Sluggish Economic Scene
In the second month of the financial year, the economic scene is sluggish, with lower than normal economic growth, low inflation, no change in interest rates and, at this stage, no likely sign of interest rates going up for a while. There are still major problems in certain business activities and locations around Australia. The key areas for small business operators to monitor are:
- Growth of the Economy (GDP – Growth Domestic Product)
- Interest Rates
- Currency Rates
- Government Policy
Whilst there has been some positive growth, it has not yet returned to the 4% trend the economy has generally performed at. It is likely to continue in this manner for the remainder of the financial year, unless there is major wages breakout, which will significantly affect the inflation rate.
The Australian Dollar is very high, especially compared to rates that were evident 4 years ago, when the Australian Dollar was 57 cents against the US Dollar. The US Dollar rate against Australian Dollar is currently at $1.05, which is good news for importers and Australians travelling overseas, but not for Australian exporters or the tourist industry relying on international tourists visiting Australia.
Cashflow management is still a high priority issue for SMEs. If you are preparing budgets for this financial year, it is a good idea to prepare three separate sets of budgets, comprising:
- Most likely outcome
- Most optimistic scenario
- Most pessimistic scenario
If you would like our assistance in the preparation of budgets and cashflow forecast, or a review of your cashflow management procedures, please do not hesitate to contact us.
Australian Taxation Office "Hit List"
Every financial year, the Australian Taxation Office (ATO) releases its "hit list" or yearly compliance program. This year is no exception. Some interesting observations can be drawn from the "hit list" in regards to all levels of businesses. One of the big focuses of the program across all levels of taxpayers is the increase in 3rd party data matching for work and business related deductions, omission of income both from Australian sources and foreign sources, Fringe Benefits Tax reporting and GST treatment of property transactions.
The ATO are also increasingly conducting more site visits to Small/Medium Enterprise Operators for the review of:
- GST Transactions
- Superannuation Registration
- Compliance with Taxation Laws
- Taxation Payments
The ATO are also checking:
- Companies with loans to shareholders
- Trustees' compliance with the requirements for written agreements and trust minutes, especially for trust distribution resolutions made prior to 30th June 2012
- Comparing these minutes with the trust income tax returns lodged, along with the income tax returns of all beneficiaries of the trust
All in all, this updated program seems to be focusing on ensuring people are complying with more areas of the law rather than simply Income Tax and GST, which has been a focus of the ATO for some time.
Some clients have received letters from the ATO targeting shareholders, truck drivers and those with rental properties and work related expenses. Please note that these are in no way linked to an audit but simply keeping you on your toes. So long as you comply with legislation there is very little to worry about apart from the time lost in dealing with the ATO should an audit be undertaken. Note that we are able to provide insurance for professional costs associated with such a review if you are interested.
If you have any concerns about any aspect of your business relating to the ATO, please do not hesitate to contact us.
In Human Resources (HR) circles, a distinction is made between "hard" and "soft" skills, with leadership being classified as a "soft" skill, while technical skills such as operating machines of any sort (including computers and IT devices and systems) are considered "hard" skills. In terms of difficulty in learning and application, it is much harder and challenging for people to acquire and apply leadership skills than it is for any manager to do the same with their technical and management skills. It is a misnomer to identify leadership, indeed any skill in dealing with people as a "soft" skill, for leaders often must make hard decisions in the face of dissenting views.
Anyone appointed to a management or supervisory position must first understand what they must do to be an effective leader. This includes ensuring functions such as defining goals and objectives, planning, organising, evaluating, controlling, motivating and setting the example are accepted and implemented by all team members.
Managers must also develop "people" skills such as developing relationships and trust, coaching and counselling, problem solving and decision making. Developing skills in motivation and delegation will help managers win the hearts and minds of the people who work with and for them.
Adam and James are currently undertaking a 12 month leadership training course which they are finding very useful. They would be happy to take a call to explain this in more detail if you are interested.
Government Grants For SMEs
Creative Industries Can Obtain Grants Of Up To $20,000
The Australian Government's Enterprise Connect Program has grant funds available for eligible businesses operating in creative industries, which can include:
- Visual Arts
- Television/Radio Advertising
- Performing Arts
- Games and Interactive Content
Grants can help creative industry businesses improve their operations, productivity and competitiveness by funding professional business advisory and development services. To be eligible, businesses must be operating in the creative industry area and have filed Business Activity Statements (BAS) for at least three consecutive years. Applicants must also have a turnover of a minimum of $1M and a maximum of $100M. The first step in the process is a free business review undertaken by a contracted Enterprise Connect Business Advisor. From this review, a decision is made on the type of services that Enterprise Connect will financially support. An eligible entity can obtain funding on a 50/50 basis.
If you are interested in obtaining more details on the operations of Enterprise Connect, please contact us.
Cashflow Management Is Important
The recent comments by the Australian Taxation Commissioner, that small businesses are approximately $9B in debt on Business Activity Statements, has highlighted the significant importance of effective cashflow management for SMEs. Two years ago, the total debt for the same group of taxpayers was approximately $4B.
This level of debt, together with the debtors' outstanding figures, as disclosed by Dunn and Bradstreet, (debtors' day outstanding of approximately 53 days at present) highlights the severe cashflow problems that many small business operators are experiencing. We can assist our SME clients to manage their business affairs better by conducting a cashflow management review. In this issue, we discuss Debtor Management Review for:
Complete review of the debtors' system including review of:
- Debtors procedure manual
- Application for credit account form
- Welcome new customer letter
- Procedures for obtaining and safe keeping of private company director's guarantees
- Debtors days outstanding calculation
- Procedures for collecting debts
- Debtors reduction checklist
Next month we will discuss the other components of cashflow management – Stock, Work in Progress, and Bank Covenants.
If you would like to have a discussion with us in relation to cashflow management system operating for your business, please contact us.