Keeping on top of your finances is a critical part of keeping your business on track. But are you doing everything you can to optimise your financial management?
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.
Let’s see how you can better control over your financial numbers.
Having the right numbers at your fingertips
One of the biggest causes of business failure with new startups is poor cashflow and a lack of capital. Having enough money to cover your expenses, pay your workforce and invest in growth is what separates the successful businesses and those that fall by the wayside.
But what can you do to improve your cash position and keep yourself in the driving seat when it comes to managing the financial side of the business?
Here are five simple things you can to get more proactive with your finances:
Embrace financial technology and cloud accounting
Make sure you’re using cloud-accounting solutions like Xero or QuickBooks, with integrated bank feeds, expense tracking, simple invoicing and a real-time view of your numbers. You can also use the advanced reporting features to get deep insights into financial performance.Use financial metrics and KPIs to monitor performance
Develop a framework of financial key performance indicators (KPIs) including gross profit margins, operating expenses, customer acquisition costs and revenue growth rates. By tracking these metrics, you can gauge your performance, spot any financial threats and make well-informed decisions about your financial management.
Forecast your cashflow position and potential challenges
Use the latest cashflow forecasting tool to track your expected cash inflows and outflows. These projections give you an overview of your cash position for the months ahead, allowing you to top up your cash as required. It’s also sensible to build up some meaningful cash reserves, so you have capital behind you when cashflow gets tight.
Work on your aged debt and debtor management
It’s important that customers pay on time and that your payment terms are clear. Use your accounting software to send out automated reminders and have structured follow-up procedures in place for overdue payments. It’s also a good idea to offer early payment incentives and to nurture strong customer relationships to minimise your aged debt and improve cashflow.
Get strategic with your working capital and access to finance
Having a viable level of working capital in the business is a must. Explore the various financing options for boosting your capital. This can include business lines of credit, invoice financing or term loans to, all of which help to increase funding and raise the company’s capital.
Talk to us about ways to improve your digital transformation
There have never been more tools to help you manage your finances. By embracing the best in financial and accounting tools, you give yourself (and your finance team) the superpowers to become cashflow positive, with capital behind you to drive your business to new heights.
If you’re looking to upgrade your financial management, come and talk to us. Our team will suggest the ideal accounting tech stack and the best ways to control your numbers.
The ATO has extended the amendment period for income tax returns from 2 years to 4 years for small and medium businesses. The period commences from the day on which the Commissioner gives notice of the assessment to the taxpayer. The extended period is applicable for assessments in relation to income years starting on or after 1 July 2024.
The previous 2-year period was considered too short, as outside of this window you would otherwise have to engage in costly and lengthy objections and appeals processes with the Commissioner.
Your application for an amendment must be in the approved form and given to the Commissioner before the expiry of the 4-year period.
These amendments intend to reduce some administrative and financial burden for small and medium business entities and avoid some instances of pursuing objections and appeals.
Small and medium business entities
You are a small or medium business entity for an income year if you:
carry on a business during the income year, and
one or both of the following applies:
the aggregated turnover of your business in the previous income year was less than $50 million, and/or
your business’s aggregated turnover for the current year is likely to be less than $50 million.
What doesn’t change
The Australian Taxation Office (ATO) may continue to decline amendment requests where they believe that the requested amendment would result in the assessment not correctly reflecting your taxable income.
Also note that there is no change to the length of time you are required to keep records for your business. You need to keep records for your business in case the ATO wants to audit your tax return. Generally, records are required to be maintained for 5 years from the date on which the record was prepared or obtained, or from the time the relevant transaction or act was completed, whichever is the later.
For instances such as fraud and tax evasion, the amendment period does not apply and the Commissioner may amend your return at any time.
Please do not hesitate to contact our office should you have any queries.
Originally announced in the 2023 Federal Budget were measures to encourage investment and construction in the build-to-rent (BTR) sector.
Currently, a tax deduction is available on the cost of constructing of a building (eg a rental property), once the building has begun to be used for a deductible purpose. One such method to get the tax deduction is to begin renting out the newly constructed dwelling.
Draft legislation for construction projects that are build-to-rent accommodation that commence after 9 May 2023, the owners of the accommodation will be entitled to a capital works deduction of 4% per annum.
This is an increase from the current 2.5% per annum that will continue to be available for other construction projects.
Eligibility criteria
To access one or both the concessions, the BTR development must meet the following eligibility criteria:
the development consists of 50 or more residential dwellings made available for rent to the general public
all the dwellings (and common areas) in the BTR development are under a single ownership, for at least 15 years (may be sold to another single entity during this period and retain eligibility)
dwellings in the BTR development must be offered for lease terms of at least 3 years
at least 10 per cent of the dwellings are available as affordable tenancies, and
all of the dwellings must be residential premises (s 995-1 ITAA 1997), taxable Australian real property and not be commercial residential premises.
Managed investment trusts
Australian tax residents have the option to invest directly in a build-to-rent accommodation project, or indirectly through a managed investment trust.
The change in the capital works deduction will also apply to managed investment trusts, meaning that you have the option to invest whichever way you wish and still get access to the increased deduction. However, please note that eligibility criteria do apply, meaning that only bona fide build-to-rent accommodation projects will get the additional deduction.
Foreign investors in a managed investment trust that choose to commence a build-to-rent accommodation project will also benefit from a reduction in withholding tax after 1 July 2024, from 30% to 15%.
Active BTR and misuse tax
A BTR development will be active if it meets all the eligibility criteria, if a new building was initially commenced as a build-to-sell development and later converted to BTR during construction, it can still be regarded as an active BTR.
An active BTR development will cease to be active if any of the dwellings fail to meet an eligibility criterion during the compliance period of 15 years (beginning on the day when the development commenced being an active BTR).
Misuse tax
If an active BTR development ceases to be an active during the compliance period, BTR development misuse tax will be imposed to approximately neutralise the tax benefits obtained both through the reduced MIT withholding rates, and the accelerated capital works deduction.
The misuse tax is roughly equal to the accelerated depreciation and reduced MIT withholding rate benefits obtained, increased by 8%. Any misuse tax assessed by the Commissioner will not be deductible and will be subject to the general interest charge.
If you have any questions about this proposed change, and its progress through the parliamentary process, please contact our office.
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.
