Accounting & Business
Taxation services
Financial Planning services

 

Quote of the week

"Mathematics is the study of patterns.

At a higher level, accounting is not just about doing a sum, it is understanding a pattern and then identifying options to the client and delivering advice based on the pros and cons."

Clio Cresswell, Mathematician and Author
#clarkemcewan  #numbernerds #brisbaneaccountant #sunshinecoastaccountant

 

Whether hiring bookkeeping resources into your business or partnering with a practice, finding the right talent to work with can provide significant value to your business's finances.

Your working relationship with your bookkeeper is as important as your accountant, and it's critical that they work well together to ensure the company's books are always healthy and up to date.

From providing useful insights into cash flow and perhaps dipping into the occasional data forensics, a good bookkeeper will act as your financial Swiss army knife.

So what questions should you ask a bookkeeper before hiring them?   CPA Tracey Sharah has a comprehensive list of questions that  to ask, and her responses are laid out in detail below.

1. What qualifications do they hold?

The Tax Agent Services Bill 2008 that took effect from 1 March 2010 means that anyone providing BAS services for a fee will need to be a registered BAS agent.

At a minimum, your bookkeeper should have qualifications such as Certificate IV Financial Services. Look for someone who is a member of one of the various professional bookkeeping associations in Australia, such as The Institute of Certified Bookkeepers (ICB) or the Association of Accounting Technicians (AAT).

Finally, ensure the candidate has had vast experience in all accounting software platforms and has used payroll and inventory options.

2. What insurances do they have?

At a minimum, professional indemnity insurance is desirable.

3. Who will undertake data entry and BAS preparation work?

Establish whether the work will be consistently undertaken by the same bookkeeper or by any member of the team and whether the work will be reviewed.

4. What experience and references do they have?

References may not always be reliable, but it is worth taking the effort to do a little research before hiring a bookkeeper.

5. If the work is done in an accounting package, who retains the ownership of the data file?

Many bookkeeping organisations will process the work on their own data file, which will save you the expense of purchasing the software upfront. If in the future you wish to bring the bookkeeping in-house, the transfer of ownership will cost a nominal fee.

6. Would they maintain reliable, off-site data backups?

Make sure that no matter where your bookkeeper works, they keep accurate backups of your files in case of an emergency.

7. Who will be responsible for rectification work?

Mistakes may date back years, and corrections can be costly exercises, involving re-keying data, reworking BAS, and reviewing end-of-year financial statements. Will the bookkeeping work be redone free of charge, or will the charges be reimbursed?

8. What is required to process the work?

Before hiring a bookkeeper, establish what they will need from you on a regular basis. Do they want the receipts sorted? Are you required to write account codes or explanations on the receipts? Unless you're paying extra for mind-reading services, expect this to be the case.

9. How will they communicate with your accountant?

You need to establish how the bookkeeper will communicate with the accountant and how the accountant will charge you. Introduce your bookkeeper to your accountant, and to encourage a professional relationship between them.

10. How much will it cost?

Today, bookkeepers' work is often vastly undervalued. Remember, if you pay peanuts you get monkeys. Once you have found your bookkeeper, don't simply outsource and ignore. You need to look at your management reports on a regular basis and incorporate them into your decision-making processes.

If you're looking for a bookkeeper contact us for a referral.  Clarke McEwan also offers training to your staff and outsourced bookkeeping solutions if you prefer for us to manage the entire process.

 

A guide to simplifying staff expense claims

Reimbursing employees for on-the-job expenses need not be the time and money-guzzling task it can appear to be.

Businesses spend a huge amount of money each year reimbursing workers for on-the-job expenses they have paid. While no single agency tracks exactly what this amount is, looking through the ATO website on fringe benefits tax rules, employee reimbursement requirements and deduction versus expenses outlines, it is abundantly clear that this is no small process for the collective business community.

Among the most common expenses reimbursed by businesses are:

  • Vehicle mileage
  • Travel
  • Entertainment/hospitality
  • Stationary
  • Accommodation

It is not only the expenses themselves that cost a business, but how they are processed can also have a direct impact on profitability.

When staff expenses are being processed, there is likely to be higher costs or lost earnings resulting from:

  • Increased strain on the finance/accounting team
  • Lost productivity from employees while completing expense paperwork
  • Difficulties in fact-check expenses are legitimate and work-related
  • Constraints on cash flow (reimbursing employees promptly can crimp business cash flows, especially when unexpected claims are lodged; while delaying repayments strains employee budgets, leading to workplace tension)
  • Determining and overlooking possible fringe benefits tax (FBT) liabilities

The most common method is for employees to provide their own receipts, and the accounting department then reimburses this as one lump sum into employee bank accounts, either at regular intervals (such as weekly) or alongside the regular salary payments.  Yet despite being the most common means, it is also the most cumbersome.  There are other options available to businesses or virtually any size, including:

  • Corporate credit cards: Providing employees with a company credit card means they are not forced to dip into their own funds for work expenses, and the business receives one itemised statement each month, making verification much simpler than sorting through a pile of individual receipts.
  • Pre-paid allowances: In some cases, it can work out to be simpler and more efficient to pre-pay employees an allowance as part of their salary package (such as a car allowance for workers who regularly drive between sites, or an entertainment allowance for salespeople who regularly entertain clients and prospects). This allowance covers the expected costs and is not a taxable portion of the employee's income, making it much faster and easier to administer than retrospective expense analysis.
  • Company vehicles: Having company-owned vehicles can reduce the burden of travel expenses, since all costs are directly borne by the business. Employers can further streamline the process by using a fuel card to manage all fuel purchases. Alternatively, some businesses will seek to hire cars as needed, particularly when travel isn't frequent enough to justify the business owning its own vehicles.
  • Digital processing platforms: There are digital platforms that allow employees to upload expenses on the go simply by taking a photo of the receipt. The platform then automatically processes expenses, tax and employee refunds, saving both the employee and the accounting team considerable time and effort.

To process in-house or outsource?

Whether your business decides to retain direct ownership of expense management or outsource it either to a digital platform or relevant bookkeeper, a number of factors should be taken into account. The volume of expenses and their value, the number of employees claiming expenses, cash flow position and the size of the overall business can all influence this decision.

The pros and cons of each method should be considered before determining the best approach to managing staff expenses in your business:

  • Efficiency: Arguably the biggest cost of expense claim management can be having employees organising their own claims. Such a task is taking them away from the money-making duties for which they were employed. So what is the most time-effective means of processing expenses for employees, not just for the business itself?
  • Cost: Weigh up the cost of outsourcing expenses management with having someone employed by the business to process these claims.
  • Convenience: The more convenient the process, the less inclined staff will be to put off lodging their expenses, in turn allowing the business to keep better control over its outgoings.
  • Rewards: A number of tools for managing expenses, (such as credit and fuel cards) may also allow the business and even its employees to enjoy additional rewards and benefits simply for going about their everyday job.

 

 

The Australian Taxation Office has hit out at cash-only businesses, citing internal research that proves customers find such firms to be "inconvenient" and potentially dishonest.

Research conducted by Colmar Brunton, commissioned by the ATO, found that almost half of Australian consumers are inconvenienced by businesses that do not accept electronic payments.

Even more (around two-thirds) suggested businesses that do rely solely on cash are likely to be dodging their tax liabilities – regardless of whether or not this is true – suggesting that reputational damage can also arise in addition to lost sales.

"The real cost of cash to business seems to be twofold. Consumers are twice as likely to associate 'cash only' as negative rather than positive. While the majority of businesses are run by honest Australians who want to do the right thing, being cash-only may have a direct impact on reputation," said Matthew Bambrick, the ATO's assistant commissioner.

"Secondly, time is money for business. Tap-and-go payments cost an average of nine cents less than cash payments, and are nearly twice as fast. This research suggests cash-only businesses take a hit to their bottom line by not offering electronic payment."

Mr Bambrick added: "While cash is legal tender and we know that some businesses may be used to dealing only in cash, this research suggests that business owners may want to think about the benefits electronic payments can bring and consider what might work best for them."

Surprisingly, the research found that of the businesses polled that are cash-only, 42 per cent have "never" investigated the use of electronic payments, while 20 per cent cited the cost of electronic payments as their reason for maintaining cash-only payments.

However, the ATO did not include a sample size for the poll, nor did it reveal the full research. A request has been made for both to be provided.

Last month, the tax office released separate research that suggested only one in five shoppers continue to use cash to make purchases.

It comes as the government is attempting to crack down on tax dodgers and the black economy, including a proposal to limit all cash transactions to a maximum of $10,000.

 

The "Ad of the month" that has set a benchmark

Innovation is a great way of creating a point of difference. But what if you are producing a product that that is pretty standard, and perhaps not even your best customers want you to change? Why change the box it comes in!

This pizza restaurant has released this new packaging for Father's Day, which is sure to win them some new fans just from its sheer novelty. I particularly liked the way they revealed the innovation, teasing you to watch to the end.

Unfortunately it doesn't come with a deodoriser to get the pizza smell out of your bed. A new innovation opportunity perhaps? What can you do to innovate something about your product or service that will get people talking and get you noticed? 

 May Your Business this Year be - As You Plan It.

 

Are you holding back your business?

Overcoming the biggest problems in business often comes down to the simple things. Here are a few simple things you can do to capitalise on your opportunities and reduce your risks.

  

"I didn't get time…" No more excuses

Most people simply don't set aside the time to do the forward planning they know they need to do. Here's a simple test: write down your goals for the business. Now ask yourself, are you doing something to achieve those goals every day or every week? If not, it's not a goal. It's just a nice thought.

  

Set a realistic budget 

 

Financially mapping your business reduces your risk and removes some of the surprises that can occur. Your budget needs to be realistic – not just a percentage increase on last year. 

Start with an operating budget and assess each line critically. Map your revenue to see where, how and when the money is coming in to create a reliable estimate of your income for the coming year.   

 

Once you have your revenue expectations in place, look at what is required to generate that income. For example, what advertising, marketing and resources will be required? 


Once you are comfortable with your revenue, work up your expenditure budget. Be tough on costs. Don't forget to allow for growth and the increases that are likely to flow through. 


Once your budget is complete and you have a good idea of your likely profit margins, do a couple of alternative estimates for your key revenue drivers so you understand the impact of changes to your assumptions. Once you have all this in place, track and measure it throughout the year. Where possible, your management team should be a part of this process and take responsibility for achieving the budget numbers they give you. When people don't take the steps that they knew were required to achieve the budget the gaps become obvious fairly quickly. Having a budget in place that you need to report on regularly makes you focus on what really needs to be done.  

Map your cash

Even some very large businesses have failed because they ran out of cash.  Understanding your cashflow needs is vital:  particularly for high growth business.

Understanding your cash position is about understanding the timing differences: How long will it take for your customers to pay you? How much stock will you need to hold? And, what are the payment terms required by your suppliers? With your cash flow, don't forget to allow for things like tax payments, loan repayments, dividends and any capital purchases that are planned. These can be 'big ticket' items and if you don't allow for them then you will get caught out.

As part of your cash flow forecast identify your capital expenditure requirements. Don't deal with these on a one-off basis as they arise, plan them in advance.

Expect the unexpected 

Growing to death is often the result of unplanned growth opportunities. It's ironic that seizing a major sales contract or big new client can be your business's ruin but its more common than you think. 

Many business operators are very good at what they do. Most have an excellent knowledge of the business they conduct and understand their products and services. Most also have an in-depth knowledge of sales performance and revenue. Few however, have a high level of financial management expertise, so when a big new opportunity presents, critical financial questions are not part of the vocabulary. As a result, there can be a sudden and unintended impact on their financial position. A rush of sales might be a great thing but it is not always counterbalanced by a rush of income and profit. Free cash and liquidity are the victims.

Take all the tax advantages you can

For small business in particular there are a range of concessions and funding you can access. Many businesses simply don't realise the opportunities available to them.  A simple example is trading stock valuations. Your trading stock is an asset that is recorded on your balance sheet. In most cases it should be tax neutral to you. The cost of purchasing stock is expensed in your profit and loss account and offset by the value of the stock asset, until you sell it. While the amount of stock you are carrying will impact on your cash position, because you have your funds tied up in it, there is no direct impact on your profits or taxable income until you sell that stock. However, if at 30 June some of your stock is worth less than its cost price, you have the option to value it at the lower figure and take the tax write off, rather than wait until the stock is sold. This reduction in your stock value will produce a tax saving for you.


For tax purposes, there are a number of ways of valuing stock. Once you have done your stocktake (assuming you need to do one), you can choose what method to apply depending on the stock and your circumstances. The different ways of valuing stock can produce different results. Most businesses chose to value trading stock at cost – but you have the option of valuing your stock at cost, market selling price or replacement value. 

 

For example, if you have stock that is about to become obsolete, valuing it at cost price for tax purposes is not going to help you. In this situation you might be better off to value the stock at market selling price, particularly if it is a large quantity. The tax rules also allow you to use a value that is lower than cost, market selling price or replacement value if this is warranted because of obsolescence or other special circumstances as long as the value you elect is reasonable. Take the example of vitamins with a use by date that only has a month or two left on it. Leading up to and once the vitamins reach their use by date they are unsaleable. In this case, you would estimate how much of the stock you are likely to sell prior to the use by date and at what price. Using previous sales as a guide, if you only expect to sell 15% of the stock prior to the use by date, you would use the market value of this 15%. Other than when you sell your stock, your tax return gives you a once a year opportunity to adjust your stock values and realise any losses.


Another way businesses disadvantage themselves is not taking the Government concessions available to them. The R&D tax incentive and Export Market Development Grant are a classic case. In the case of R&D incentives, if you develop new technologies or products, you might be eligible for a 43.5% tax offset (if your business has a turnover under $20 million). The Export Market Development Grant reimburses up to 50% of eligible export promotion expenses above $5,000 provided that the total expenses are at least $15,000.

Measures small businesses can take to prevent debt

As a small business, bad debt can be a financially painful and even disastrous experience, especially if cash flow is tight. When it comes to bad debts, prevention is always better than the cure, particularly when it comes to the impact on customer relations. As a small business owner, there are a number of steps you can take to prevent late and unpaid client invoices from happening in the first place.

Check their credentials:

For larger transactions, conducting a credit check on a potential customer can give you some idea of their ability to pay on time. We can provide varying levels of credit and financial reports for businesses you are considering taking on as a client or customer. It may also be a good idea to speak with industry contacts such as other suppliers or business owners. In some cases, you may be able find out about customers who have a frequent habit of making late or non-payments.

Upfront payments:

For large sales or long-term projects, it may be advisable to ask for partial upfront payments before delivering the product or service, according to Small Business NSW. For example, a business may ask for a 25 per cent upfront payment before beginning a project, with the remainder to be paid on completion.

In the event the client fails to pay in full, your business will still have recouped some of the losses. Alternatively, it may be possible to ask for staggered payments, with customers invoiced for each stage of a work project. This can be especially useful for freelancers and contractors who may need a regular source of income while working on the project.

Agree on payment terms:

Where possible, ensure you have an agreement in writing regarding payment policy. This not only provides clarification to your customers, but can also assist in the event of legal action. Invoices need to be professional and detailed, listing each specific charge and how it relates to the products or services your business provides. It is also extremely important to detail payment terms and payment options on invoices – otherwise, your customers may decide to pay by their own terms!

Offering incentives to pay on time can also be effective, such as discounts for early repayments. Alternatively, attaching late penalty fees or interest can motivate customers to pay on time or reap you financial compensation for late payments, but it may also damage the relationship with your clients.

Communication:

In many cases, customers who fail to pay on time may have simply forgotten the matter. If you don't hear back from a customer shortly after sending an invoice, follow the matter up. Send regular but polite reminders by mail or email. If the customer fails to respond, try calling. However, avoid any form of harassment or even publicly "naming and shaming" late payers – this is not only unprofessional, it can expose you to legal action.

Record keeping:

With so many other duties to tend to, small business owners can often fall behind on collecting payments. Ensure you have an efficient, up-to-date database of customers and outstanding payments. Accounting products such as MYOB usually include invoice records software, or you can use a generic spreadsheet product.

Of course, if all else fails, you can take the next step outsourcing your debt to an experienced debt collection agency. This allows you to receive more cash sooner, focus on core functions and reduce your operating costs.

IP Australia have developed a new tool, Trade Mark Assist, to help guide business owners when applying for a trade mark and protect their brand.

Trade Mark Assist is an educational tool designed to identify some of the trade mark basics, explore a proposed trade mark and identify common mistakes that may lead to a refusal to an application or a delay.

There are many things to consider when applying for a trade mark. Trade Mark Assist can help:

  • Explore a proposed trade mark
  • Discover if the proposed trade mark contains a word or phrase that may be difficult to register
  • Identify the goods and services the business owner wishes to protect
  • Searches for existing trade marks that may be a problem

Trade Mark Assist lets users search their proposed trade mark, identify what classes of goods or services they wish to protect, and identify any issues before they file an application.

A trade mark is a way of identifying a unique product or service. It's not limited to just 'a logo'; it can be a word, phrase, shape or distinctive design. A trade mark gives you the exclusive rights to use, license, and sell the mark.

For more information about applying for trademarks, visit IP Australia's website.

Disclaimer:  Trade Mark Assist is an educational tool for proposed marks comprising solely of word(s). Information provided should not be interpreted as legal advice.  At Clarke McEwan we work with a network of legal consultants to help clients with a range of legal issues.  Contact us for a referral.

Start with the cure. The cure for affluenza. 

Clarke McEwan recently attended a number of sessions with presenter  at the 2018 Byron Bay Writers Festival.   Richard is the author of Econobabble and Curing Affluenza, and co-author of Affluenza.  He is chief economist at the Australia Institute.

Richard's book takes an honest look at the economy we support. It's home truths can help us recognise the symptoms in ourselves of this modern disease.  He maintains that we have been trained to love things not for their material function, but for the symbolic act of acquiring and possessing them. 

Below is an edited extract from Curing Affluenza: How to buy less stuff and save the world

"Affluenza has not just changed the world, it has also changed the way we see the world. Short of money? Borrow some. Caught in the rain? Buy an umbrella. Thirsty? Buy a bottle of water and throw the bottle away.

Our embrace of "convenience" and our acceptance of our inability to plan ahead is an entirely new way of thinking, and over the past seventy years we have built a new and different economic system to accommodate it. There is nothing inevitable about this current way of thinking, consuming and producing. On the contrary, the vast majority of humans who have ever lived (and the majority of humans alive today) would find the idea of using our scarce resources to produce things that are designed to be thrown away absolutely mad.

But the fact that our consumer culture is a recent innovation does not mean it will be easy to change. Indeed, the last few decades have shown how contagious affluenza can be. But we have not always lived this way, which proves that we don't have to persist with it. We can change – if we want to.

I define consumerism as the love of buying things. For some, that means the thrill of hunting for a bargain. For others, it is the quest for the new or the unique. And for others still it is that moment when the shop assistant hands them their new purchase, beautifully wrapped, with a bow, just as though it's a present.

But the love of buying things can, by definition, provide only a transient sense of satisfaction. The feeling can be lengthened by the "thrill of the chase", and may include an afterglow that includes walking down the street with a new purchase in a branded carry bag. It might even extend to the moment when you get to show your purchase to your friends and family.

But the benefits of consumerism are inevitably short-lived as they are linked to the process of the purchase, not the use of the product. So while consumerism is the love of buying things, materialism is the love of the things themselves – and that's an important distinction. " 

Salespeople and psychologists are well aware of this phenomenon. The term buyer's remorse refers to the come-down that follows the thrill of buying something new. For many, the cold hard light of day takes the gloss off their new gadget, their new shoes or their new car. For some, this can be so overwhelming that they return the item. For a minority, the thrill of buying new things is so great, and the disappointment of owning new things so strong, that they make a habit of buying things they know they will return.

For those interested in the impact of consumption on the natural environment, it is crucial to make a clear distinction between the love of buying things and the love of owning things. While consumerism and materialism are often used interchangeably, taken literally they are polar opposites. If you really loved your car, the thought of replacing it with a new one would be painful. Similarly, if you really loved your kitchen, your shoes, your belt or your couch, then your materialism would prevent you rushing out and buying a new one.

But we have been trained to love the thrill of buying new stuff. We love things not for their material function, but for the symbolic act of acquiring and possessing them – the thrill of anticipating a new thing, of being handed it by a smiling shop assistant, of pulling up at the golf club in an expensive new car. For many, if not most, consumers, it is the symbolism of a new handbag or new car, its expensive logo proudly displayed, that delivers happiness, rather than twenty years of using a material object.
It makes no sense to conflate materialism and consumerism. Indeed, our willingness to dispose of perfectly functional material goods and gadgets is the very antithesis of a love of things. The process of buying new things and displaying new symbols might provide status or other psychological benefits, but the pursuit of such symbolic objectives is largely unrelated to the material characteristics of the products being purchased and disposed of.

Symbols matter, and psychological benefits matter. The fact that people are willing to spend their own time and money to show they fit in or to make sure they stand out should be of little or no concern to others.
But for those who are concerned with the impact of 7.5 billion humans' consumption decisions on the natural environment, the choice of such symbols matters enormously. Whether people choose to signal their wealth by spending money on huge cars or antique paintings is arbitrary, but that does not mean the environmental consequences aren't highly significant.

Put simply, if we want to reduce the impact on the natural environment of all of the stuff we buy, then we have to hang on to our stuff for a lot longer. We have to maintain it, repair it when it breaks, and find a new home for it when we don't need it any longer. If we want to cure affluenza, we have to get more satisfaction from the things we already own, more satisfaction from services, more satisfaction from leisure time, and less satisfaction from the process of buying new things.

If people loved their things, cared for them, maintained and repaired them and then handed them on to others who did likewise, the global economy would be transformed, as would the impact of human activity on the natural environment.
But if people continue to embrace the benefits of "convenience" and pursue the symbolic appeal of novelty then, as billions more people emulate the consumption patterns of today's middle-class culture, the impact on the natural environment will be devastating. "  

We hope you enjoyed this extract from Curing Affluenza: How to buy less stuff and save the worldIf you would like assistance with setting up a budget or a financial plan, contact us now.    

Understanding the equity sweet spot

Keep that new car smell

So, you've taken the wheel of your new car. You love how it hugs the road, all the new tech and, of course, that new car smell. If only you could make this feeling last. Well, you can.

The equity sweet spot

As every car owner knows, new cars instantly lose value when they're driven out of the dealership. A car's value then continues to decline over time, but usually at a slower, more stable rate.

If you have a car loan, each repayment you make builds equity in your car. As most car loans have a five year term, by the time you're three or four years post-purchase, you'll reach a 'sweet spot' where the resale value of your car may be greater than the balance left on your loan. In financial terms, this is called being in 'equity'. If you chose to sell at this point, you may be able to pay out the rest of your loan and if there's any equity left over, you could put it towards the deposit on a new car.

But, won't my repayments increase?

That's up to you. Do you want to upgrade, or update?

If you choose to update your car with an equivalent model, your repayments could remain similar. If you upgrade to a more expensive model, however, your repayments will likely increase.

Each repayment you make builds equity in your car.

That said, you should always consider your personal financial situation and the total cost of car ownership when deciding to keep, update or upgrade your car. Slightly higher loan repayments for an updated or upgraded model may be offset by lower maintenance costs, free servicing and better fuel efficiency, for example.

Remember that older cars usually cost more to maintain than new ones. And, as new car warranties expire anytime from three to seven years after purchase, you may be left to cover the full maintenance costs of your aging car.

Do your homework

Of course, it's important to know your budget and financing options before buying a new car. With a little homework, you can enjoy that new car smell every few years – at little or no extra cost.


Contact Clarke McEwan