Month: February 2022

A Business Plan Requires Structure – Here Are 5 Things You Should Be Including In It

Posted on by Adam_Admin

When you are first setting up a business, understanding exactly what you are setting out to achieve can be a daunting task. But a business plan takes some of that stress away by helping to cement your business idea into achievable goals. It can be as simple as dot pointing your strategy on the back of an envelope, or a 30-page report of what your business is hoping to achieve.

However, a formal business plan should consist of specific information that you can present to investors (or a bank, or just your spouse) as an indication of how your business will succeed.

Your Concept

What is the point of the business? In this section, try to outline your plan succinctly.  You should discuss the industry that your business will be operating within, what structure your business will take, the particular product or service

Actioning The Strategy

What goals do you have for your business? When and how will you reach your goals? Do you have a clear set of steps that you need to take to implement your strategy into being?

Why Your Product?

What’s the competitive advantage of your product over the others in your field? Are you a solicitor who specialises in family law? Do you sell vintage merchandise for Aussie Rules football teams?

What niche does your business fulfil that your customers need? Provide solid information about your product to your readers, and explain the reasoning behind why your customers will want to purchase your product, and not those of your competitors.

The Market

Who are your target customers? What demographics do your customers primarily lie in? How will you attract and retain enough customers to make a profit? What methods will you use to capture your audience? What sets your business apart from the competition?

Answering these questions will assist you in planning out your marketing strategy, and demonstrate to your investors that you understand how you will be targeting your customers.

Financial Needs

These will be based on your projected financial statements. These statements provide a model of how your ideas about the company, its markets and its strategies will play out.

Obviously, a report that outlines your business plan is probably preferable to a scrap of an envelope, but the main point to this is working through the business idea in a written form that you can take to your business strategists to formulate a more comprehensive and viable business plan that aligns with your goals.

As you write your business plan, stick to facts instead of feelings, projections instead of hopes, and realistic expectations of profit instead of unrealistic dreams of wealth. Facts—checkable, demonstrable facts—will invest your plan with the most important component of all: credibility.

It’s time to start writing that business plan if:

  • You have a new idea for a business and want to explore its feasibility
  • Your industry is undergoing significant changes and dramatic developments, and you want to map them out for your current business
  • You’re looking to sell your business and want to establish a value for it that can be supported by facts and figures.
  • You require financing for your business idea and want to plan out how you’ll expend the resources you’re committing.

If you’re looking for assistance with planning for your business’s future, you can come speak with us.

Structured Settlement Contributions – What Are They And Why Should You Care?

Posted on by Adam_Admin

Disasters, be they natural or man-made, can happen to anyone. It could be a car accident, a tree crashing through the roof, or a bushfire hitting your residence. In any case, an event that causes significant harm or impact that affects someone’s everyday life in an adverse way is never pleasant.

Thankfully, as a society, there are laws that provide compensation to people who experience these accidents as a result of someone else’s actions and are significantly impacted. If someone were to be (potentially) disabled for life due to such an incident, there may be a substantial compensation payout.

The idea of this compensation is not only to compensate for economic loss but to also provide a capital amount for the person’s living costs for the rest of their lives. Often that compensation will run to millions of dollars. Sounds like a lot, right?

If you receive compensation for becoming totally and permanently disabled, investing this lump sum should make it last far longer. This action will require careful planning and professional advice. Consulting with a professional on this financial decision may be in your best interest.

One effective strategy that can be used here is to make what is known as a Structured Settlement Contribution to superannuation.  You can then use your superannuation to pay you a pension.  If done correctly, all the money that your investment earns in super should be tax-free and all of the money that you draw out of super should also be tax-free. Removing tax from the equation when it comes to the money that you can draw out of your super will have a massive impact on your ability to have that money last your lifetime.

However, you need to make sure you comply with all of the rules around making a structured settlement superannuation contribution. These rules include:

  1. You will usually have to be under 67 at the time of making the contribution
  2. The contribution needs to be made within 90 days of getting the money
  3. Two doctors need to certify that you are totally and permanently disabled
  4. The payment must be compensation for personal injury where someone else was at fault or for workers compensation
  5. You must notify your super fund that it is a structured settlement contribution

The contribution will also have no impact on your pension transfer balance limit.  This means that if you make a structured settlement contribution of $2 million then you will now be able to transfer $3.7 million into a pension instead of the usual $1.7 million.

The payments are usually received after a lengthy legal process and it is probably not something that will be top of mind for the 90 days following receipt of the funds but the decision to contribute the amount to superannuation can have a lasting positive impact on your after tax income.

Consulting with a registered professional about your options regarding contributions, withdrawals and general options can give a better understanding of what you might be in a position to do.

End Of FBT Year Is Approaching – Do You Know What Benefits You’re Giving Your Employees?

Posted on by Adam_Admin

As a part of your employees’ employment contracts, do they receive benefits such as a car space, gym membership or even a car to drive?

These are what’s known as fringe benefits, which is a ‘payment’ to an employee that takes a different form to salary or wages. This incurs a specific kind of tax separate from income tax known as fringe benefits tax, which is based on the taxable value of the fringe benefits provided. FBT applies even if the benefit is provided by a third party under an arrangement with the employer.

Knowing what is and what isn’t deemed as a fringe benefit will assist you in working out what you might provide to your employees as a benefit for working with you.

Examples Of Items That Are Fringe Benefits

  • Allowing an employee to use a work car for private purposes
  • Giving an employee a discounted loan
  • Paying an employee’s gym membership
  • Providing entertainment by way of free tickets to concerts
  • Reimbursing an expense incurred by an employee, such as school fees
  • Giving benefits under a salary sacrifice arrangement with an employee.

Examples Of Items That Are Not Fringe Benefits

The following are not fringe benefits:

  • Salary and wages
  • Shares purchased under approved employee share acquisition schemes
  • Employer contributions to complying super funds
  • Employment termination payments (including, for example, the gift or sale at a discount of a company car to an employee on termination)
  • Payment of amounts deemed to be dividends under Division 7A
  • Benefits provided to volunteers and contractors
  • Exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.

Employees don’t have to worry about paying the tax on these items, but it is an area of concern that employers need to be careful of. Employers must self-assess their FBT liability for the FBT year (which ends 31 March) and lodge an FBT return.

Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay. However, there are ways in which you may be able to reduce your liability when it comes to FBT.

These methods include:

  • providing benefits that are income tax-deductible
    • If your employee is given a benefit that they could otherwise have claimed themselves.
  • using employee contributions
    • If your employees contribute to the cost of the FBT themselves through cash payment to the provider of the benefit, the taxable value of the fringe benefit can be reduced by that amount
  • by providing a cash bonus
    • If you provide your employee with a cash bonus instead of a benefit you won’t have to pay FBT, and the employee will pay income tax on the amount.
  • providing benefits that are exempt from FBT.

FBT exemptions can sometimes be changed by the Australian Taxation Office (ATO), which can affect your FBT liability.

One such change was the FBT Retraining & Reskilling Exemption. Under this change, if you are an employer who is providing to their employees who are redundant (or soon to be made redundant) a benefit that encompasses training or education.

The exemption can be applied to retraining and reskilling benefits provided on or after 2 October 2020. This exemption is not to be included in your 2022 FBT return or in your employee’s reportable fringe benefits amount. If you have already lodged your 2021 FBT return though and paid any FBT owing, you can amend your 2021 FTB return to reduce the FBT paid for retraining and reskilling that is exempt.

It’s advisable to consult with a tax agent (such as us) if you need to amend an FBT return (as we are equipped with the tools and skills to negotiate what can be a tricky area filled with complexities and traps). Now’s the best time to speak with us about your FBT liability, what you might need to include in your return and more. Start a conversation with us today.

Cash Flow Checks For Businesses Are Best Done As Soon As Possible

Posted on by Adam_Admin

After the stress of the holiday period, there are plenty more times throughout the year that cashflow issues can become a recurring problem that you need to get on top of.

Small businesses with cash flow problems may put themselves at risk of failing or suffering significant financial hardship.

Cash flow provides a business with stability so they are able to pay employees, avoid loan defaults and pay the overheads necessary to keep their business up and running. Follow these tips to boost your cash flow so you can secure your business’ future.

Perform A Business Health Check

Preparing financial statements will give you an objective insight into the health of your business. Identifying if you have a cash flow problem is the first step to coming up with solutions. Looking into the following reports will allow you to see if your cash flow is up to scratch.

  •     A balance sheet will tell you what your business is worth on any given day. The value of your business is calculated by subtracting your liabilities from your assets.
  •     Profit loss statements reveal if your income is meeting your expense requirements. If your profit is dipping below your expenses, it is time for a change.
  •     Cash flow reports reveal the money that is going in and out of your business over a set period and identify peak and off-peak periods

Use A Business Budget

After analysing your cash flow situation, is your cash flow cyclical?

Creating a yearly budget is not only imperative to receive financing in future, but will also help you identify the best months to save to cover the quieter months. Where applicable, business owners can consider flexible rostering, whereby employing casuals and using a flexible roster can help you cut back on hours when you need to improve your cash flow in quiet periods.

When you have identified your quieter periods of the year, try to find additional revenue streams for when cash is low. Is there a product or service that could be introduced? Work with your team for new ideas to cover low cash months.

Get On Top Of Your Accounts Receivable

Allowing late repayments jeopardises your cash flow and can put you in a tight financial spot. Avoid being out of pocket by implementing some of these credit policies:

  • Collect the debts on time – allowing late payments means that you’re without those funds for longer
  • Offer an early bird discount to incentivise early repayments – it pays to repay that kindness
  • Set credit limits and payment terms – know exactly what your terms and conditions are so that you can make sure that those who owe you are abiding by them
  • Make credit applications and carry out credit checks on all new customers
  • Penalise late payments with interest – set a specific interest rate that will apply and which you deem as fair.
  • Consider cutting down on inventory – unsold stock can be a waste of funds, and if you’re finding yourself with plenty of it, you may not need to be ordering as much.
  • Request upfront payment or a non-refundable deposit where viable, especially when dealing with large orders.

If you’re looking for assistance with invoicing, chasing payments or a general checkup of your business’s cash flow situation, accountants like us are equipped to help. Speak with us to find out what we can do for you.