Signum Business Advisers, Chartered Accountants, Parramatta, NSW

Congratulations Shae Tye

After enduring sleepless Sydney summer nights, with a midnight breastfeeding routine, Shae needed to find a solution of how to keep her daughter from overheating but also wrapped so that she didn’t startle or scratch. Following home-made pattern making, over locking classes and months of trials the Sleepy Wings product was born. Sleepy Wings is an infant slumber wear jacket worn during a baby’s day and night sleep, enabling them to sleep in their natural and preferred position. The garment keeps the baby’s neck and chest clear of hazard and overheating as well as prevents the baby from scratching their delicate skin. The product is designed to mimic the swaddling method, without all the layers of muslin wrap.

For further information visit: www.sleepywings.com.au.

Navigating Your Business

The two major issues on the horizon, which could have a significant effect on SMEs, are the carbon tax and mineral resources rent tax.  Both of these are taxes that could have significant impact on your business’ operations.  We recommend that all SMEs start thinking about what effects the proposed carbon tax will have on their business and start to plan now for strategies to minimise this effect. 

There are also a number of other issues affecting the economy that could (and will) affect some small businesses over the balance of this year and into 2012.  The Australian dollar continues to rise against the US dollar resulting, not from the strength of the Australian economy, but obviously from the weakness of the USA economy.  An American economist, visiting Australia last week, forecast the Australian dollar could go as high as $1.70 to the US$1. 

What effect will this have on your business?  If you are an exporter, the returns are going to be very low.  If you are an importer, you should be able to introduce product into Australia at a very cheap rate and, if you are a local manufacturer in Australia, you will need to be prepared for a possible major challenge from imports (unless you are producing very unique products within Australia).  Reports from Federal Treasury indicate lower household spending as many Australians are cautious about extending debt levels, when there is obviously a lot of uncertainty in the world.

The government has forecast that its debt will increase by $24.2B to $106B by 30 June 2012.  The interest rates on these borrowings is staggering and, when combined with forecast inflation rates, could lead to higher interest rates over the next 12 months. 

Another ongoing problem for small businesses is securing skilled labour.  The government has announced a change for the recruitment of skilled persons wishing to migrate to Australia.  If you are trying to employ skilled personnel, then perhaps you should have a closer look at the government's proposals relative to the online matching system which will allow employers to “cherry pick” from the government’s database of skilled persons wanting to migrate to Australia.  If you are interested in employing apprentices, we would suggest that you closely follow the developments on the overhaul of the apprenticeship scheme that the government has announced. 

What could emerge as the biggest problem is in China, where it is reported that the Chinese government is attempting to clamp down on domestic inflation.  These measures could slash the demand for Australian minerals and other products.

Now is the time to sit and reflect on these various matters and consider how your business might be affected.  At this time of the year, many businesses seek advice from their accountants on their planning for a new financial year and we would be happy to have planning discussions with you.

Are References Worthwhile?

Some commentators believe that references are “not worth the paper they are written on”.  When you contact a referee, ask them specific questions such as;

• How long did the applicant work for your organisations?
• In what capacity?
• Does the referee care to comment on the qualifications and experience of the applicant?
• Would they re-employ the applicant in his/her former position? (probably the most important question).
• Was the applicant a team player?
• Did the applicant exercise initiative in his/her job? 

There are significant benefits from the utilisation of a referee’s form that you could prepare and send to the referee to complete.  This will reflect the referee's true thoughts of the applicant.

Astute buyers will look beyond the profit and loss account.

• What does the Key Performance Indicators (KPIs) for the business indicate?
• How does the business compare when it is benchmarked against other businesses?
• What written systems does the business have?
• Can the current business owner be replaced or is he/she making all the critical decisions and carrying around “in their head” vital information for the business.

If you want to sell your business and maximise its value, attention needs to be given to the peripheral aspects of a business:

• Key Performance Indicators.
• Benchmarking.
• Written systems.
• How effective is the current management team in running the business?  
• Do they have regular meetings?
• Do they compare their performance to the KPIs?

Business buyers are very interested in systems, management and the people involved in the business. 

Management and people are normally rated at a higher benefit factor than the product the business is selling.  This is because management and people make businesses work - “products” can’t do that on their own.  So the key questions that a buyer will be looking at are:

• Is there stability in the business?
• Does the management team know what they are doing?
• Is there a loyal work force?
• Are there systems and controls in place?
• Will there be alarms triggered if certain KPIs are not achieved?

Therefore, to minimise the perceived risk in the business, it is a good idea to take some “time out” to review and document the systems that are necessary for the affective management of your business.  If you want to sell your business, you have to make yourself replaceable.  Therefore the key factors are: 

• Prepare a detailed list of what you currently do.
• What, of the current workload, can be delegated to other members of the management team or to external part-time consultants or staff?
• What additional training is required for your team members?
• Have they kept up to date with technology and systems?
• Do other members of the team know the key customers and suppliers to the business?

In summary, written systems and adherence to those systems, will make your business more efficient, with less risk, and therefore more attractive to potential purchasers.  The high number of businesses currently for sale, and the higher number of businesses likely to go up for sale in the next decade or so, means that business owners, wishing to sell, should seriously review all aspects of the business to ensure that the business will pass a due diligence review.

If you would like us to review your business' systems or have discussions relevant to the suitability of your business for sale, please do not hesitate to contact us.

Fringe Benefits Tax Reminder

Fringe Benefit Tax returns need to be lodged by the 28 May 2011.