You need them to tell your friends and family how good your product or service is so you can sell more of these in order to grow.

Most importantly, you need your customers to pay you or your business fails!

The questions you need to consider are:

Am I invoicing our customers promptly or is there a serious lag between the time you sell the product or service and the invoice being prepared?

• Do you post your invoices or email them directly to your customers?
• Is it easy for customers to pay me?
• Are my payment terms clear and concise?
• Are these invoices followed up should payment not be received by the due date?
• How are you monitoring your debtors?

Good paying customers are vital to your cash flow. Whether you are start up, looking to grow or are a mature business, slow payers can have a significant impact on the performance of your business and can hinder the opportunity for your business to grow.

We work with clients for solutions to debtor management and understand the importance of having good payers for the success of your business. Through cloud accounting programs such as Xero and Intuit Quickbooks Online, you are able to monitor debtors at ease.

If debtor management has been a problem in your business, contact us today to discuss ways to create efficiencies in this process as well as to discuss what products may be suitable for your business in order to improve your cash flow.

The post Is it taking too long for your business to get paid? appeared first on HBT Advisory.

Sometimes it can just be a little bit of budgeting and reviewing your profit margins to see what products or services are generating you what levels of profit.

Understanding your gross profit (GP) margin

For every $1 of sales, what is your GP? It is important to understand what your GP margin is in order to ensure that you can cover the overheads to operate your business and also to have a desired level of profit.

What product or services generate you good margins?

Understand and analyse your profit margins to see what product/services categories, segments are more profitable.

This allows you to understand your high margin or low margin products and also whether there is room for adjustment on price. If there are segments that you are making losses on, it is time to cut them!

Review your prices

Are your prices in line with the competitors? What justifies you charging your prices?

If there is a price increase, you may lose the odd customer here and there, but as a business owner, your costs are going up and therefore you need to consider whether your prices are in line with the current market.

But in saying that, it’s not always about price!

It’s about what value you are offering your customer. Are you giving an excellent level of customer service and do your key sales people in your business truly understand your products and services? Do your customers feel comfortable working with you and your team?

This adds value to the transaction and justifies your price and can lead to repeat business.

Customers love a discount, but how does that affect your business?

Have a good understanding as to why you are offering a discount. Are you doing it to get paid sooner or just to make that sale? Discounting can ruin a profit margin on a product or service and see you making very little profit.

As mentioned earlier, understand with your products or services where there is room for movement so you are not depleting your margins.

Your customers love a discount and so does your business!

If there are discounts on offer from your suppliers, you may find it attractive to take up these offers as this improves profitability, however you need to look your cash flow to see whether it is viable to do so.

You may find borrowing the money to pay that big supplier is still going to improve your profit margin than waiting the full term and paying the full price.

Could you be operating your business more efficiently?

Are you running your business the most efficient way possible? Can technology help smooth out those process and allow you more time working on your business?

Using technology to reduce time spent on processes can free up more time to allow you to work on your business and have your key people trying to generate more sales.

Understand your business performance regularly during the course of the year.

How often are you checking your profit and loss statement to see the profit you are making?

Using a cloud-based accounting package can allow you to monitor your performance in real-time and allow you to track your results more regularly. Your business may be making more profit, however you could find cashflow tight.

We work with clients regularly during the course of a Financial Year to help them understand the performance of their business through regular meetings. This is our way of offering a tailored business package for a fixed fee not just focused on the tax compliance, but also the performance of your business.

Feel free to contact us today for a no obligation meeting to discuss your business.

The post Enhancing Business Profits: Effective Measures for Success appeared first on HBT Advisory.

Being in business with someone, whether work colleagues or friends getting together is a like a business marriage and therefore you need something in place that can be used to help solve disputes.

The best time to prepare a Shareholders/Partnership agreement is while you are “in love”. This is usually when you are about to start a business or taken the reins from someone else in the business and you are “in love” with being a business owner.

What is a Shareholders Agreement?

A Shareholders / Partnership Agreement covers the funding, structure, management and direction of the business. It outlines the responsibilities and obligations of the business owners and provide guidance should there be disputes between business owners.

Why do we need one and when should we get one?

It is designed to deal with the issues that may arise during the life of a business, by determining in advance, how such issues should be dealt with (hence my comment above about doing it “whilst you are in love”).

The process of developing a Shareholders Agreement and the content included will differ between each entity after discussion and input involving all the relevant partners/shareholders and their relevant advisors. There is no ‘one size fits all’ approach.

What other measures are in place should there be a dispute?

It is a good opportunity for you and your business partner/s to have a think about what you personally want from your business and then collate and collaborate those thoughts with your other business partners.

It is ideal to discuss the items below openly and freely to keep communication lines open. You will get an understanding of each other and the direction that you personally see the business going very quickly!

Common features of a Shareholders/Partnership Agreement include:

• How do we add or remove partners/directors/shareholders?
• What key business decisions that require a unanimous decision?
• Frequency and timing of Directors Meetings (should be regular with an agenda and notes taken)?
• Expectations, roles and responsibilities of a partner/director (or principle of a shareholder) within the business.
• Dividend/Drawing policy & loan accounts within an entity.
• Consequences in the event of death or permanent/temporary disability of partners/directors/principal in the event of death. (There are insurances available to protect this, however we would need to refer you to a business insurance specialist).
• Determining goodwill calculations on entry and exit Agreements need to cover in what circumstances a goodwill payment is made and how any such payment is to be calculated.
• Restraint requirements and notice period on retirement. Care needs to be taken to ensure that any restraint requirements set out under an agreement are enforceable, and do not invalidate the whole agreement.
• Requirement for capital on the happening of a defined event. There may be a need for capital injections into the entity in periods of declining business growth or insufficient economic activity.

A pre-agreed resolution process is extremely important and can save the parties to a Shareholders’ Agreement a lot of time, money and inconvenience in the unwanted event of a major dispute.

On too many occasions, business owners don’t consider a Shareholders Agreement, usually taking the “she’ll be right” approach or the “we have been mates for years” or “I’m sure we can work it out if there is a problem”.

HBT Advisory works with clients to discuss planning opportunities for the business, but also works with the key individuals that are involved within that business. A Shareholders Agreement is a legal agreement and therefore is required to be prepared by a solicitor, however having these conversations with your Accountant can be important to the content of the Shareholders Agreement.

Feel free to contact Andrew to arrange a meeting (either at the office or at your business premises) to discuss the strategic direction of your business.

The post Do you and your business partners have a Shareholders Agreement? appeared first on HBT Advisory.

Are you working from home?

Seems like more of us are taking work home and are using items such as Mobile phones, Computers, Laptops and other assets. Any items that are used for work related purposes under $300 you can claim an immediate deduction, anything $300 or more you can claim depreciation on over the effective life of the asset (don’t worry too much about the effective life as we have guides you can use to determine that).

If you are working from home and are using your study, you may be able to claim home office expenses. Please ensure you keep record of the hours you spend in the home office over a four week period as well as any other costs you incur (eg. telephone and internet expenses).

Do you have any Professional Memberships or Subscriptions?

Items such as Memberships (professional memberships not to your favourite AFL team), Union Fees, Annual Registrations are all tax deductible as long as they are paid for before 30 June 2018.

Have you borrowed money to invest in a rental property or a share portfolio?

You can pay the interest in this financial year for the year in advance and claim a tax deduction in this financial year.

Do you have Income Protection premiums due?

Premiums for income protection can be prepaid in advance for the next 12 months to receive the tax deduction in the current financial year.

Have you made (or are looking to make) a donation to a charity?

If you are feeling generous leading into the end of a financial year and are making a donation to a charity or non-profit organisation, you can claim a tax deduction as long as the charity has received your donation before 30 June.

Are you making additional contributions into super?

For the 2018 Financial Year, the pre-tax concessional contributions cap is $25,000.

If you’re a salary/wage earner the concessional contributions cap includes the following:

• Employer’s Superannuation Guarantee (SG) contributions (currently SG is at 9.5%)
• Any voluntary employer contributions including salary sacrifice amount
• Any personal deductible contributions you make.

If you’re claiming a tax deduction for a personal contribution this financial year, you will need to ensure that it is received by your super fund before 30 June 2018 (which is a Saturday this financial year).

Don’t break the bank to claim a tax deduction

Please also be mindful you don’t want to be breaking the bank just to pay for something prior to 30 June so you can claim a tax deduction.

The start of June is a great time of year to start planning and putting all these things together and will hopefully get you into a good habit to do this planning for years to come!

Disclaimer:

The following information is provided as an information service only and, therefore, does not constitute, and should not be relied upon as, financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs, and you will need to make your own decision about how to proceed. Alternatively, for financial product advice that takes account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services licensee before making a financial decision, which we are able to provide you a referral should you wish to do so.

The post What you can do between now and 30 June to make tax time a breeze appeared first on HBT Advisory.

This is Part One of our two-part series and we will focus on Individuals in Part Two.

Here are a few things to consider leading into 30 June:

Pay it Forward!

If you incur the expense before 30 June 2018, then it can fall into the 2018 Financial Year. Some examples of this can include:

• $20,000 instant asset write off (if you meet the small business entity conditions)
• Office Supplies and Stationery
• Employee Superannuation payments

$20,000 Instant Asset Write Off (set to end on 30 June 2018)

Small business entities with a $10m turnover threshold for the 2018 Financial Year have access to the $20,000 instant asset write-off for new or second hand depreciating assets, if they have been bought and installed ready for use before 30 June 2018. This is a good opportunity for businesses to purchase those assets required to run their businesses and be able to depreciate them fully in the 2018 Financial Year.

Any assets over the $20,000 threshold can be pooled in a general small business pool and depreciated at 15% in the first year, and 30% in the years after that.

With a Federal Budget set to be released on the night of Tuesday, 8 May we will have any further developments about any changes to this posted on our website and Facebook page.

Pay employee super contributions before 30 June

To claim a tax deduction for superannuation for the 2018 Financial Year, the superannuation contribution needs to be received by the employee’s super fund before 30 June. It can take a few days from the time you pay the superannuation contribution to being received by the employee’s super fund so be mindful of this when making the payment.

If you are using the ATO’s small business clearing house, the superannuation contributions are considering to be received when the clearing house accepts them (so you don’t have to worry about when the employee’s super fund receives them!)

Review your debtors

Do you have any debtors that just have not paid? Have you shaken them (not literally, but figuratively) as much as you can to get the money they owe you? If you aren’t getting any traction with the debtor, then these debtors need to be written off. To be able to claim a deduction for a bad debt, each bad debt must be written off before 30 June and have been previously included in the last financial year as income.

Tip: Keep documentation and correspondence of your attempts to chase this debt.

Review your business structure

Whether you are operating your business as a sole trader, partnership, company or a trust, it is a good opportunity to review your business structure as you may find that it may no longer be suitable for your business. This may depend upon when you are growing/expanding or scaling down your business.

For small business entities (that is entities with less than $10 million turnover), you can change your business structure without being subject to capital gains tax on the transfer of assets. This allows businesses to consider what the most suitable business structure would be to continue operating their business without any serious tax consequences.

Between now and 30 June, you can establish that new business structure ready to commence trading for 1 July 2018.

These are a few of the examples that could be available to your business, however it is not always a “one size fits all” approach and we ask that you seek specific advice tailored to your circumstances.

Should you wish to discuss your business and are looking at taking some steps leading into 30 June to help minimize your tax, please contact our office for a free no obligation meeting to discuss your business.

The post What does your small business need to do before 30 June to save tax? appeared first on HBT Advisory.

Do you know how small business CGT concessions can apply to the sale of your business?

The small business CGT concessions are concessions in the legislation for small businesses which have an aggregated turnover of under $2 million or the market value of your net assets are under $6 million. Should you meet either of these conditions you could potentially sell your business without paying Capital Gains Tax.

How I hear you ask? We will discuss these in details later in this article, however here is an example of Joe, who has a manufacturing business.

Meet Joe: He is ready to retire and going to sell his business.

Joe purchased a manufacturing business for $100,000 in 2005. The business had a sales turnover of $900,000 in 2017 and likely to get to $1 million for the 2018 Financial Year.

Joe operates his business through a family trust and has been distributing the income entirely to himself over the last five years.

At age 57, Joe has bought himself a caravan. He is ready to retire so he can travel around Australia so has made the decision to sell his business.

He is going to sell his business to one of his staff who has been with him from the beginning of the business, Tony who is committed to the purchase and will take over the business on 1 July 2018. Joe sells the business to Tony for $650,000.

Joe’s cost base is $100,000 and therefore the capital gain on the sale of the business is $550,000 ($650,000-$100,000).

What are the Small Business CGT Concessions?

There are the following small business CGT concessions that are available to small business owners who meet the basic conditions of the turnover test and the net asset tests.

The 15-year exemption

This is available when the business has been owned for 15 years by the same owner. Under this exemption, the taxpayer’s capital gain is entirely disregarded and no other concessions can be (or in fact need be) applied. This concession is applied before any capital losses are applied against the gain.

Capital losses

The taxpayer’s capital gain is then reduced by:

• any capital losses from the current income year; or
• any previously unapplied net capital losses from prior income years.

CGT discount

If the asset has been owned for over 12 months, the capital gain is reduced by the 50% discount.

50 per cent reduction

A capital gain or discount capital gain can be reduced by the Active Asset reduction which is also at 50%.

The active asset reduction is optional. A taxpayer can choose not to apply the concession in order to maximise use of the retirement exemption (mentioned later in this article).

Retirement exemption

The retirement exemption and/or the small business roll-over may be applied as alternatives, or in combination, to reduce a capital gain. The retirement exemption is based upon the following:

If 55 years of age or over, you can utilise the $500,000 retirement exemption. This is the lifetime cap or;

If under the age of 55, you can still utilise the $500,000 retirement exemption, however you will need to contribute the remainder into superannuation in order to maximise the tax free exemption Note 1.

How can we apply these concessions to Joe?

Joe’s $550,000 capital gain is subject to three separate capital gains tax concessions, being the 50% discount that applies to all assets, the active asset exemption and the retirement exemption.

Their combined effect is cumulative, and in summary, this means no Capital Gains Tax is payable on Joe’s capital gain.

This is a very basic example of how small business CGT concessions can apply to the sale of a business. We ask that you seek advice based upon your specific circumstances in order to determine your eligibility for these concessions.

This can be a complex area and it is important to get the right advice. Should you be in a situation where you are considering or are ready to sell your business (whether that is to retire or not), contact HBT Advisory to discuss your business and what small business CGT concessions could be available to you.

Note 1: We note that you should obtain financial advice on making a contribution into superannuation and we can assist you regarding this process.

The post Understanding CGT Concessions When Selling Your Business appeared first on HBT Advisory.

The Australian Taxation Office (“ATO”) are cracking down on unpaid superannuation by employers and have the data to track outstanding super far better than they have before.

Under the current laws, there are some strict laws which could see a Director become personally liable to pay the unpaid super obligations that the company would have been liable to pay.

When is an employer required to pay superannuation?

Minimum superannuation entitlements must be paid for all eligible employees by the 28th day of the month following each quarter of the financial year.

Once superannuation becomes overdue, the company is required to pay the unpaid superannuation entitlements to the ATO, together with penalty interest and an administration fee per employee per quarter. This can add up to quite a substantial penalty based upon the number of employees you have!

From a tax perspective, the employer can only claim a tax deduction for super payments that are made for eligible employees in the financial year you make payment.

When is a director liable?

A director’s obligation to pay the unpaid super is the day after the payment due date.

This can have quite an impact not only on the current director/s of the business but also an incoming director to a company. This means that it is vitally important that prior to becoming a Director of a company that you know that the superannuation reporting requirements and payments of super have been made on time to reduce your personal exposure to any unpaid super obligations.

However, the ATO must issue a Director Penalty Notice (“DPN”) before it is able to commence recovery proceedings against a Director. Depending on the circumstances of the unpaid super, it may be either a ‘lockdown’ or ‘non-lockdown’ DPN.

What is the difference between a Non-lockdown and a Lockdown DPN?

The non-lockdown DPN is issued in circumstances where superannuation is unpaid and requires that within 21 days the director either pays the outstanding superannuation or comes to a payment arrangement with the ATO. If neither of these can be achieved within the 21 days, the employer may have to look at appointing a voluntary administrator or liquidator.

The lockdown DPN has much further ramifications as the only way to deal with the matter is payment of the debt in full. If payment and reporting obligations have not been complied with and have remained unpaid and unreported for three months after the due date, directors may expect to receive a lockdown DPN and the option of appointing a voluntary administrator or liquidator is no longer available, making the director/s personally liable.

How can I avoid this happening to my business?

You are best to avoid all of these headaches where you can and ensure that super payments are made on time so that interest and penalties are avoided.

The law does not favour the disorganised or uninformed director. A DPN may be avoided if super is paid on time or the unpaid entitlements are reported by lodging an SGC statement by the reporting due date.

It is important to be ensuring that:

• There is an allowance made in cashflow budgets to ensure the super obligations are met before the due date.
• You use tools such as Small Business Clearing House and other clearing houses through software (cloud or desktop) to keep track of what super is to be paid.
• You lodge the necessary reports through the clearing houses to ensure the super amounts for each employee are reported.

There are many ways to keep on top of this in your business and we recommend a clearing house for making payments for your employees super. A cloud-based accounting package can help facilitate this process so feel free to contact the office to discuss this further.

The post Director’s Personal Liability For Unpaid Employee Super appeared first on HBT Advisory.

We do hope all our teachers are enjoying their term 3 school holidays.

The Royal Melbourne Show, Grand Final week and a number of other things going on make it an enjoyable time to be out and about.

Now, the last thing on your minds would be talking tax, but are you aware of the HECS-HELP benefit that you may be eligible for?

Although the HECS-HELP benefit was removed on 1 July 2017, you are still eligible to go back and claim the last two financial years (2016 and 2017 Financial Years). These HECS-HELP benefits could see you claim a reduction on your HECS-HELP debt of up to $3,623!

The good news is that it is not just available for Education courses, it is also available for courses in Mathematics, Statistics or Science, Nursing, Midwifery and Early childhood education. So teachers, tell your nursing friends as well!

What’s the catch?

Well, there isn’t a catch, but there is a criteria you need to meet regarding your course as well as your current employment as a teacher.

For further information, feel free to visit the Study Assist http://studyassist.gov.au/sites/studyassist/payingbackmyloan/hecs-help-benefit/pages/nursing-and-education

or alternatively contact our office to discuss further.

Enjoy the rest of your school holidays teachers!

The post Could you be eligible to receive a HECS-HELP rebate? appeared first on HBT Advisory.