Posts Categorized: News

So what did Friday’s public holiday cost your business?

We have long had a public holiday for a horse race; we now have one for the AFL Grand Final.

I have been asked many times over the last week about what Friday’s holiday cost the typical small businesses. The answer depends on the nature of your costs.

If your costs are largely fixed (like mine), the loss is basically the loss of time and subsequent billings. Or costs basically don’t change – maybe we saved $10 of electricity.

Other business will have more variable costs than fixed. Most of these businesses losses won’t be as great as they avoided the variable costs that otherwise would have been incurred on Friday.

Some businesses may have gained, but I suspect that they are few and far between. I understand a lot of shops were closed but some cafes may have a booming day even after allowing for penalty rates and other labour costs.

All this leads to an interesting point.

So few business understand what costs are direct and which aren’t and which ones are fixed and which are variable.  They don’t know their gross margins and they don’t know their break-even point (which may be rising in steps as they grow).

With this information to hand, you can confidentially make decisions about your business and know what the outcome will look like. Our business clients know these things. Do you? If not, why not have a free meeting with us to see how we can help you.

In the meantime, read the following posts from our archive:-

  • 1st post from Feb 2015 – Greater profitability is closer than you may realise
  • Last post from Feb 2015 – When growth is bad (and running out of cash)
  • Last post from March 2015 – What your accounting system should do for you.

 At MRS, we will spend today planning for your success tomorrow.

Don’t be misled

Front page headlines on Tuesday and to that night’s TV news were how the share market had dropped $60 billion by day’s end. It was a big number.

Some mentioned the % fall; most didn’t. The “billions wiped out” bit was the big message, with the headline often being in red and/or pictures of unhappy people.

So what has actually happened? On Tuesday. the share market index value which opened at 5,070 fell to 4,918.

It made up half of those gains within the next 24 hours. Now, at the close of trading on Thursday, only 48 hours later, it sits at 5,110 – i.e. 40 points higher than when it started on Tuesday.

But does this recovery and indeed increase above Tuesday’s “wipe-out” lead the news? Most certainly not. There probably won’t be a single heading anywhere except in the business section. So unless you read the business pages you would be left thinking that the market had suffered some kind of permanent loss.

So who won out of this – these that that took the chance to buy shares at a reduced price.

So who has lost out of this – those that panicked and sold shares at a lower value. It’s funny how many of these people then buy back in at inflated prices.

The clear lesson from these often recurring episodes is to be very careful of what you read and hear. The market might well fall further. But do not confuse sensationalised headlines with facts and fundamentals. Short term minor corrections, no matter how the press portray them, should not cause you to make snap and emotional decisions.

The 10 benefits of cloud accounting

One seemingly today can’t spend five minutes without hearing about cloud services and, in particular, cloud accounting packages.

However, we believe that there are now compelling reasons as to why most businesses should upgrade to a cloud-based solution if they have not done so already (please note the use of the words solution rather than version and most but not all clients).

Here are our top 10 benefits of using cloud accounting:-

  1. You can access your numbers anytime from anywhere and do so easily. So can we.  So can your bookkeeper.  So can someone else in another store.  So can anyone else that you need or wish to give access to.  Access can be granted with differing rights to access certain areas and perform various functions (such as access payroll records and generate a profit and loss).
  2. You can issue invoices from anywhere at anytime, even from a tablet or mobile.  No more waiting until you get back to the office.  You might even be able to speed up your cash flow by taking payments on the go.
  3. The three big players in this space, Xero, MYOB and Reckon Hosted (QuickBooks), all include the option to automatically upload bank transactions.  You don’t have to, but it does save time.  The first time a payee name appears in a data feed, you assign an account to it – so, for example, the first time Maggs Reid Stewart appears, you link our name to accounting fees.  Thereafter, Maggs Reid Stewart is automatically posted to accounting fees unless you otherwise edit the transaction.  As you can imagine, data entry progressively takes less and less time and it is for this reason that there are a lot of good bookkeepers out there scratching for work.  The fees for these bank transaction data feeds are now very reasonable.  So the benefit to you is that you either pay your bookkeeper less or spend less time yourself bent over the keyboard.
  4. With automatic bank feeds, it becomes much easier to keep your numbers up-to-date.  Remember that old saying – what you can measure you can manage (and by extension, what you can manage you can control and what you can control gets done).  You will have the power to know what is happening in your business at all times.  The days of business owners being in the dark as to their true situation until a Tax Return is prepared some time after 30th June should, finally, be a thing of the past.
  5. As multiple people can access the same file, gone will be the common problem of the client, the bookkeeper and the accountant all wanting to work on the file at the same time yet only one having the current file at any one time.  No more re-entering invoices, no more incorrect restores, no more avoidable time wasting, no more wasted and costly time in delivering or collecting a back-up of a desktop file and other such annoying problems.
  6. It is sometimes months after year end before we finalise a client’s financials (we only have two arms so we can’t finalise them all in July).  Cloud accounting packages allow us to access a client file at all times.  The closer we are to the time of each transaction, the greater value we can be to our clients.
  7. You don’t have to load upgrades to the software – it is done for you.
  8. No more version control problems between a client and their accountant.
  9. We have for some years used programs such as LogMeIn to access clients’ computers remotely whether that be to obtain reports, fix problems, etc.  Those remote access programs are comparatively cumbersome.  With cloud based programs, we can just login once you have set us up as a user.  We can then answer your queries far more quickly and efficiently.
  10. When up and running and used properly, cloud accounting should reduce accounting fees and, more importantly, enable us to provide a better service.

Is cloud accounting the way to go for your business.  And if so, which program will better suit your needs?  Call us fro a free initial meeting to discuss your business and its needs.

At MRS, we will spend today planning for your success tomorrow.

Pay tax and earn frequent flyer points

In our September edition of Tips & Traps (*) we explored the ability to maximise your frequent flyer points from using a credit card (wisely).

Another way to maximise your points is to pay your business or personal tax debts by credit card. Whilst the ATO do charge credit card payment fees, they are the same that they are charged by the various card providers. As such, the rates charged are very low.

You can pay by credit card by:-

At MRS, we will spend today planning for your success tomorrow.

 

(*)        Tips and Traps is a free quarterly newsletter issued to our business clients full of, as the name suggests, tips and traps. Please call Alex Stewart if you would like to be added to the mailing list.

Avoid the avoidable

The ATO is progressively becoming more and more active in demanding the lodgement outstanding documents and issuing fines.

Fines have become more expensive from last month as the basic penalty unit has increased from $170 to $180.

By way of example, this means that:-

  • A small business which lodges a BAS will be fined $180 for every month that it is lodged late up to a maximum of $900.
  • Under the trustee penalty regime that has applied to self managed super fund trustees since July 2014, the maximum fine per trustee (and which must be paid from their own funds, not the super funds) has increased to $17,000 from $18,000. So, for say a mum and dad fund for which they are trustees in their own name which commits two serious breaches, the fines are $34,000 to both trustees. If a company was trustee, then the directors would collectively be fined $34,000.

Some people decide not to lodge as they can’t pay the tax then and there. This is not the best course of action. It can be said that the ATO issue fines and interest to encourage people to lodge as they just want to know who owes them what. They are actually quite reasonable in offering payment plans for up to six months and to do so on an interest free basis.

So don’t be afraid of lodging – and avoid the fines.

 

ATO targeting rental properties

As reported in The Age today, the ATO is on the war path over rental properties, particularly those in holiday locations. Their activity will be focused on properties generating low rent but comparatively high outgoings, repairs & improvements, travel claims and apportionment of private use.

If you are unsure what you can and can’t claim, you can refer to the ATO’s guidebook which can be found at:-

http://tinyurl.com/npm6hjy

Or, if you can’t be bothered reading it or can’t understand those 44 pages, ask us.

And if you are thinking of buying an investment property, we have a calculator which models out what your future income / net tax loss will be as well as growth in equity in the property over 10 years. We also have a guidebook that steps you through all the things you need to know and do.

At MRS, we will spend today planning for your success tomorrow.

Why are the global share markets so volatile?

If you have some experience with the share market, you will know that it is always volatile. However the market has recently been very sensitive mainly due to:-

  • The contraction in China’s manufacturing sector.
  • Turbulence in Europe.

China has been re-balancing its economy towards services and consumption while trying to maintain its growth rate. Recently, it has taken steps to flood banks with liquidity to increase lending. While some markets are relieved that Beijing has finally stepped in, others are focusing on the dimming growth prospects for the world’s No. 2 economy. Its slowdown poses challenges to global growth, particularly to emerging markets. This is not new news. It didn’t suddenly hit the market on Monday as some sort of new development.

That said, we can expect more volatility because:-

  • The possible rise in US interest rates (which would be the first time since 2006) as its economy remains strong,
  • There are still questions about Chinese growth, and
  • The resulting ongoing weakness in commodity prices (especially iron ore and energy).

Through this time, it will remain important to stay calm and to focus on fundamentals.

Avoid reacting to sensationalised news headlines.

Why is it that every significant fall is a front page story yet a recovery the next day or by the next Monday is on page 32 or not even mentioned on the nightly news?   It’s no wonder so many fall into the trap of selling on down days and only buy in when the market is near the top. What is that saying from Warren Buffett – be fearful when others are greedy and be greedy when others are fearful.

A missed opportunity – no fries with that

I am amazed how often this happens.

During a break at a seminar the other day, I went outside for some fresh air and wandered, as I do, into a golf shop that was next door (some would say I still would have found it if it was three blocks away).

This was most fortunate as they had a great sale on a named brand of golf trousers– for those non-golfers, they were tailored specifically to the game of golf with an expandable waist, an outside tee pocket for tees (thereby saving the wear and disfiguration on traditional pockets), protruding and accessible pockets for scorecards and golf glove as well as other attractive features.

I digress slightly as the real point is they were cheap for their high quality. I thought this was as good as Christmas.

I therefore bought three pairs – and without my asking, he reduced the price further (therein lies a story for another day).

But an easy opportunity was lost.

I wasn’t asked if I would like to buy a belt or belts with those (nor indeed anything else for that matter). Golf shops sell belts. How easy would it have been to suggest buying a matching belt (particularity given one pair of trousers was a different colour from my existing golf trousers and shorts). Asking the question wasn’t going to stop me from buying the trousers which I had already decided to buy anyway. The question would have taken 5 seconds. The question would not have offended or annoyed me. Perhaps they had some belt with special features – waterproof whatever – that I may have happily bought.

For the sake of spending 5 seconds asking a question and perhaps making a recommendation, the chance to sell something else, at a normal margin mind you, was lost.

So who is at fault here?

I would suggest the store manager as they should better train their staff.  McDonalds worked this out long ago as the simple question do you want fries with that adds MILLIONS to their collective bottom line.   I would like to think our clients wouldn’t fall for the same mistake as we have software we use with your clients that shows the gain from increasing the number of transactions by each customer and increasing the average transaction value of those transactions. There is also the true cost of giving discounts – but as I said above, that is a story for another day…

What are you going to do?

During the week, I read PWC’s 2015 Stem report (aka Future-proofing Australia’s workforce by growing skills in science, technology, engineering and maths {STEM}/April 2015).

The headline finding was that 44% of all jobs performed in Australia are at risk from digital disruption. That’s 5,100,000 jobs! And accountants top PWC’s list with 97.5% of all existing jobs at risk of automation.

So whilst this raises some series questions for myself and my colleagues, what does it mean for you and your business?

Will your existing business model be economical in the not too distant future? Will your competitors find new and better ways to provide your good and service at much lesser cost? Will your competitors be able to provide a superior product or service? Or both?

And then there’s the one fundamental hurdle raised upon the report’s release made by PWC’s Chief Executive Luke Sayers is that “business is already struggling to find the right skilled talent for their workforce.”

So how much time to you take out of working in your business to work on your business? The world is changing at an unprecedented rate and most businesses need to change with it to survive. Are you setting time out of every week or month to address these issues?

In writing this, I’m reminded by what I once heard John Bertrand state as the secret to the success of the 1983 America’s Cup campaign. As you will remember, the key to their success was the technological approach that was taken and which was manifested in the famous winged keel. Underpinning this approach was the initial framework of working within the mantra of what it would take to win the cup in 20 years’ time from then.

What will your industry look like in 5, 10 and 20 year’s time? Hard to say. But even if you don’t get it right, you will be heading in the right direction and ahead of most of your competitors. For some, this will mean cleaning up; for others this mean getting out of a dying industry before it is too late.

We can help you address these issues, whether that be from using our collective years of experience from clients in your industry or just general experiences from all of your clients (and our own).

At MRS, we will spend today planning for your success tomorrow.

Employer reporting obligations for June 2015

For those of you who are employers, Tuesday 28th July is the end date for satisfying your SGC super obligation for the June 2015 quarter.  Late payments will attract substantial interest and penalties which effectively doubles or triples the cost.  Even if your cash flow is tight, this commitment should be paid before anything else.

The final day for payments and reporting of Victorian Pay-roll Tax is Tuesday 21st July.

For those who lodge a quarterly BAS or IAS, your June quarter activity statement is due to be lodged by Tuesday 28th July (but 25th August for activity statements if you have registered your business as a user of the Taxpayer Portal and are not paying only fixed $ instalments).

Please note that lodgement of an activity statement (even if it is nil statement) and payment are two separate requirements.  Late lodgement attracts a minimum non-deductible fine of $170 for every 28 days that a form is lodged late whereas as late payment results in an interest levy (which is often remitted).  A fine is not tax deductible, interest is.  Not that we encourage it, but should you not be able to pay an activity statement in full, do not defer lodgement as the possible fines are significant.  The ATO will of course in time identify that an activity statement liability has not been paid and follow it up; but by this time though the liability should be paid in full anyway and at worst, incur a deductible interest charge far less than any non-lodgement penalty.

I remind you that under the Director Penalty Regime which came into effect in July 2012, PAYG Withholding (WH) and SGC super which remains unreported and unpaid after 3 months now results in the unpaid amounts becoming a personal liability of any directors.  Placing a company into liquidation doesn’t avoid or extinguish this liability.  For further information, please refer to our September 2012 Tips and Traps newsletter.

WorkCover finally saw sense a few years ago and now issue staggered lodgement dates for the annual Certificate of Rateable Remuneration.  This Certificate advises WorkCover of the exact remuneration for the prior year which triggers a reconciliation process against premiums paid during the 2014/15 year.  The Certificate also serves to advise the expected remuneration for the forthcoming 2015/16 year.  Non-lodgement may result in an excess assessment as their default assessment may increase remuneration by some 20%.  Employers with a March 2016 lodgement date who expect to have lower remuneration in 2015/16 will need to lodge their 2015 Certificate before the end of August to ensure that are not levied an excessive premium in 2015/16.  Please contact us should you have any queries or require assistance.

The government had previously scheduled the introduction of the Single Touch Payroll (STP) reporting for all employers on an progressive basis from July 2016 (with all employers required to adhere to electronic notification by July 2018).  They have deferred the first introduction date of July 2016 as they now (finally) understand that businesses are largely unprepared for such a system and the associated costs.  Under this system, each payment to each employee will be reported to the ATO at the time of payment (including super thereon).  We had been developing  package to our clients who would have been unable or not willing to attend to this real time reporting but will now defer any further action until we have a concrete start date.