The End of Another Financial Year
The 30th June 2011 is fast approaching and SME operators have a lot of issues to consider in the current business climate. There is no doubt that there is a two speed economy operating in various parts of Australia. The month of April had the highest number of insolvencies in 2011 with retail and mining companies being the highest categories of companies which went into liquidation.
The news that first home buyers taking out home loans is at the lowest it has been for seventeen years is not good news for the building industry.
The Australian government's new regulations relative to paid Parental Leave put more administrative responsibilities on employers as does the government’s requirement for building industry contractors to submit an annual report detailing payments made to all sub-contractors.
Company directors need to be aware that the government’s new legislation is making director's liable for unpaid superannuation contributions. This is not restricted to phoenix companies; it could also apply to any corporate entity.
All of these changes, and the general uncertainty in the business world, highlight the necessity for businesses to have a plan.
- What are your business’ objectives?
- What do you want your position to be in one, three, five years time?
Business Plans can assist in:
- Reviewing all aspects of your business operation;
- Documenting what the plan is; and
- More importantly, how you intend to make the journey from now until you have achieved your business objective.
If you would like our assistance in the preparation of a Business Plan for 2011/2012, please do not hesitate to contact us.
Debtors Days Outstanding
The latest reports from Dun & Bradstreet indicate that trade payments are now taking 56 days on average. This is causing cashflow stress for many businesses. If you are experiencing problems in the collection of your debts and would like our assistance in the review of your systems, please do not hesitate to contact us.
Knowing Breakeven Helps!
Do you know what the breakeven amount is for the various operations being conducted in your business? "Breakeven" sales are the level of sales necessary to cover all fixed and variable expenses. This gives the revenue needed to produce neither profit nor loss. The formula for calculation of break even sales is:
Total of fixed and variable costs divided by gross profit percentage x 100/1 = break even sales.
A fixed expense is an expense that does not vary relative to production or turnover within reasonable production or sales levels.
- Rent would normally be considered to be a fixed expense and would not vary until such time as it was necessary to obtain larger premises.
- Management salaries would normally be considered as a fixed expense.
- Some staff salaries would also be considered fixed expenses, but in the main, staff expenses that relate to production or sales would normally be termed a variable expense, as variable costs normally move directly in relation to increases in production or sales of the business.
- To calculate the breakeven amount you also need to know the gross profit percentage for that particular operation within the business, or the overall gross profit percentage for the business.
To determine your Breakeven Sales Figure for a particular operation within your business, you need to prepare a list of the fixed expenses relating to that business or to that activity and then prepare a list of the variable expenses that relate to that activity and add the two totals together.
eg:
| If the fixed costs were | $195,750 |
| And the variable costs were | $392,000 |
| The total of costs would be | $587,750 |
If the business was achieving a gross profit of 32%, then the calculation of breakeven sales would be as follows:
Total of Fixed and Variables Costs divided by Gross Profit Percentage x 100/1 = Breakeven Sales.
|
$587,750
|
x
|
100
|
=
|
$1,836,718
|
This is the Breakeven Sales.
|
|
32
|
|
1
|
|
|
|
Proof :
|
Sales
|
|
$1,836,718
|
|
Gross Profit Percentage 32% =
|
|
$ 587,750
|
|
Less: Fixed Costs
|
$195,750
|
|
|
Variable Costs
|
$392,000
|
|
|
Total Costs
|
|
$ 587,750
|
Management should be aware of the breakeven sales figures for their business or individual operations so as to assist in the strategies being prepared for the business or the individual business operation.
Austrade Changes Focus
The Australian government has announced that Austrade will be encouraging exporters to North America and Europe to use private consultants as Austrade shifts it emphasis to emerging markets such as Mongolia, Latin America, Africa and Central Asia. Austrade believes that its expertise would be more valuable to Australian exporters in these emerging markets. Austrade is expected to halve its presence in locations in North America and Europe in the near future.
If you are interested in exporting to these new markets, we recommend that you contact your local Austrade Office or contact us to arrange a meeting with Austrade.
Directors Liability Extended
The Federal Budget included additional liabilities for directors who will now be liable for unpaid superannuation guarantee payments. Directors will also be liable for PAYG arrangements unpaid for three months by their companies.
Directors should be ensuring that they receive an assurance on a monthly basis of a company's position with the Australian Taxation Office, particularly with regards to superannuation payments and PAYG payments.
Superannuation Contributions
Superannuation contributions for persons aged under 50 years are restricted to $25,000. If you are over 50 years, contributions for the year ended 30th June 2011 and for the 2011/2012 year can be $50,000.
The government has introduced new legislation that from the 1st July 2012, only those persons over 50 years with superannuation savings of less than $500,000 will be able to make a $50,000 contribution.
If the level of superannuation savings exceeds $500,000 - from the 1st July 2012, superannuation contributions for a person over 50 years will be restricted to $25,000.
If you would like to have a discussion in relation to your superannuation contributions, please do not hesitate to contact us.
Parental Leave Mandatory from 1st July 2011
The Australian government's Parental Leave Scheme, which has been operational since the 1st January 2011, becomes mandatory for all employers of eligible employees from the 1st July 2011.
The Australian government will fund eligible employees for parental leave (calculated at 18 weeks of the federal minimal wage which is currently approximately $550 per week) for paid parental leave. The payment amount will be indexed from time to time.
The Federal government will pay the employer and the employer will be responsible for making the payments to the eligible employee.
Employers do not have to concern themselves with an employee's eligibility. An employee wishing to claim parental leave has to contact the Family Assistance Office (FAO) who will review the employees' eligibility by utilising tests, including citizenship and work tests. The FAO may make some enquiries about the employee to the employer.
The employer can elect to be paid by the Australian government either on a fortnightly basis or in three payments equivalent to six weekly instalments.
The employer is responsible for making the payments to the employee, on the same basis that the employee is normally paid e.g. if the employee is paid weekly, the employer would have to pay the parental leave amount on a weekly basis.
If you have any concerns about the operation of the parental leave payments please do not hesitate to contact us.