analyse costs in terms of cost of sale and overheads.
Cost of sale and overheads
Cost of sale (also known as Cost of Goods Sold or CoGS) is how much it costs you to make a sale.
In a business that sells products, CoGS is based on the price paid for the product, plus any costs necessary to put the merchandise into inventory and make it ready for sale, including shipping and handling. You can even break it down to calculate the cost of sale of individual units.
Overheads are general business expenses. They can’t be tracked directly to sales. Overheads are what it costs you to open your doors (whether online or actual) every morning.
What’s your plan?
Reduce unnecessary expenses – Trim expenses that aren’t related to your core product or service.
Suppliers – Are you able to work with your providers to ask for discounts or more favourable payment terms on either cost of sale or overhead expenses?
Talk to your team – Analyse your costs and involve your team, including frontline sales staff.
Efficiencies – Are there efficiencies that could save you money, this can be anything from reducing shipments from suppliers or between stores, to taking advantage of AI to save you time, money or both.
Advertising – It might be a false economy to cut back on advertising, as customers are always looking for bargains and price-checking alternatives. But would targeted campaigns work better?
Prioritise – Can you pinpoint products most likely to bring the fastest or best return and hold back on products that are a slower sell?
Promote or discount – If you have old or slow-moving stock, can you discount it and convert old stock to cash? If you attract customers now, you may be able to use it to spotlight other products.
Every dollar you pull back from your costs can go straight into cash flow. Talk to us if you’d like to review your costs and your systems to keep costs under control. Whether your sales are boom or bust, make sure your costs aren’t holding you back.
We’re trading in uncertain times at present. But there’s still a pressing need to refine your business model, add value and look at the opportunities for growth.
In this series, we’ll look at some key ways to optimise your business, exploring different avenues to evolve your enterprise and create a legacy you can be proud of.
Six ways to optimise your business
Your game plan might have been to sell the business, achieve a great deal and retire on the profits. But in the current market, it’s possible you’ve had to press pause on this exit strategy.
However, instead of letting the business just tick over, why not get proactive about improving and enhancing your business model, so it’s a more profitable and viable business?
Here are six key areas you should be looking at:
Go digital and automate the business
Now’s the ideal time to embrace digital technologies. With the latest cloud tech, AI and automation solutions you can streamline your operations, improve your overall customer experience and boost sales. You can also explore e-commerce solutions, social media marketing and digital marketing.
Get proactive with your finances
Strong financial management sets the foundations for making the business profitable. Switching to the latest cloud accounting software helps you get a handle on your cashflow, a better overview of costs and a more informed view of your overall financial position. Many accounting platforms will also offer integrations with other helpful business tools, such as inventory, invoicing and point-of-sale (POS) tools.
Build on those customer relationships
Exceptional customer experience helps to build loyalty and drive repeat business. This means getting granular with your customers’ needs, providing excellent customer service and listening to (and acting on ) your customer feedback. It’s the best way to improve your customer service and brand.
Diversify into new areas
It’s easy to get stuck in a rut when it comes to your product range and industry focus. One way to shake things up is to diversify and explore new product ideas, new customer audiences and new niches. Diversification can reveal a whole new customer demographic, not to mention additional revenue streams.
Nurture your team and employee experience
Engaged employees are the foundation of a great business. Invest in training and development to improve your team’s skills and motivation and do everything you can to build a positive work culture. When hiring, look to create a diverse and inclusive team of people, so you have a real melting pot of talent, ideas, skills and experience in the business.
Look for strategic partnerships
Navigating the market is far more successful when you explore the benefits of business partnerships. Connecting with other businesses can extend your market reach, reduce costs and allow you to share resources. You also open up your brand to a whole new customer audience, boosting sales and growth.
Talk to us about optimising your business model.
There’s no single strategy for turning around the success of your business. But looking at new ideas, markets, products and business tools can certainly add considerable value.
If you’re looking to add some pizazz to your business model and operational effectiveness, drop us a line. Our team will be happy to review your current business and identify the opportunities.
It used to be that your bank manager was an integral part of your business. But in these digital times – where banking is less about relationships and more about online transactions – is your bank truly supporting the ongoing growth of your business?
40% of SME customers are only ‘somewhat positive’ about their bank
79% of SMEs prefer digital banking, but 59% still want access to local branches
78% of SMEs would rather be paid digitally, yet 49% oppose the elimination of cash services
It seems we’re caught in a moment of major change, as banks and small businesses switch from traditional services, to a more online, digital future.
But is this transition adding value for your business?
The digitisation of banking is not something you can ignore. Being able to manage every facet of your business banking from your phone is a huge upgrade in so many ways. And initiatives like Open Banking are making it easier than ever to access your banking data.
But does your bank still offer help with managing your finances? And do you have access to the ready cash and long-term funding you need to expand your company?
Here are five routes to improving your banking and access to finance:
Request a meeting with your business banker
Get to know your local business banker and build a relationship. What you’ll get is personalised financial advice and support. It also helps to discuss the financial goals, challenges and future plans of the business and how financing options, like loans and overdrafts, can help your growth.Explore the banks financing options – most banks will offer a range of financing options for small businesses. Think about business loans to fund your growth, overdrafts to manage short-term cashflow needs and lines of credit for flexible funding. It’s also worth seeing if you can claim any government-backed loans, grants or tax reliefs.
Consider alternative lending and finance options
If your bank isn’t delivering the finance you need, think about other alternative finance options. Invoice financing, merchant cash advances and specialist industry loans are all available, giving you fast access to funds. Always consider the interest rates on business loans and how repayments might affect your future cash position.
Investigate private investment opportunities
When your business has high-growth potential, private investment from angel investors or venture capital firms can be a viable option. These investors deliver the capital you need, in exchange for equity in the business. This allows you to scale the business rapidly, but does mean that your investors will want some strategic control over the future direction of the company.
See if crowdfunding is an option
Crowdfunding platforms raise funds from a large number of individuals, usually interested customers or small private investors. This can be a great way to generate capital for specific projects or to launch new products. Equity crowdfunding, reward-based crowdfunding, or donation-based crowdfunding are all options to think about, depending on your business model and goals.
Talk to us about finding the right finance support
If you don’t feel that your business bank is supporting the financing and growth of your business, it might be time to explore the alternatives.
Effectively managing your expenses is crucial for sustaining growth and ensuring profitability of your business, while ensuring you have a smoother journey along the way. Whether you’re a start-up or an established enterprise, maintaining control over your finances can be the difference between success and failure. Here are eight strategies to help you better manage your business expenses and keep your finances and operations running smoothly.
1. Establish a Comprehensive Budget
Creating a detailed budget is the foundation of effective expense management. A budget shouldn’t just be a one-time task but a dynamic tool that adapts as your business grows. Start by identifying your fixed and variable costs, and use historical data to forecast future expenses. Regularly review and adjust your budget to reflect changes in your business environment, ensuring it remains relevant and accurate.
2. Monitor Cash Flow Diligently
Cash flow is the lifeblood of any business. Keeping a close eye on your inflows and outflows will help you avoid cash shortages. Implement a system to monitor your cash flow in real time — this could be through accounting software that alerts you to discrepancies or potential problems. Regular cash flow analysis enables you to identify trends and make informed financial decisions promptly.
3. Separate Personal and Business Finances
Mixing personal and business finances can lead to confusion, making it difficult to track business expenses accurately. Open dedicated business banking accounts and ensure only business transactions are conducted through them. This separation not only aids in clear financial analysis but also simplifies tax preparation and legal obligations.
4. Implement Expense Tracking Tools
Technology offers numerous solutions to streamline expense management. Consider using expense tracking software or apps that allow you to photograph receipts and automate entries. These tools can generate comprehensive reports, providing insights into spending patterns and helping you identify areas for cost reductions.
5. Review and Reduce Unnecessary Expenses
Regularly review your expenses to identify non-essential costs. This could include subscriptions, services, or supplies that are rarely used or that don’t add significant value to your operations. Make sure expenses are worthwhile, and approach vendors for better rates or seek alternative suppliers.
6. Foster a Cost-Conscious Culture
Encourage your team to be mindful of spending by promoting a culture that prioritizes cost efficiency. Educate employees about the impact of expenses on your business bottom line, and empower them to suggest improvements. When everyone is aware of financial goals, they are more likely to contribute to cost-saving initiatives.
7. Plan for Taxes Early
Taxes can be a significant expense, so it’s crucial to plan for them well in advance. Work with a tax professional to ensure compliance with all tax obligations, and take advantage of any deductions or credits available to your business. Setting aside money for taxes up front helps prevent cash flow issues at tax time.
8. Regular Financial Audits
Conduct periodic audits of your financial statements. This doesn’t necessarily mean hiring an outside firm; instead, engage a team member or business partner to review the records. These audits can help you discover discrepancies, unexpected expenses or even fraudulent activities early, allowing for timely correction.
Conclusion
Effective expense management is not a one-time task but an ongoing process that requires vigilance and adaptation. By establishing a robust budget, employing the right tools, and fostering a cost-conscious company culture, you can ensure your business maintains financial health. Implement these strategies to transform your expenses from a potential pitfall into a pillar of your business strategy, driving growth and sustainable success.
Need assistance with managing your business finances? Contact us today to learn how we can help streamline your expenses and improve your cashflow and profits.
