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Hudson & Young Blog

Your invoices and PPSR

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“Conditions: Ownership of the goods delivered shall remain with [your company] until paid in full.”

Does your invoice have something like this printed on it? Maybe it is in your terms and conditions?

Under the changes brought in with the PPSR (Personal Property Securities Register), these clauses are now meaningless without a PPSR registration to back them up.

Census data gives boost to business owners

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The Australian Bureau of Statistics has a wealth of demographic information freely available to small business. Anthony Keane reports:

THE customer is always right, but how do you know if you are targeting the right customer?

A growing number of small businesses are using demographic research to boost their profits and last month's release of the latest Census data makes now as good a time as any to join them.

You can spend as little or as much as you like - in both time and money - crunching the data, and even just a five-minute search of the Australian Bureau of Statistics database to discover the demographics of your customer base can be beneficial.

The 2011 Census paints the clearest picture yet of our population. It maps 54,000 different statistical areas, up from 38,000 previously, which allows businesses to narrow their target areas.

Jenny Wilson, a Deloitte Consulting partner and the firm's leader of customer analytics, says the main types of research useful to small businesses include age, gender, education, where they live, life stages and incomes.

But better insights, she says, can come from drilling down further to examine things such as cultural background, net worth, renting and home ownership, and spending on health and recreation.

"By mapping the data to the customers they already serve, it can provide a very good view of where the business is having the most success in winning and retaining customers, and the actual profile of these customers," Wilson says.

"The insight about these customers helps the business shift from a mass market view to a personal customer view."

And this great insight from Pitney Bowes Software director of product management Sean Richards:

…demographic data can appear daunting for business owners who are working in their business rather than on their business…

…Richards says a lot of small businesses are run by entrepreneurs on a "gut feel".

"That was their formula for success in the early days, but it is rare for someone to do that for so long and get continual growth," he says.

Richards says demographic data has traditionally been the domain of big business, but more small businesses are now seeking help.

Five tips put forward by Keane to “Make the data work:”

  1. Know who your customer is - many small business owners don't take the time to think about this.
  2. Don't buy data without knowing the particular decisions you want it to help you make.
  3. Be prepared to invest in knowledge.
  4. Treat demographic data as an asset - analysing it properly will deliver value to your business.
  5. Use the data to make offers to your customers more personal.

New (financial) Year Resolutions

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NEW year resolutions should not be reserved for January 1. For small businesses, July 1 is a critical time, as the new financial year begins. It is an ideal time to take stock, set goals and make plans writes Alexandra Economou & Anthony Keane.

Their checklist is packed full of business ideas and plans that Hudson & Young consultants can help you with. Just ask us.

Review debt and spending

HLB Mann Judd Perth tax and business services manager Kirstin Andrich says reviewing expenditure is also critical.

"Insurance for both business and personal needs should be reviewed every year at least," she says.

"A good place to start with other expenditure is to check where money went (in 2011-12). By cutting out waste and looking at whether all regular expenditure is necessary, good savings can be made."

Andrich recommends reviewing current debt as well as the different types of finance available and interest rates being charged.

"High interest-bearing liabilities should always be paid off first, as should non-tax deductible debt," she says.

"Slightly increasing repayments as well as the payment frequency can reduce the life of a loan and total interest paid."

Reed says engaging with customers is also important and business owners will be surprised at how much a little extra effort can mean to clients.

"Engaging with key customers might mean a loyalty program," he says.

"It might even mean a phone call to give them a little extra attention."

Go online

Businesses without an online presence need to act urgently.

"We know three-quarters of Australian consumers will look for a local business first by searching the internet, but only 40 per cent of Australian businesses have a website," Reed says. "Creating a website used to be expensive and complex but that's no longer the case."

Take time on tax

Kelly & Co taxation partner Marc Romaldi says tax planning is a priority.

"Taxation is not something SMEs should turn their mind to in May or June - by then it's often too late," Romaldi says.

"Effective tax planning for 2012-13 starts now. There may be some residual taxation issues left over from the last financial year that business will need to turn their attention to as soon as possible."

He says some SMEs may have brought forward costs or deferred assessable income in the lead-up to June 30 to minimise tax payable.

"This will now have to be taken into account in the new financial year," Romaldi says.

"Businesses operating through a company may need to consider the taxation treatment of any staggered dividend payments - which are often paid out partly before and partly after June 30 - and what impact that has on the new financial year.

"Businesses planning any corporate activity in the new year would be wise to keep the taxation implications top of mind."

Succession planning

National Australia Bank's nabbusiness executive general manager Daryl Johnson says SMEs should think about succession planning.

"If your business has a succession plan, review it in light of any recent or pending changes to your circumstances," he says. "If you do not have a plan, it's probably worth putting one in place."

Check cashflow

Johnson also recommends looking at cashflow.

"Many businesses focus all of their efforts on generating revenue through sales without a true understanding of how this impacts on their business cashflows," he says.

"Every business should consider having a three-way budget in place that integrates their profit-and-loss, balance sheet and cashflow forecast.

"A three-way budget will help you to better understand the relationship between all of the cash drivers of your business. Reporting in this format will assist with your understanding of how items such as debtors, creditors and stock holdings are being managed."

Last minute business tax tips

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MYOB chief executive Tim Reed has put forward a few tips to saving business tax:

"Look at any write-offs or expenses that might be able to be brought forward into the current year to create a tax deduction."

This includes stock that is unlikely to sell and customers who are unlikely to pay their debts, Reed says.

"Just because you choose to write it off, it doesn't mean you should not try and get value from it in the future," he says.

"For a late-paying customer, you can write it off in this period but still try to collect the money from them. If they do pay, you need to record the revenue again, but it means the profit is in the next financial year. If in doubt, have a chat to your accountant."

Reed says businesses can buy small assets now to book an immediate tax write-off for 2011-12, but anything costing more than $1500 should be deferred a week.

This is because the Government is lifting the limit for an immediate asset write-off from $1500 to $6500 from July 1.

"The last thing you want to do at the end of this financial year is buy an asset priced over $1500," Reed says.

Tim also says now is the time to make sure your books, systems and processes are in place for the year-end, and to prepare for the wide range of tax changes coming next week. Contact us if you have any urgent queries – remember next week may be too late.

How to fly the family flag without friction

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BLOOD might be thicker than water, but working in a family business can strain even the closest ties writes Claire Heaney.

Putting the ground rules in place from the outset can ensure those niggling family squabbles are kept at bay.

Deloitte Private Partner Elise Elliott says disquiet about such things as remuneration, seniority, promotion, holidays and other perks can fester away, damaging the business.

Ms Elliott says she uses a program with families where individuals can confidentially come clean about their concerns.

She uses it to "draw a line in the sand" and come up with tools to move ahead.

Ms Elliott says issues that need to be formalised include what qualifications family members need to have before they can join the business, whether they have to apply for a job based on their skills, whether they need to work outside the business first and whether their spouses may join the family firm.

"Some of the businesses are saying that their children have to work outside the business for two to five years," she says.

"It means they make the mistakes in someone else's business and they get external experience that will bring new ideas into the family business."

Ms Elliott says employing husbands and wives of family members in the family firm is particularly problematic.

Then there is the problem of knowing when the time is right to hand over the reins.

We agree and believe the key to working with family members in the business is setting the ground rules, making sure these rules are clear, documented and apply to everyone and using external adviser to moderate and keep the family ties correctly in place. The suggested list of family business tips:

HOW TO AVOID FRICTION

* Form a board with an independent non-family member to act as mentor and sounding board.

* Establish a family council that concentrates on family dynamics and is separate to the board.

* Draw up a list of values. Call it a code of conduct, constitution or charter.

* Set down requirements of outside education/experience before joining the family firm.

* Ensure that family members know they are not entitled to a job, they have to earn it.

* Make sure each family member has a role and is benchmarked against how they perform in that role.

* Business patriarchs should ensure that they are not the business alone by sharing the load.

* Develop career paths for family members.

* Working outside the business can give family members valuable knowledge to inject back.

blog26june 350x197The Lombard family members. Picture: Chris Scott

Businesses misunderstand private equity

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AAP reports:

Many business owners have a poor understanding of the role that private equity can play as a source of funds, according to financial services provider PricewaterhouseCoopers (PwC).

PwC released a report on private equity funding on Monday, after surveying 1000 businesses with an annual turnover of between $10 million and $100 million.

Of those businesses, 342 said they would be seeking funding for investment in the next 12 months, but only five per cent of those businesses said they would consider private equity as a source of capital.

Forty-one per cent of all respondents failed to agree that private equity provided cash to fund growth.

"The results reinforce what we see consistently - understanding of private equity among private businesses is low and misconceptions are high,'' PwC private clients partner Alan Elliott said in a statement.

He said four out of every 10 businesses believed that bringing in private equity would lead to a loss of control over the business.

"The truth is, under the right circumstance, the right type of private equity can be an accelerator of business growth or a facilitator of ownership change in the case of succession planning,'' Mr Elliott said.

"Private equity can be more flexible than other funding options and bring a network of talent and experience.''

"It's more about a shared interest than a controlling interest.''

This last comment is important to note. We at H&Y have seen some very good private equity placements that not only bring funds to the business, but bring expertise, connections, distribution channels or just more customers.

These investor/business matches are always more successful than cash investment alone as long as one simple rule is followed: make it very clear between the parties who has what say and why, over which aspects of the business and ensure everyone understands and document it.

Clock Ticking on Tax Returns

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News Corp reprorts that summary data from the ATO suggests that the time taken for individuals completing the business and professional items schedule took an average 4.9 hours. 

"Small and medium business and micro-business are spending 5% longer completing their returns compared with last year - while government and large business shaved 20% off the time they took."

PPSR Explained

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An explanation video about the PPSR from Veda.

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