It may seem obvious that business growth can only occur when there is money available for re-investment. However, many businesses do not consider this when budgeting and planning their long term finances.
One of the biggest impediments to growth is access to finances that will fuel the investments that are needed to support growth.
Therefore, it is important that a business obtains healthy and robust profit margins to prepare for any future expansions.
If a business is planning to fund investment in its own infrastructure it will only be able to do so with appropriate profit margins. Without this, the firm may have to raise funds through the sale of equity, or borrow funds in order to grow.
Here are some key aspects of business growth that may require funding in the future:
With more data to process through increased transactions there must be sufficient finances to fund the necessary support systems.
These include financial, logistics, quality control, human resources, customer relationships management, complaints handling and asset tracking. These new systems also require staff training which similarly costs money.
The time it takes to train staff will have an impact on the cash flow of the business. This training will be necessary as new products or operating systems come into play with business growth.
Furthermore, in adopting and/or inventing new products for sale, new marketing operations will need to be implemented.
Surplus cash can help firms to counter aggressive marketing, meet competitive product changes or undertake competitive pricing.
The ability to absorb mistakes, evaluate what went wrong and identify solutions can mean the difference between complete failure and just a bump in the road. Rather than having to instantly cut back or take drastic action, the firm with a cash buffer can re-enter the market with a renewed approach. Therefore, even without any immediate prospects of business growth it is wise to implement strategies from day one of business operations that account for the future. After all, growth does not come from standing still.
We have compiled this guide to maximise your chances of successfully raising finance for your business.
Spend time thinking about the most appropriate funding source for the project or objective. Long-term projects are probably not best funded by overdrafts or loans in debt. Learn about the various sources of finance and select those best suited to your purpose. If in doubt, seek our help.
More often, rejected propositions do not suffer because of the lack of imagination in the idea, or because the bank disapproves of the proposed development. Rather, it is because the proposal is not presented in terms that will appeal to a potential lender.
Make sure that you fully understand the information that the bank wants. This often means much more than simple financial projections.
To have confidence in an enterprise, a financier usually wants to gain an appreciation of the business, the quality and depth of management and the key people involved – and this information should be presented in a suitable way.
It is best to use the services of a professional when preparing and presenting a proposal. We can help you prepare a solid, detailed business plan that will attract financial support, and perhaps identify potential financiers who will meet your needs.
Making your business seem like it is bigger than it actually is can go a long way in helping you to secure larger clients.
It will also make customers feel more secure when dealing with you, and can give your voice more authority. Punching above your weight when it comes to making first impressions is easier than you might think, and many of the available strategies are very cost effective.
Your website is almost always going to be potential customers' first point of call. The impression that your website makes on them can seriously influence their perception of your company. A website that has a dated design, difficult navigation or poorly written copy will instantly give them the impression that you're a small or amateur company.
Developing an active and current social media presence can help a business connect with their customers and will assist in making the company appear more prominent and experienced than it may actually be. Social media sites increase the amount of information that can be found on a business, and are usually far more engaging (and cheaper!) than traditional forms of advertising. People assume that businesses with a lot of online material have been there for a long time. If a company has a lot of 'followers', it creates a sense of age and goes a long way in enhancing the image of the brand.
Professionally designed business cards with consistent stationery and letterheads will give a business credibility. Printing the details on cheques and envelopes, rather than posting them hand-written, are small and cost-effective options that will also assist in this area.
If your business cannot afford a full time receptionist, setting up a virtual office can have the same effect at a much cheaper cost. Having a virtual employee answer phone calls and manage customer service from an outside location means eliminating the costs of actual employment while giving the impression that the business is much bigger than it is.
To visit clients is often essential for small businesses, and pulling up in a company branded car can give a business respectability and show professionalism. This will also give you the added benefit of getting your brand noticed on the street.
To get the attention of bigger potential clients, it may be necessary to spread the word on some of the other big-name clients the business has had. Once a business has obtained a few large contracts, using this as leverage to secure other clients will be easy. Business owners should mention these previous jobs in meetings and show the work on their websites.
No matter how big or small, we are always trying to help our clients. With that in mind the Harris Black team have put together a list of recent wins for our clients.
- Helped a client to improve their profits by $150,000 by demonstrating the benefits of a 1% price increase rather than a focus on growth;
- Obtained a further refund of $13,000 for a new client, we determined that interest on a rental property had not been claimed correctly by the prior accountant. Harris Black prepared amendments for the past 4 years and lodged them with the Australian Taxation Office (ATO);
- Improved a client's business loan interest rate by 1.5% by preparing a professional presentation pack to provide to the bank;
- Successfully liaised with the ATO regarding an audit with all of Harris Black's fees covered by Harris Black's audit insurance cover;
- Saved a client a day per month by using bank feeds;
- Boosted a client's superannuation balance by $900,000 by moving a client's business premises into their self-managed superannuation fund using small business CGT concessions resulting in no Capital Gains Tax. We were ably helped by NewLeaf to ensure all contributions were treated correctly.
- Saved a client $28 dollars in parking by making them aware of the pre-paid online booking discount - http://www.secureparking.com.au;
- Avoided potential penalties of up to $33,000 for a client by ensuring they were providing the Fair Work Statement to all new employees;
- In conjunction with NewLeaf, boosted a client's death benefit by $78,000 by applying anti-detriment rules. This was a welcome surprise to the spouse at a time of great sadness;
- Assisted a client that was having trouble sending a file via email to Harris Black as it was more than 10mb.
We set the client up with a secure client login and sent instructions so they could upload the file directly to our website;
- Saved a client approx. $30,000 in additional tax by successfully contesting the residency status of a client with the ATO;
- Saved a client $72 in penalties by applying for a fee waiver from ASIC – this may sound small but this is a big win for Harris Black as ASIC have been notoriously bad at waiving fees;
- Determined that a client was not receiving dividends from one of their investments. Assisted the client to contact the share registry to update the details and receive back pay of unclaimed dividends;
- Identified a further $3,500 per year in GST could be claimed by the client by determining they could claim partial GST on financial supplies; and
- Saving a client $18,500 in stamp duty by advising a client on how to correctly structure their property transaction.
Online reviews are becoming increasingly crucial for businesses, and they can make or break a customer's decision.
Obviously the quality of the reviews matter, but it is also important to have a reasonable quantity of reviews. Here are some tips to increase your number of online reviews:
Follow up sales with an email or phone call to check up on the customer's satisfaction. This is a great way to get feedback at the same time.
If you have had a particularly successful long term relationship with someone you can politely ask them to write a testimonial for you, which can also be posted online.
Be honest. Explain to customers how important online reviews are for your business and ask them to help you out. Most people will be more than happy to do this, especially if they were satisfied with their experience.
You can offer incentives for online reviews such as a discount on their next purchase, or being entered into a prize draw. Be sure to only offer the incentive for making the review, not for making a good review - this looks bad and could potentially undermine the credibility of your business
Emphasise that the reason you're asking them to review you is because you value their input.
Don't waste the reviews you get! Carefully read over all of the comments and use them to make improvements to your business.
Your staff are the most important asset that your company has, and it is imperative to treat them as such. Investing in training your staff and expanding their skillsets can make huge improvements to your business
Clearly, the minimum you need to offer staff is the training that will allow them to perform their roles. For example, your administration team will need essential computer skills, and your sales team will need a good understanding of your products and services. There are also certain mandatory requirements, such as health and safety training. But beyond these basics, there are benefits to offering non-essential, or 'added value' training to your staff.
A clear advantage to offering ongoing training is that it can give you a competitive edge. For instance, salespeople who have received ongoing training to enhance their verbal communication, phone manner, writing skills and negotiation approach will be at an advantage over those who are only given product training and a script.
When deciding on the particular training to offer staff, the key is to identify any skill gaps and also skill shortages. Essentially, you can do this by defining what you want your business to achieve, identifying the skills and knowledge required to do so, and then examining where existing staff fall short of the required expertise. You can do this in a management brainstorming session. There are also a number of online-based skill assessment tools now available at very low cost.
There is also an argument that investing in widespread training can be beneficial for its own sake, turning your business into a learning oriented organisation, where staff are constantly learning new skills across a range of disciplines and applying these to the business.
How much you spend will depend on the type of training you want to offer. Typically, businesses with less than 100 staff spend an average of less than $600 per employee on training every year. Whilst this may sound like a lot of money, particularly for a small business, it is important to keep in mind that training is one of the most significant factors in retaining staff. Even a modest investment in training may go a long way in increasing employee longevity and reducing the costs of recruiting new staff.
But perhaps the best approach is not to view training as a cost, but a business investment that will positively contribute to your bottom line.
From 1 July 2014, once the ATO receives an electronic lodgement of a Business Activity Statement or Instalment Activity Statement they will no longer send the paper statements. Future statements will be issued electronically.
Electronic lodgement includes through the following sources:
- ATO Business Portal;
- Electronic Commerce Interface; and
- Tax Agent Electronic Lodgement Service.
If you are currently utilising our tax agent services to lodge your activity statements it will mean you will no longer receive paper copies of the statements.
If you continue to lodge the paper statements with the ATO, you will not be affected by these changes.
The ATO has provided a private and secure way of receiving and lodging your electronic activity statements, called the Business Portal.
You will be provided with a secure AUSkey log-in that will allow you to view outstanding activity statements, complete the activity statements electronically and lodge the statements electronically.
The ATO will require proof of ID when setting up the Business Portal log-in, and you will need to register each of your entities as required.
If you require more information regarding setting up the Business Portal, or the changes to the paper lodgement's please contact your Harris Black team member who can assist you.
More information can be found on the ATO's website at the following links:
If you have any questions please contact your Harris Black team member on 07 3032 0200.
Recently the Queensland Building and Construction Commission (QBCC) announced changes to their license renewal policy.
From 1 October 2014, a license holder can self-assess their eligibility for a license renewal.
Under the new rules, a licensee will generally only need to have a financial report submitted by their accountant when they apply for a new license or need to increase their "maximum revenue" for the forthcoming twelve months.
Whilst you no longer need to report to QBCC on an annual basis, it is still important to know where your business stands by keeping up to date financials and internal management reports. You will also need to have a good understanding of where your business is going so that financial reports are lodged with the QBCC in time to increase your maximum revenue.
Please contact your Harris Black team member on 07 3032 0200 to discuss how the new QBCC rules impact your business and how to monitor your business on an ongoing basis.
Vanessa Powell recently celebrated her 5th Year Anniversary with Harris Black. Vanessa commenced in 2009 as an Administration Assistant whilst studying her Accounting degree. Vanessa has now completed this Degree and is our internal Accountant.
Vanessa has been an integral part of the growth of Harris Black.
Congratulations and Thankyou Vanessa.
The mining tax has been repealed. However, in order to pass the legislation through the Senate, the Government made a deal with the Palmer United Party and Senator Muir to defer the abolition of:
- The Income Support Bonus to 31 December 2016;
- The Schoolkids Bonus to 31 December 2016 (and restrict the Bonus to families earning less than $100,000 per annum); and
- The Low Income Super Contribution to 30 June 2017.
The Government also agreed to freeze the superannuation guarantee rate at 9.5% for seven years. Under the changes, the rate will increase to 10% from 1 July 2021 and by 0.5% per year from 1 July 2022 until it reaches 12% for the year beginning 1 July 2025.
No other changes were made to the legislation, meaning the abolition of the associated measures such as loss carry-back (from 1 July 2013 for 30 June balancing companies), and geothermal expenditure deduction (from 1 July 2014), will proceed.
The reduction of the instant asset write-off threshold for small businesses (from $6,500 to $1,000), and the discontinuation of the accelerated depreciation arrangements for motor vehicles, will also go ahead (from 1 January 2014).
The abolition of the loss carry-back, the reduction of the instant asset write- off threshold for small businesses and the discontinued accelerated depreciation for cars apply retrospectively. Taxpayers who have made these claims for the 2013–2014 year are now required to amend their returns. The ATO has indicated that it will not impose penalties on those taxpayers who amend their returns if the amendments are lodged within "reasonable time". Also, in light of the superannuation changes, individuals may want to consider reviewing their retirement savings strategy. Please contact our office for further information.
The ATO is investigating arrangements involving the allocation of profits from a professional firm carried on through a partnership, trust or company, where the income of the firm is not personal services income. Firms which could be affected include, but are not limited to, those that provide architectural, engineering, financial, legal, and medical services.
In particular, the ATO wants to take a closer look at arrangements where practice income is treated as being derived from a business structure, even though the source of that income remains, to a significant extent, from the provision of professional services by one or more individuals. The ATO said it was concerned that the general anti-avoidance rules under the tax law could apply to a scheme which is designed to ensure that the individual practitioner professional is not directly rewarded for the services they provide to the business, or receives a reward which is substantially less than the value of those services. The ATO further indicated that the lower the effective tax rate achieved by the scheme, the higher the risk of attracting the Commissioner's attention.
The ATO has been chasing up individuals who did not respond to its initial letter indicating that the individual may have entered into dividend washing transactions. The ATO has reiterated its position that obtaining two sets of franking credits from one dividend event was not allowed. In March 2014, the ATO issued letters to these individuals asking them to amend their returns in order to reverse franking benefits they may have received from dividend washing transactions.
Having obtained new information, the ATO has also issued new letters to more individuals that it believes may have entered into dividend washing transactions. The ATO said it will continue to monitor dividend washing and apply the law to disallow additional franking credits.
The ATO has warned landlords that it is increasing its focus on rental property deductions. The ATO has identified a number of common errors made by rental property owners. Key errors include claiming rental deductions for properties that are not genuinely available for rent, or incorrectly claiming deductions for properties only available for rent part of the year, such as a holiday home.
If a property is only available for rent for part of a year, a partial deduction reflecting when the property was available for rent could be available. The correct apportionment needs to be made with the relevant documentation to substantiate the claim. Contact our office for further information.
The ATO is widening the breadth of data it obtains on individuals from financial institutions, possibly revealing hidden or undisclosed offshore income. The ATO has recently announced a data-matching program targeting offshore bank accounts. Under the program, the ATO will collect account details of bank customers from various financial institutions to identify Australian resident taxpayers with offshore bank accounts which may indicate evidence of undeclared income and/or gains.
The Tax Commissioner earlier this year announced a tax "amnesty" called Project DO IT which aims to encourage individuals to disclose previously undeclared offshore income or assets. Under the program, individuals could be offered reduced penalties for disclosing their offshore income. The ATO has been warning individuals to come forward before 19 December 2014, which is when the project will end.
The Administrative Appeals Tribunal (AAT) has held that an individual was liable to capital gains tax on a settlement payment of $350,000 received in respect of litigation she pursued for damages for breach of contract and negligence. The litigation was in relation to an agreement to facilitate the retirement of a partner of a law firm and to hand over the clients to another solicitor. The AAT was of the view that the taxable assets in question were the various claims made in her statement of claim. It also held the individual had failed to establish any relevant cost base for legal expenses, which meant she could not reduce the amount to be taxed on.
In making its decision, the AAT said it was clear law that damages received by way of settlement of a legal claim could be subject to capital gains tax. It also affirmed the Commissioner's decision to impose an administrative penalty of 50% of the shortfall amount for "recklessness". The AAT noted the taxpayer took no steps to seek independent legal advice in relation to whether tax may be payable on the amount, as well as her failure to keep records as required by tax law.
The ATO has released its views on the tax treatment of Bitcoins. Users of Bitcoins and businesses transacting with Bitcoins should be aware that the ATO has confirmed that it does not consider Bitcoins to be money or a foreign currency – rather, the ATO considers Bitcoins to be property. This means, the ATO will treat Bitcoin transactions as barter transactions, with similar tax consequences.
Taxpayers will need to keep transaction records such as the date of the transaction, the amount in Australian dollars (taken from a reputable online exchange), what the transaction was for, and who the other party was (eg their Bitcoin address).
If you are considering transactions involving Bitcoins and other crypto-currencies, it would be prudent to seek advice on how the transaction would be treated for tax purposes. If you have any questions, please contact our office.