This month's newsletter includes the following topics:
- Key Factors for a Successful Business
- Hazard or Risk? Do You Know the Difference?
- Small Business Taxation Disputes
- Do Your Customers Recommend Your Business?
If you would like more information on any of the below, please contact the office.
Key Factors For A Successful Business
A client asked us recently "what are the key factors for a successful business"? We think the following are some of the important factors to take into consideration:
- Think about "scaling up" your business from the very beginning of the business, no matter how small the business. This means implementing systems, regular meetings, adopting business strategies, thinking about the future, thinking about your exit strategy.
- Appoint a mentor – someone who understands business who you can talk to.
- Appoint a board of advice and then, as you grow, a board of directors.
- Determine a meeting schedule relating to your team, advisers and board of directors or board of advice members.
- Your team – you will need a schedule relating to daily, weekly, monthly meetings.
- Establish a system that will determine a weekly profit/loss estimate for your business.
- Undertake a risk management review and establish risk management procedures relating to:
- insurance policies
- Personal Property Securities Register Registrations
- protection of intellectual property owned by the business
- Know your customers – their demographics, preferences.
- Allocate key responsibilities to your team members or external advisers so that you have an "executive team" you can discuss issues with daily/weekly including:
- chief financial officer/company secretary
- Establish a debtors' system that facilitates the prompt preparation of tax invoices, debtors' statements and registrations on the Personal Property Securities Register (if necessary).
- Establish a system for the recording of the business' investment in inventory and the determination of inventory management information.
- Establish a system for the recording of work in progress, in particular the identification of any jobs that are not being invoiced regularly.
- Establish a monthly reporting process to include:
- detailed financial accounts prepared on an individual operation basis
- operational reports prepared by the manager or person in charge of each operational unit
- comparisons to budget
- strategies for the next month
- A schedule of management team meetings to be held on, at least, a monthly basis.
- A schedule of board of directors or board of advice meetings to be held monthly or on some other basis that ensures that there are at least 6 meetings per annum.
Hazard or Risk? Do You Know The Difference?
To understand how to manage risk we must first understand the difference between a "hazard" and a "risk". So, what is the difference between a "hazard" and a "risk"?
A "hazard" can be identified as anything that has the potential to cause harm.
A "risk" is the potential that a hazard will cause harm.
When it comes to health a "hazard" is the possibility of something causing harm whilst "risk" is the likelihood or probability of something causing harm.
Take for example a ladder; the ladder is a "hazard" and someone climbing the ladder and falling off is a "risk". With a ladder there is always the possibility of someone misusing the ladder, but, until they misuse the ladder, the ladder remains a hazard. Therefore, when someone misuses the ladder, the hazard converts to a risk of falling or injury. Another example is a venomous snake. The snake is a hazard, getting bitten by the snake is a risk.
Now that we have an understanding of the difference between a hazard and a risk, how then do we determine the specific risk that a hazard poses?
First, we assess how likely it is that someone will be exposed to a hazard. The likelihood will then depend upon the probability and frequency of exposure to the hazard. We also assess the most likely outcome. The outcome is the severity or range of the potential consequences resulting from the hazard.
Remember our aforementioned venomous snake? The hazard, in this case, is our venomous snake. In this instance, however, the snake is contained in a secure glass snake enclosure. Rating the hazard, our snake, against the severity and probability scale, we would most likely say that the risk to a person in the room is minor and remote. Change the circumstances and take the snake out of its enclosure and we change the rating to probable and severe.
This is how we must assess hazards and risk within our workplace. The same hazard in two workplaces can have vastly different outcomes based on how we manage and control the risk associated with that hazard.
There are tools in place to manage risk and control hazards such as the hierarchy of controls. Another tool that employers must implement are risk assessments, these are vital in mitigating risk and protecting your workforce.
Creation Of A Special Division For Small Business Taxation Disputes Welcome News
It is pleasing to see that the Australian government has made changes to the approach to small business taxation disputes with the Australian Taxation Office.
The way the Australian taxation system works regarding disputes with the Australian Taxation Office (ATO) has been on a pay now fight later basis and even if there is current legal litigation occurring with the ATO, the Taxation Office's position was that the debts still have to be paid even though the dispute is ongoing.
This situation, of having to pay the ATO and then having to fund a legal battle against the ATO is never pleasant and the payment to the ATO and funding of the legal and accounting expenses can prevent a taxpayer from being able to adequately mount a defence and continue trading in business.
A recent initiative of the Australian government was the creation of a special division within the Administrative Appeals Tribunal (AAT) that deals specifically with small business taxation matters known as the "Small Business Taxation Division". The major benefit to small business operators of this initiative is that only taxation matters will be dealt with in the special division of the AAT.
It is also welcome news that the Australian Small Business and Family Enterprise Ombudsman's office will provide the unrepresented small business taxpayer with some free and discounted legal advice and a dedicated case manager throughout the process with the Administrative Appeals Tribunal.
A dispute resolution instruction bulletin has been issued by the ATO which summarises the ATO policy and principles on conducting litigation in the Small Business Taxation Division of the AAT. The key commentary in this bulletin is that the ATO "will not enforce recovery of the tax debt in dispute before the Small Business Taxation Division – other than in exceptional circumstances".
Many small businesses, subject to an adverse finding from the ATO, do not have the funds to pay the alleged debt and pay for accounting and legal advice to fight the finding by the ATO which is why this change, implemented by the Australian government, will make a difference to small business operators who have a disagreement with the ATO, as long as the taxpayer has an aggregated turnover of less than $10 million per annum.
At a recent convention of the Taxation Institute of Australia, the Commissioner for Taxation in a speech mentioned that "small business taxpayers had the highest percentage "tax gap" across all the ATO taxpayers' segments.
The tax gap is the ATO's attempt to calculate the difference between the "theoretical level of tax paid" and the "actual level of tax paid".
In his speech the Commissioner of Taxation identified that the ATO is of the belief that small business taxpayers are paying less income tax than they should.
The consequences of this statement will probably mean that the level of tax audits for small business taxpayers is likely to increase and the number of disputes with the ATO in the future is likely to increase.
Small business taxpayers, caught up in these types of disputes, will have reason to be appreciative that the government has created the special division within the AAT to decide on small business taxation disputes.
Do Your Customers Recommend Your Business?
- Do your customers say "Wow"?
- Do they recommend your business to their friends and associates?
- Do you acknowledge long-term clients for their continuous support of your business?
- Do you send letters/emails to new customers thanking them for their patronage?
- Do you encourage customers to give you referrals to their friends and associates?
- Do you ask clients for testimonials which you can post onto your website?
- Do you give guarantees? Do your team members understand how to process guarantees?
- Have you discussed with your team members the "lifetime value of a customer"?
- Are your team members familiar with the strategies that you have implemented relative to the processes of scaling up a "customer" to a "client" and then to an "advocate"?
- Do you utilise a customer relationship management system (CRM)?
- Do you understand the demographics of your customers?
- Do you have procedures in place for handling customer's complaints?
- Do you offer events or ongoing training/familiarisation to your clients?
- Have you developed information videos and webinars that are available from a secure section of your website for your customers to access?
- Do you prepare a regular newsletter/video alerting your customers to recent developments within your business and your industry?