The decrease in the Reserve Bank of Australia's cash rate by 0.5% to 3.75% is great news for small businesses. Hopefully the reduction in interest rates will give consumers more confidence to spend. The reduction in interest rates however is also an indication that the economy is not performing well; although it is in some isolated areas, primarily driven by the mining industry boom. Now is a good time to review budgets and cash flow forecasts to determine how you expect your business to perform during the balance of 2012. When you're preparing budgets, it's a good idea to prepare three forecasts:
• the first being your best estimate;
• the second a more optimistic; and
• the third a more negative budget.
You can then determine how you can best manage your business.
Another very important consideration is the commencement of the Carbon Tax from the 1st July 2012. Whilst it is true that the Carbon Tax is directed at the 500 biggest polluters in Australia, these businesses will be passing on their extra costs incurred through the Carbon Tax, through their supply chains which will affect a wide range of businesses. Prices of goods affected by the Carbon Tax will increase. The increased costs will primarily be felt in the cost of electricity, but it is also expected that there will be significant increases in some other business expenses including fuel, bricks, cement, steel, aluminium, glass and other construction materials and in carbon rich refrigerants for air conditioning, fridges and freezers.
What all this highlights is the necessity for businesses to review components of your purchases, try and estimate what prices are likely to change and then calculate the effects, so you can determine adjusted prices to charge to your customers. Obviously if you already have contracts in place, you will have to check the contract wording and perhaps have negotiations with some of your customers. The other problem that many businesses will have is whether their customers will accept the higher prices for your products? Some experts believe that, in some industries, there could be price rises from 5-10% because of the impact of the Carbon Tax If you would like our assistance in calculating strategies for minimising the effect of the Carbon Tax, please contact your Harris Black team member.
To develop a Marketing Plan you will need to ask yourself some questions:
• What do you want to achieve in your business?
• What are your personal goals?
• What are your business goals?
These types of questions need to be answered before undertaking the task of preparing a Marketing Plan:
• What are your strengths and weaknesses?
• What are your differences?
• What makes you unique?
• What is your business' "unique competitive advantage"?
• Why do people deal with your business?
Many people consider marketing to be just advertising or promotion, however marketing is much more. Marketing is a number of related activities which start from producing products/services that meet people's needs, making those products/services available and letting potential customers know about the existence of these product/services. The key strategy is to concentrate on keeping the customers and clients coming back again and again. Marketing is concerned with everything that is involved with the transfer of goods or services to the customer. The aim should be to provide the right products/services, at the right price, at the right place, with the right promotion, using the right team. The key questions to be asked, as part of the deliberations on the preparation of a Marketing Plan, include:
• What is your product or service?
• How do you determine its price?
• How have you planned a marketing campaign?
• Are you using a Customer Relationship Management (CRM) system to assist in co-ordinating the marketing campaign?
• Are you utilising social media (LinkedIn, Facebook, You Tube etc) to promote your product?
• Are you using the website as an effective promotional tool?
• How are you going to sell your product? Directly through your own sales team or through agents over the internet?
• What is your strategy for promotion of your products/services to potential customers?
The marketing review is a very important prerequisite to the actual preparation of a Marketing Plan and a Marketing Plan is, in turn, an essential component of a Business Plan for a business.
About one third of customers will take up a special offer linked to their current purchase. How can you package products to include companion sales items to increase the total sales value from the sale transaction?
You can assist your customers or potential customers to make a decision if they can access copies of testimonials from current customers. This will give them some reassurance that your business is selling sound products or services.
People like receiving something for nothing, so why not throw something in that they did not expect to receive. It might be a free product, an invitation to an event or even a "white paper" on a particular subject in which you perceive the customer will be interested.
Have you checked the condition of your packaging when it arrives at a customer's residence/business premises? Is it still attractive? Is the product securely bound? Is the packaging colour conducive to the type of products and market to which you're trying to sell?
If you have been awarded certificates and business awards, display them at your premises because they can convey to customers and potential customers that you are a good corporate citizen and you're interested in quality and service to your clients.
If you have had a good article written about your business, in a newspaper or magazine, reproduce it and send it to your current customers and have it available for potential customers to read. A newspaper article can give your business a "credibility status" which all helps in the value proposition that the customer, or the would-be customer, is trying to form about your business.
Business Plans are like maps for tourists. If you don't know where you're planning to go, how are you going to know when you get there? Virtually every business, large or small, requires a Business Plan to assist with effective management of the business.
The six week period prior to the 30th June is an ideal opportunity to give detailed consideration to how your business is going to operate in the next twelve months.
A proven format is to conduct a "think tank" meeting to review all aspects of the business operations with input from all of the key people within the business. This assists in developing strategies that have been made thorough analysis on and contributions made, by all of the people who are likely to be affected by decisions contained within the Business Plan.
Our approach is to review operational matters with you and then discuss your vision for production and sales in the next twelve months, together with estimates of selling prices, cost of raw materials, labour costs etc., so detailed budgets and cash flow forecasts can then be prepared.
The final Business Plan should be a "living" document and it should then be used to monitor actual implementation of strategies to assist in the achievement of the overall vision of the business. Without a Business Plan you will be flying blind in your business operations. If you would like to discuss the preparation of a Business Plan for your business with us, please do not hesitate to contact a Harris Black team member.
As we approach the end of the financial year, it is a good time to give consideration to the risks that might affect your business. If you believe that a particular risk poses a real threat to your business then it is a good idea to prepare a short commentary on the exposure and consider a Risk Mitigation Strategy. In the unfortunate event that the risk does occur, you will then have a well thought out action plan to minimise the damage from the risk. Some of the potential risks for a small business include:
• If you sell products on credit or supply property to other organisations, have you considered the benefits of registering under the Personal Properties Securities Legislation which commenced in January this year?
• Have you reviewed your Workplace Health and Safety procedures to ensure you are complying with the new regulations that commenced in January 2012?
If you would like to discuss your Risk Management Strategy for your business with us, please do not hesitate to contact a Harris Black team member.
Simply put, tax planning is the arrangement of a taxpayer's affairs so as to comply with the tax law at the lowest possible cost. This involves objectively assessing and actively managing tax risk. Common tax planning techniques include deferring the derivation of assessable income and applying techniques to bring forward deductions.
Now the Federal budget has been released, it is time to meet your Harris Black team member to ensure the most effective tax position is achieved. For those with trusts, tax planning is a must this year as the ATO confirms the need to have your trust minute completed by 30/6/2012.
Following recent compliance activities that have been conducted, the ATO says many Australian resident taxpayers may not be aware of their Australian taxation obligations in relation to their worldwide income. The ATO has reminded taxpayers to correctly report foreign sources of income when required. Examples of foreign sources of income can include:
• interest accrued in an offshore bank account;
• income derived from a foreign investment (eg dividend or rental income);
• income from an asset that has been inherited from an overseas source;
• a foreign pension or annuity; and
• foreign trust income.
The ATO has announced that for taxpayers who make full voluntary disclosure of their foreign source income, any applicable penalties may be reduced by 80%.
The ATO has released a Taxation Determination that provides the Commissioner's views in respect of certain "investment loan interest payment arrangements". According to the Commissioner, the general anti-avoidance provisions in the tax law can apply to deny a deduction for some, or all, of the interest expenses incurred in respect of these arrangements.
The type of arrangements discussed in the Determination broadly involve outstanding loans on a residential home, an investment property and a line of credit. The ATO says a key feature of these arrangements is the use of the line of credit to pay the interest on the investment loan. This results in all (or most) of the interest on the investment loan being, in effect, capitalised. That is, the payment of the investment loan interest is deferred.
According to the ATO, the deferral has the economic effect of allowing the taxpayer to repay the home loan at a faster rate than would otherwise be possible.
The Government has introduced regulations that require certain businesses in the building and construction industry to report annually to the ATO details of payments made to contractors in the industry.
The new requirements essentially mean that purchasers must report certain transactions for which they have been issued an invoice. The reporting requirements will commence on 1 July 2012.
A taxpayer has been unsuccessful before the AAT in arguing that the Commissioner should exercise his discretion and reallocate excess super contributions to a previous financial year.
The taxpayer had used an electronic funds transfer on 30 June 2007 to transfer the funds, but they were not credited to the super fund's account by the bank until 2 July 2007, thereby pushing the transfer into the next financial year. The excess concessional contributions for the 2008 financial year amounted to almost $54,000 and the Commissioner imposed excess contributions tax of around $17,000.
In rejecting the taxpayer's arguments, the AAT noted the Commissioner's practice to deem contributions as having been made "when the funds are credited to the superannuation provider's account".
The AAT also disagreed that there were "special circumstances" that would allow the Commissioner to exercise his discretion. It noted that the taxpayer was in the same situation as every other taxpayer and that it was incumbent upon the taxpayer to ensure that the electronic funds transfer was effective and completed at the right time.
TIP: Amounts contributed and counted in the "wrong" financial year, causing an investor to exceed the relevant superannuation contributions cap, could lead to an excess contributions tax bill. Investors should consider planning any extra contributions early and should not leave transfers to the "last minute". Note that this year, 30 June 2012 falls on a Saturday.
The Government has announced the "cents per kilometre" rates for calculating tax deductions for car expenses for the 2011–12 income year. Note that these are unchanged from 2010–11 and are as follows:
• Small car (non-rotary engine up to 1600cc, or rotary engine up to 800cc): 63c/km.
• Medium car (non-rotary engine 1601 to 2600cc, or rotary engine 801 to 1300cc): 74c/km.
• Large car (non-rotary engine 2601cc and above, or rotary engine 1301cc and above): 75c/km
Commercialisation Australia – Proof Of Concept Grant
Commercialisation Australia has funding for "proving the concept" of an invention or new product, relating to testing the commercial viability of the business, model or idea for a product, process or service. Grants of between $50,000 and $250,000 are available to eligible applicants, with grants being made, on a 50% subsidy basis, for eligible expenditure for the Proof of Concept Project. Applicants for Proof of Concept Grants can include:
• A company which has a turnover of $10 million or less in each of the three preceding years.
• Researchers, who are eligible to apply through their Australian University Commercialisation Office,
• Individuals who may apply through an Eligible Partner Entity. (An Eligible Partner Entity is a body corporate whose primary purpose is to assist individuals or companies in commercialising their ideas or research. It could be a business incubator). An applicant must have ownership or legal access to the beneficial use of any intellectual property necessary to carry out and/or commercialise the project.
Proof of Concept funding does not include Research and Development.
To successfully apply for a grant under the Proof of Concept category, the entrepreneur must have concluded their basic research. If you are interested in obtaining additional information on the operation of the Commercialisation Australia Proof Of Concept Grant please contact a member of the Harris Black team.