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Breaking Habits

Most of life is habitual. You do the same things you did yesterday, the day before and every day for the last month. It's estimated that out of every 11,000 signals we receive from our senses, our brain only consciously processes 40.

Habits, good or bad, make you who you are. The key is controlling them. If you know how to change your habits, then even a small effort can create big changes.

Most people in business need more time in the day to get through their workload or spend more time strategising where their business is going. One of the best ways to break habits in business is to review what you do on a daily/weekly basis. Do you really need to be doing them?  Could someone else in your business do them for you?  Write a list of what you habitually do and then next to each activity record the following:

  1. Stop – this is an activity you need to stop doing all together as it creates very little value
  2. Delegate – this is an activity that needs to be done but with a little training someone else could be doing it
  3. Keep – these are essential activities that must be completed by you and should create the most value to your business

Finally you should tell someone else about it, especially those activities you have decided to "Stop" as you may need a little push along the way to make sure you continue to break those habits.

Key Targets For Budgets and Cashflow Forecasts

Now is a great time for the preparation of Budgets and Cashflow Forecasts for the new financial year.  We recommend that you begin the budget process by considering your key targets for 2012/2013.  These include:

  • What are your goals for the next 12 months?
  • What are your sales targets?
  • What effect do you believe the economy will have on your business?
  • Break-even calculations - what are they going to be at a various levels of operations?
  • Currency fluctuations -  if you're an exporter or importer, what effect will a move in the Australian dollar have in your business?
  • Have you reviewed your "sales funnel"?  This can be calculated by:
           Past History:
           ·       Introduction/Contacts  
           ·       Proposals submitted     This represents ....% contacts of introduction
conversion
           ·       Orders received     This represents ....% proposals submitted
conversion
           Budgeted Sales Funnel:
           ·       Introduction/Contacts  
           ·       Proposals submitted     This represents ....% contacts of introduction
conversion
           ·       Orders received     This represents ....% proposals submitted
conversion
 
After reviewing the historical figures, what are your budgeted "sales funnel" targets for 2012/2013?  You then need to establish key targets for the following per month:

Stock (Inventory)
  Investment            $
  Stock Turn
  Stock Days on Hand

Work in Progress
  Investment            $
  WIP Days on Hand

Debtors
  Amount Owing      $
  Debtors Days Outstanding

Creditors
  Amount Owing    $
  Creditors' Days Owing

Setting business targets for 2012/2013 will also require small business operators to take into account a number of variables, including:
  • Growth in the Economy - A number of commentators were surprised at the annual rate of growth revealed in the March 2012 figures, which was calculated at 4.3%.  Do you expect that kind of growth to continue throughout 2012/2013?  Probably not, unless you're operating in one of the key industries in the strong economic performance states of the Northern Territory, Western Australia and Queensland.
  • Inflation Rate - The inflation rate appears to be under control and it is not expected that there will be a significant change in the underlying inflation rate during this financial year.
  • Interest Rates - The Reserve Bank of Australia (RBA) retained from moving interest rates at the July and August board meeting.  There is much speculation over which direction interest rates will go.  There is an expectation however that, by 2013, interest rates will start to increase again.  So if you're currently negotiating new loans, it maybe worth considering locking in rates for a period of time.
  • The Government - It is difficult to ignore government action because so many things, which may affect small businesses, can be instigated by government action. The Carbon Tax has commenced, businesses can expect significant increases in gas and electricity charges. However, in some areas of Australia, waste disposal fees and dump usage fees are expected to increase substantially because of high methane gas production from dumps, which means that a number of local government organisations are included in the 500 major organisations that are expected to be paying the Carbon Tax. These organisations will undoubtedly seek to recover the costs in dump usage fees, waste management fees and general rates. In many areas of Australia, business conditions are still very sluggish with the retail sector in particular being very slow. There has been some publicity of public companies, involved in retail activities, announcing profit downgrades and closure of some retail outlets.

Cashflow management remains a very important component of effective business management for small business operators.  Due to the uncertainty of the current market we recommend you prepare 3 forecasts
  1. Break even analysis
  2. Achievable Budget
  3. Stretch Budget

Don't forget to compare your actuals to budget monthly and reforecast if required.

If you would like any assistance on developing your plans for 2012/2013, please do not hesitate to contact your harris black team member.


Marketing/Sales Hints

Keeping abreast of your local environment

Do you know what is happening in your local area?  Does your local area know you?

Some of the questions to consider are:

  • Has your business created local strategic alliances with other businesses in your area?
  • Does your business have a "can do" attitude that is recognised in your area?
  • Do you attend conferences, seminars and meetings to keep abreast of developments in your local community?
  • Has your management team talked to other business people to ascertain their views as to where business in your geographical area is heading?
  • Are you an active member of organisations such as Chamber of Commerce?

Cooperative Promotion

As a means of broadening your target market base and advising of the availability of products that you have for sale, have you considered negotiating with another organisation to sell their products for a commission.  You may be able to do this as a value-add to the products that you are currently supplying to your customers.  Making cooperative promotion sales may be a means of promoting your services to other potential customers who are not currently customers of your business, but they may be interested in the cooperative products that you are selling.

Database Clean Up

Databases can become obsolete very quickly.  This can be due to people leaving their positions, businesses changing their contact details (email addresses, phone numbers, etc.).  Every six (6) months is an ideal time to check the integrity of your database by contacting the organisation that you have listed in your database to ensure that the contact person is still present and that the contact details in your database are still appropriate and up to date.

Send Articles To Your Customers

Whilst it is true that we are living in an era where there is potentially information overload, many customers are still hard-pressed to find articles, magazines, books, YouTube video clips, etc., that could be beneficial to their business operations.  Why not have a policy of ensuring that, whenever you notice any such articles, you send a copy or alert your customer of the article, etc.  This will show the customers that you do have concerns about their businesses and that you're trying to assist them in their knowledge of important things, occurring in the marketplace, which might affect their business.


ATO data-matching programs

The ATO has revealed details of two new data-matching programs aimed at identifying tax non-compliance. These will affect individual taxpayers.

The ATO has advised that it will collect share transaction details from various organisations relating to securities held in ASX-listed entities. The details will be electronically matched with ATO data holdings. Areas of concern for the ATO include incorrect compliance with capital gains tax, income tax and GST obligations. The ATO said around 1.2 million individuals will be affected by the program.

The ATO has also advised that it will request from Centrelink details of individuals who were eligible for Family Tax Benefit Part B for the 2010 to 2013 income years and/or received parental leave pay for the 2010 to 2013 income years. The details will be electronically matched with ATO data holdings to identify incorrect claims for the dependent spouse tax offset. According to the ATO, some 1.3 million individuals will be affected.


Living-away-from-home tax law changes on the way

The Government has introduced into Parliament proposed changes to the tax treatment of living-away-from-home (LAFH) allowances and benefits. The Government said it is reforming the tax concession "by better targeting it at people who are legitimately living away from their actual home in Australia (which they continue to maintain) for an initial period". Essentially, the Government is restricting access to the concessions.

Employers and employees who may be affected need to take note. The proposed changes are set to take effect on 1 October 2012 (not 1 July 2012, as originally proposed). However, there will be grandfathering provisions to preserve tax concessions for some arrangements that were in place prior to Budget night (8 May 2012).

TIP: As a result of these developments, it will be critical for employers and employees to identify, before the enactment of the legislation, if and how the changes might apply.


Excess super contributions: Commissioner's discretion refused

In a number of recent decisions, the AAT has affirmed the Commissioner's refusal to reallocate excess superannuation contributions received by superannuation funds to an earlier financial year, and has therefore affirmed the excess contributions tax assessments made in those cases.

In one decision, the AAT found that the taxpayer had tried to stay under the relevant contribution cap, but had simply "miscalculated" and that the law had been correctly applied by the Commissioner.

In two other cases, the AAT held that contributions that were made by way of electronic funds transfer and BPAY just before (or on) 30 June, but that were received by the relevant fund on 1 July (ie in the next financial year), were not situations that amounted to "special circumstances" that would warrant the Commissioner's discretion to reallocate the excess contributions to another financial year.

However, in one recent decision, the taxpayer was successful in convincing the AAT that there were "special circumstances" to warrant the Commissioner's discretion. Among other things, the AAT found that the taxpayer had missed the relevant deadline for contributions for the relevant year as a result of "misunderstanding" the rules.


Export Market Development Grant Application

If you have exported product during 2011/2012 and have expenditure in excess of $20,000 on export market development activities, then you could be eligible to lodge an Export Market Development Grant Application.  The application needs to be lodged by Austrade by no later than 30th November 2012. There are no extensions available.  Businesses with turnovers under $50M in the 2011/2012 financial year and who have spent in excess of $20,000 on eligible export expenses, can apply.

In the first year, a business is able to combine eligible export expenses for two years to achieve the $20,000 minimum expenditure requirement.


Division 7A benchmark interest rate

The ATO has advised that, for the income year that commenced on 1 July 2012, the benchmark interest rate to be used in calculating the interest component on the repayment of a private company loan received by a shareholder (or the associate of a shareholder) is 7.05%.


Reasonable travel and meal allowance amounts

The ATO has announced the amounts the Commissioner considers are "reasonable" for the 2012–2013 income year in relation to claims made for:

  • overtime meal allowance expenses;
  • domestic travel allowance expenses;
  • travel allowance expenses for employee truck drivers; and
  • overseas travel allowance expenses.

 

Car depreciation limit and luxury car tax threshold

The ATO has released the following limits and thresholds for the 2012–2013 income year:

  • car depreciation limit – $57,466;
  • luxury car tax threshold – $59,133; and
  • fuel efficient car limit – $75,375.

Breaking Habits

Most of life is habitual. You do the same things you did yesterday, the day before and every day for the last month. It's estimated that out of every 11,000 signals we receive from our senses, our brain only consciously processes 40.

Habits, good or bad, make you who you are. The key is controlling them. If you know how to change your habits, then even a small effort can create big changes.

Most people in business need more time in the day to get through their workload or spend more time strategising where their business is going. One of the best ways to break habits in business is to review what you do on a daily/weekly basis. Do you really need to be doing them? Could someone else in your business do them for you? Write a list of what you habitually do and then next to each activity record the following:

  1. Stop – this is an activity you need to stop doing all together as it creates very little value
  2. Delegate – this is an activity that needs to be done but with a little training someone else could be doing it
  3. Keep – these are essential activities that must be completed by you and should create the most value to your business

Finally you should tell someone else about it, especially those activities you have decided to "Stop" as you may need a little push along the way to make sure you continue to break those habits.

Key Targets For Budgets and Cashflow Forecasts

Now is a great time for the preparation of Budgets and Cashflow Forecasts for the new financial year. We recommend that you begin the budget process by considering your key targets for 2012/2013. These include:

  • What are your goals for the next 12 months?
  • What are your sales targets?
  • What effect do you believe the economy will have on your business?
  • Break-even calculations - what are they going to be at a various levels of operations?
  • Currency fluctuations - if you're an exporter or importer, what effect will a move in the Australian dollar have in your business?
  • Have you reviewed your "sales funnel"? This can be calculated by:
        Past History:
        · Introduction/Contacts
        · Proposals submitted This represents ....% contacts of introduction
conversion
        · Orders received This represents ....% proposals submitted
conversion
        Budgeted Sales Funnel:
        · Introduction/Contacts
        · Proposals submitted This represents ....% contacts of introduction
conversion
        · Orders received This represents ....% proposals submitted
conversion

After reviewing the historical figures, what are your budgeted "sales funnel" targets for 2012/2013? You then need to establish key targets for the following per month:

Stock (Inventory)
Investment $
Stock Turn
Stock Days on Hand

Work in Progress
Investment $
WIP Days on Hand

Debtors
Amount Owing $
Debtors Days Outstanding

Creditors
Amount Owing $
Creditors' Days Owing

Setting business targets for 2012/2013 will also require small business operators to take into account a number of variables, including:
  • Growth in the Economy - A number of commentators were surprised at the annual rate of growth revealed in the March 2012 figures, which was calculated at 4.3%. Do you expect that kind of growth to continue throughout 2012/2013? Probably not, unless you're operating in one of the key industries in the strong economic performance states of the Northern Territory, Western Australia and Queensland.
  • Inflation Rate - The inflation rate appears to be under control and it is not expected that there will be a significant change in the underlying inflation rate during this financial year.
  • Interest Rates - The Reserve Bank of Australia (RBA) refrained from moving interest rates at the July and August board meeting. There is much speculation over which direction interest rates will go. There is an expectation however that, by 2013, interest rates will start to increase again. So if you're currently negotiating new loans, it may be worth considering locking in a rate for a period of time.
  • The Government - It is difficult to ignore government action because so many things, which may affect small businesses, can be instigated by government action. The Carbon Tax has commenced, businesses can expect significant increases in gas and electricity charges. However, in some areas of Australia, waste disposal fees and dump usage fees are expected to increase substantially because of high methane gas production from dumps, which means that a number of local government organisations are included in the 500 major organisations that are expected to be paying the Carbon Tax. These organisations will undoubtedly seek to recover the costs in dump usage fees, waste management fees and general rates. In many areas of Australia, business conditions are still very sluggish with the retail sector in particular being very slow. There has been some publicity of public companies, involved in retail activities, announcing profit downgrades and closure of some retail outlets.

Cashflow management remains a very important component of effective business management for small business operators. Due to the uncertainty of the current market we recommend you prepare 3 forecasts

  1. Break even analysis
  2. Achievable Budget
  3. Stretch Budget

Don't forget to compare your actuals to budget monthly and reforecast if required.

If you would like any assistance on developing your plans for 2012/2013, please do not hesitate to contact your harris black team member

Marketing/Sales Hints

Keeping abreast of your local environment

Do you know what is happening in your local area? Does your local area know you?

Some of the questions to consider are:
Has your business created local strategic alliances with other businesses in your area?
Does your business have a "can do" attitude that is recognised in your area?
Do you attend conferences, seminars and meetings to keep abreast of developments in your local community?
Has your management team talked to other business people to ascertain their views as to where business in your geographical area is heading?
Are you an active member of organisations such as Chamber of Commerce?

Cooperative Promotion

As a means of broadening your target market base and advising of the availability of products that you have for sale, have you considered negotiating with another organisation to sell their products for a commission. You may be able to do this as a value-add to the products that you are currently supplying to your customers. Making cooperative promotion sales may be a means of promoting your services to other potential customers who are not currently customers of your business, but they may be interested in the cooperative products that you are selling.

Database Clean Up

Databases can become obsolete very quickly. This can be due to people leaving their positions, businesses changing their contact details (email addresses, phone numbers, etc.). Every six (6) months is an ideal time to check the integrity of your database by contacting the organisation that you have listed in your database to ensure that the contact person is still present and that the contact details in your database are still appropriate and up to date.

Send Articles To Your Customers

Whilst it is true that we are living in an era where there is potentially information overload, many customers are still hard-pressed to find articles, magazines, books, YouTube video clips, etc., that could be beneficial to their business operations. Why not have a policy of ensuring that, whenever you notice any such articles, you send a copy or alert your customer of the article, etc. This will show the customers that you do have concerns about their businesses and that you're trying to assist them in their knowledge of important things, occurring in the marketplace, which might affect their business.
ATO data-matching programs

The ATO has revealed details of two new data-matching programs aimed at identifying tax non-compliance. These will affect individual taxpayers.

The ATO has advised that it will collect share transaction details from various organisations relating to securities held in ASX-listed entities. The details will be electronically matched with ATO data holdings. Areas of concern for the ATO include incorrect compliance with capital gains tax, income tax and GST obligations. The ATO said around 1.2 million individuals will be affected by the program.

The ATO has also advised that it will request from Centrelink details of individuals who were eligible for Family Tax Benefit Part B for the 2010 to 2013 income years and/or received parental leave pay for the 2010 to 2013 income years. The details will be electronically matched with ATO data holdings to identify incorrect claims for the dependent spouse tax offset. According to the ATO, some 1.3 million individuals will be affected
Living-away-from-home tax law changes on the way

The Government has introduced into Parliament proposed changes to the tax treatment of living-away-from-home (LAFH) allowances and benefits. The Government said it is reforming the tax concession "by better targeting it at people who are legitimately living away from their actual home in Australia (which they continue to maintain) for an initial period". Essentially, the Government is restricting access to the concessions.

Employers and employees who may be affected need to take note. The proposed changes are set to take effect on 1 October 2012 (not 1 July 2012, as originally proposed). However, there will be grandfathering provisions to preserve tax concessions for some arrangements that were in place prior to Budget night (8 May 2012).

TIP: As a result of these developments, it will be critical for employers and employees to identify, before the enactment of the legislation, if and how the changes might apply.


Excess super contributions: Commissioner's discretion refused

In a number of recent decisions, the AAT has affirmed the Commissioner's refusal to reallocate excess superannuation contributions received by superannuation funds to an earlier financial year, and has therefore affirmed the excess contributions tax assessments made in those cases.

In one decision, the AAT found that the taxpayer had tried to stay under the relevant contribution cap, but had simply "miscalculated" and that the law had been correctly applied by the Commissioner.

In two other cases, the AAT held that contributions that were made by way of electronic funds transfer and BPAY just before (or on) 30 June, but that were received by the relevant fund on 1 July (ie in the next financial year), were not situations that amounted to "special circumstances" that would warrant the Commissioner's discretion to reallocate the excess contributions to another financial year.

However, in one recent decision, the taxpayer was successful in convincing the AAT that there were "special circumstances" to warrant the Commissioner's discretion. Among other things, the AAT found that the taxpayer had missed the relevant deadline for contributions for the relevant year as a result of "misunderstanding" the rules.

Export Market Development Grant Application

If you have exported product during 2011/2012 and have expenditure in excess of $20,000 on export market development activities, then you could be eligible to lodge an Export Market Development Grant Application. The application needs to be lodged by Austrade by no later than 30th November 2012. There are no extensions available. Businesses with turnovers under $50M in the 2011/2012 financial year and who have spent in excess of $20,000 on eligible export expenses, can apply.

In the first year, a business is able to combine eligible export expenses for two years to achieve the $20,000 minimum expenditure requirement.
Division 7A benchmark interest rate

The ATO has advised that, for the income year that commenced on 1 July 2012, the benchmark interest rate to be used in calculating the interest component on the repayment of a private company loan received by a shareholder (or the associate of a shareholder) is 7.05%.
Reasonable travel and meal allowance amounts

The ATO has announced the amounts the Commissioner considers are "reasonable" for the 2012–2013 income year in relation to claims made for:
  • overtime meal allowance expenses;
  • domestic travel allowance expenses;
  • travel allowance expenses for employee truck drivers; and
  • overseas travel allowance expenses.


Car depreciation limit and luxury car tax threshold

The ATO has released the following limits and thresholds for the 2012–2013 income year:

  • car depreciation limit – $57,466;
  • luxury car tax threshold – $59,133; and
  • fuel efficient car limit – $75,375.

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Since 1994, Harris Black has been providing accounting and advisory services to our valued clients to help them achieve their business and personal wealth goals.

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