The Power of Positive Psychology

With Aussie politics heating up and the usual slanging matches and constant talk of our exploding deficit it seems to me that there needs to be more talk about positive policies and positive communities. 

As a global community we have endured some tough times of late.  What tools did we have available to us to cope with the GFC?  And what tools will we and our future generations have available to cope with growing unemployment, stressed businesses, unaffordable housing and terrorist attacks.

Wellbeing and positive psychology are important key elements to a happier existence and tools that enable us to “flourish” as individuals and as a community as a whole.

So what about at a business level?  What are we doing as business owners, managers or employees to foster wellbeing and positive relationships in our workplace, our colleagues, peers and with ourselves. The GFC showed us that we are absolutely part of the global economy and that our thinking in business needs to change beyond our front yard. 

What policies have you implemented in your own day to day functioning to cope with global crisis and what positive habits or tools can you tap into to cope with these. 

Need more information?  Checkout Professor Martin Seligman’s website here

Are you saving for your tax liabilities?

After a few years of leniency in the wake of the GFC, no more Mr Nice Guy...the tax office is now playing hard ball with Aussie businesses.

As reported in The Age last Friday, the tax office is now taking a much more aggressive approach on outstanding debts, not necessarily allowing payment arrangements, or, where payment arrangements are in place, making sure they are met within strict guidelines.  Some such guidelines include paying any other debt (PAYG or GST) in full whilst a payment arrangement is in place and if you default on a payment you could face immediate debt collection.  This is pretty hard going for a lot of businesses at the moment, particularly for those at the bottom of the food chain - if the big guns are slow paying this filters down to the smaller people and cashflow becomes extremely tight and stressful.  The tax office's view of if you can't pay maybe you're not a viable business and maybe you should shut shop is pretty frightening.  
Don't ignore anything from the tax office regarding an outstanding debt.  They can and are now promising to chase this in a take no prisoners way - you may be referred to a debt collector and maybe you will have legal proceedings issued against you.
If you can't pay a debt then speak to the tax office or your accountant immediately to find out what options are available to you. 
Implement a plan to save on an ongoing basis for your GST and income tax.  It is as easy as setting up another bank account and as soon as income comes in, shifting at least 1/11th (for GST only) to the second bank account....and then DON'T TOUCH.  This might mean rejigging how you pay your creditors and yourself so that your cashflow is not adversely impacted.
If you are having problems paying your bills, then seek advice.  A good accountant can help you with a cashflow budget - a great way to see on an ongoing basis where you are at and what's in the kitty.

Voluntarily Register for GST ?

When starting a small business there are a number of things to consider, one of which is registering for GST.  This can be done at the same time you apply for an ABN.

Under the current legislation:-

·          you are required to register for GST if your turnover (gross sales) is $75,000 or more.  If you provide any type of taxi travel as part of your business you are also required to register for GST, regardless of your turnover.

·         If your gross turnover is less than $75,000 you can choose to voluntarily register for GST.

What does GST registration mean?

·         you will need to charge an additional 10% on all sales income.

·         you can claim GST paid on all purchases

·         the net of what you charge and what you pay will then be remitted to or refunded by the tax office.

So should you voluntarily register for GST? 

Positives

1.    Projected Turnover to reach threshold over shorter term

If you project your income will increase to the $75,000 threshold over the shorter term (say 12-24 months) then it may be better to voluntarily register for GST at the commencement of business. Having to increase your prices by 10% once you do hit the threshold can cause negative issues with customers particularly if you want to also increase your prices by any sort of CPI. 

2.    Refund of GST credits

Many businesses experience major cash outflows in the start up stage and therefore it might be handy to have some GST refunded as this will have obvious cashflow positive implications. 

3.    Perceived Business Status

Not being registered for GST indicates to other businesses and customers that you are “small” with a turnover of less than $75,000.  This can be an issue as they may form the opinion you are “too small” to provide them with the service they want.

Negatives

4.    Administration

One of the biggest downsides of registering for GST is the extra administration for completion of your Business Activity Statement (BAS).  This can be minimised if you elect to report GST on an annual basis.

5.    Cash Outflow

We all want our business to make a profit so if you are achieving this and your sales are far greater than your expenses you will need to remit GST to the tax office periodically (monthly/quarterly/annually).  This can be a real problem with cashflow if you haven’t saved the GST you have been collecting.

I recommend seeking advice from your accountant before applying for an ABN to discuss your situation including short to medium term projections.  Every situation is different and what may work for your friend won’t necessarily work best for you.

If you do voluntarily register, make sure you are strict with saving the GST you charge.  Setup a separate bank account.  You need treat this extra money received as non-income. 

Please note that this is not advice and is for the purpose of general discussion only.  If you would like specific advice please contact Sarah Willoughby at sarah@willoughbys.com.au .  

Forecasting for the New Year

Now is a great time to reflect on how your business has performed over the last year but also to plan for where you want your business to go for the next 12 months.  Forecasting is an essential element of running a business.

So what exactly is forecasting?  Forecasting is a process used to estimate or predict the future financial performance, which of course can be a tricky process.

It is essential to use some sort of tool to help you do this.  I like to use a month by month cashflow budget format in excel and use this hand in hand with a business plan as there are some important considerations when deciding what numbers to plug into your spreadsheet.

Firstly, how did your business actually fair last year?  Where were the peaks and troughs in sales?  This is quite important to forecasting similar patterns for the coming year, particularly if specific troughs caught you off guard last year.  Once you have an understanding of your customer then this will enable you to produce a more accurate forecast.

Secondly, how does last year’s actual data compare with your business plan?  Are there things you can do differently to combat negative cashflows?  For example, introducing discount periods to stimulate sales or buying stock at different times?  Did you overspend in particular areas?  And can some item spends be tightened?

Thirdly, it is important to note that we are still not out of the woods economically.  Predictions are that the next 12 months will again see suppressed profits for many businesses due to the flow on effect of the European crisis.  Have you considered how this economic downturn may impact on your business?

For forecasting to be really successful, get into the habit of reviewing it on a regular basis during the year.  Whilst it is essential at the start of a year to help you plan financially, it should also be an ever evolving tool to really help you understand and better run your business. Revisiting the forecast each month and comparing it with actual data will help you iron out problems and hopefully minimise cashflow issues.

Christmas Parties & Gifts Entertainment

This Silly Season don't forget the rules in relation to entertainment and Fringe Benefits Tax (FBT).


The tax office considers a Christmas Party an "entertainment benefit" and therefore FBT will apply.


However, if the cost per employee (including their spouse/family) is less than $300 this will be considered a Minor Benefit and thus exempt from FBT.


So, keep the cost down and avoid FBT.  But don't forget that "entertainment" is not tax deductible nor is the GST able to be claimed.


What about gifts?


A non-entertainment gift to staff (such as beauty products, perfume, flowers, wine, and gift vouchers) is exempt from FBT if the total cost including GST is less than $300 and a tax deduction and claim for GST is allowed.


An entertainment type gift to staff (theatre tickets, holiday, movie tickets) will be subject to FBT.  However, again, this can be avoided if the cost is less than $300. But, there is no deduction for tax purposes nor is a GST claim allowed.


A non-entertainment gift to clients or suppliers do not fall within the FBT rules and are allowable tax deductions and GST credit claims.


Need more information?  contact me at sarah@willoughbys.com.au

Are you a Mummy Thinking of starting a new business?

I was interested to recently read an article about the rise of "Working at Home Mums (WAHMs).  In particular the thoughts of a male psychologist about the pitfalls of a WAHM.  He wasn't saying don't do it but he certainly wasn't entirely supportive of the rise of the WAHM.  He pointed to stress, exhaustion, inexperience and isolation as some key negatives.

Balancing a career with babies and toddlers is no mean feat.

So how do you do it?  How do you go into business for yourself and still devote time to your young family without feeling guilty or completely exhausted?
Firstly, picking the right industry is key.  It should be something that is meaningful to you.  Something which you like doing and if possible use a skill you already have.  Remember, any new business, if it is going to succeed, requires a great deal of time in its early stages.
Secondly, surround yourself with the right people.  Seek some good advice.  If you have never worked for yourself you absolutely need to see an accountant or business adviser before you proceed.  They can help you with a business plan, budget and forecasting and ensure you have the correct structure and other necessities (like insurances) in place.
Thirdly, be organised, disciplined and most importantly, realistic.  If you are a new Mum, wait until you and your new baby are in a routine.  Starting a new business will always have an element of stress so it is important that you don't take on too much too soon.
Fourthly, think about how and where you are going to run your business.  If from home, where?  Have you setup a separate room that you can close off from the family?  There is a lot to be said for "going to work";  you are more likely to be focused and efficient if your work place is clean, tidy and a designated area away from the washing or children's toys.  This isn't to say that I haven't sat in my home office with baby bouncing in the jolly jumper whilst I am at my desk working, but the point is, it was my office setup just how I needed it to be setup and could accommodate an awake baby to play happily whilst I worked.
If you are providing consulting type services, think about a serviced office.  These are in abundance and can be reasonably priced for short term rental.  Leaving home for a couple of days a week to work in an office might be a more efficient option.
If you are running an online retail shop, what about hiring a short-term "pop-up" shop in a popular shopping centre or arcade to gain some exposure.  This just might give your sales the boost you couldn't achieve from home.

If you are working from home, yes it can be very isolating and, in turn, stressful.  Consider joining networking groups to get yourself out of the house or online support when you are feeling overwhelmed.  I recommend www.motivatingmum.com for excellent support, tips and forums.

Blogging - Am I A Business?

It is only a matter of time before the tax office scrutinises our internet activity as we roar forward into the era of social media.  Facebook, Websites, Blogs – these are all possible sources of revenue with opportunities for advertising, sponsored blogs and paid guest blogs.

So what is income and what isn’t?  And what do you need to declare for tax purposes?

The first step is to establish if you are carrying on a business or if you are merely carrying on a hobby on your blog or alike. 

Unfortunately there isn’t a simple answer as to whether you are carrying on a business or not.  It becomes more a question of fact, that is, the more facts that point to a business activity the increase in likelihood you are a business, not a hobby.  And just because your friend might be a business doesn’t mean you are too – each case is different and therefore each case needs to be examined individually.

As a guide, the tax office suggests using the following questions in determining whether you are a business:-

Ø  Does your activity have a significant commercial purpose or character? Ø  Do you have more than just an intention to engage in business?  For example are you not only blogging but also engaging sources of revenue such as advertising and sponsorship? Ø  Do you have a purpose of profit as well as a prospect of profit?  For example, are you actively pursuing advertising opportunities and entering into agreements which will be a form of income? Ø  Is there repetition and regularity to your activity?  For example, is paid advertising or sponsorship a one-off or “ad hoc” or is it a regular thing? Ø  Is your activity carried on in a similar manner to other businesses in your industry? Ø  Is your activity planned, organised and carried on in a business-like manner? Ø  Does your activity have characteristics of size, scale and permanency? Ø  Would it be true to say your activity is really better described as a business, rather than a hobby? Ø  Do you have a business plan? Ø  Have you done market research? Ø  How much activity to you spend on the activity?  Is it part-time or your main source of income? The more times you answer “yes” the more likely it is you are running a business. If you are running a business then your income will be assessable for income tax purposes.  You will need to obtain an ABN and raise tax invoices (detailing your ABN).  Should you earn more than $75,000 you will also need to register for GST. If you are a business, you can also then claim applicable expenses incurred to generate income.  For example, if you blog and communicate with prospective sources of revenue on the internet, an obvious expense is the charge of the internet.  The tools necessary to your business are your notebook computer, iPad or iPhone and printer, so these will all become items which can be expensed either immediately or over the deemed life of item (depreciated).  There may be other expenses too that are partly business and partly personal, for example monthly mobile telephone calls, or a portion of electricity charge for a home office. If you only answered yes a few times to the above questions it may be that you are carrying on a hobby not a business and thus any income earned is not assessable for income tax purposes and any expenses incurred are therefore not claimed as tax deductions.  For example, if the blog is something you do in your spare time and income earned from it is very ad-hoc, not actively sought and not the sole purposes of the blog, then it is more likely to be a hobby. Please note that this is general information and not advice.  As this is very much a question of fact, I suggest seeking advice from a qualified accountant.

Pre 30th June SOS

The 30th June 2011 is only a few days away.  Here are some things you might want to consider ASAP:-

1. Contribute to Super - you may be entitled to a tax deduction of up to $25,000 if under 50 years old or up to $50,000 if over 50.
2. Government Super Co-Contribution - you may be entitled to a government co-contribution of up to $1,000 if you contribute to super before 30 June.
3. Private Hospital Cover - you may want to take out Private Hospital Cover to avoid the Medicare Levy Surcharge.  This surcharge kicks in at $77,000 for singles and $154,000 for couples and is calculated at 1% of taxable income.
4. Need to reduce your taxable income? Prepay expenses such as Income Protection Insurance premium (not paid through super), Interest on Investment Loans, Rent, Memberships and Subscriptions.
5. Change in business trading?  Has your business changed dramatically in the last 12 months?  You may want to see your accountant prior to 30 June to review your current business structure and tax effectiveness.
6.  Sold An Asset or a Business?  Capital Gains Tax may apply but there are options to reduce or defer capital gains tax (CGT) - see your accountant before 30 June to make sure that any potential CGT liability is as low as possible

Year End Tax Planning

It's that time of the year again when we start scrambling to get in all those last minute deductions.

Here are some tips on reducing your income before 30 June and therefore reducing your tax bill:-

• Prepay up to 12 months of expenses - like rent, income protection insurance, interest on investment loans, subscriptions
• Donate - there are many worthy causes out there that need our help.  But if you want a tax deduction make sure they have the 'Deductible Gift Recipient' status otherwise your donation won't count towards reducing your tax
• Contribute to super - you can contribute to super but be aware of the deductible contribution caps - $25,000 for  under 50 and $50,000 for over 50. 
• Fancy an iPad?  small business concessions allow business to claim up front a deduction for most assets costing less than $1,000.

This time of year is also a great time to get organised.  Why not see your accountant earlier rather than later and then give yourself time to budget for possible tax payable.

Here are some great ways to get organised and save money on your next visit to the accountant:-

• Tally up your receipts under specific headings such as Stationery, Parking, Subscriptions in an Excel spreadsheet.  
• File your receipts in an expanding folder for easy access and easy storage.
• Scan receipts and credit card statements saving them on your computer and/or portable hard drive.
• Get in early and see your accountant.  If you have tax to pay, you may be able to delay payment until May 2012.  Give yourself time to plan and save and whilst you are seeing your accountant, embark on a tax planning strategy for the new financial year at the same time

Not sure if something is tax deductible or not?  Keep a separate folder/file for all those "not sure" items with a list so it is easy to address with your accountant.

Starting A Small Business

Considering starting a small business?  Here is my checklist

 

How will you structure your business? - will you run the business as a sole trader, partnership, trust or company?  Seek advice from an accountant to get your structure right before you start.

Business Plan - having a business plan in place before you commence trading is a necessary tool in working out your objectives and goals and helping you stay on track.

What is your business name?  And is this available?  Before registering, check the national name register for availability.

ABN and GST.  Register for an ABN and determine if you need to register for GST

Setup a business bank account  and designated credit card - this is the best way to keep an accurate account of your business transactions and enables easier reconciliation at quarter and year ends

Does your business qualify for any grants or small business loans?  Grants can assist with set up costs and thus are worthwhile investigating.  Checkout Business Grants Australia

Insurance - it is important to know what insurance you require when you start up a new business and imperative that you have the correct insurances in place before commencing trading. 

Recording of information - work out what software package is best for your business size and budget to accurately record all your income and outgoings and, if registered for GST, to correctly record GST paid and collected for Business Activity Statement (BAS) compliance purposes.

Stationery and Printing - if you are on a tight budget there are a number of options including online and overseas companies with competitive prices.  They also include website design.

Seek Out Help and Support - if you have never run a business before, seek advice from your accountant and join networks which provide assistance.  Motivating Mum is a site dedicated to Mums in business which provides tips and support free and at a minimal cost.

Are You Being Paid Correctly For Leave Entitlements

A meeting with a client this week once again highlighted to me the lack of understanding leave entitlements by payroll office staff. 

My client, employed for 9 years by a Victorian based company undertook all of his duties in South Australia.

Trying to figure out how long he could "holiday" before looking for a new job, he asked the payroll office to supply him with an estimate of the payout and then he dropped in to see me to run some budget figures. 

This isn't necessarily a dig at the payroll personnel as payroll packages can be lacking in this area.

However, people, you should know that Long Service Leave (LSL) is calculated based on the state in which you work (similar to Payroll Tax and Workcover).

My client's payroll office had calculated, incorrectly, his LSL entitlement based on Victorian law.  Lucky for him he came in to see me as under SA law, he was entitled to a further $4,300.

If you think you are entitled to LSL, contact your state industrial relations office to ensure your payroll office pays you properly.

Tightening the Net on International Transactions

The tax office is slowly but surely tightening the net on our assets and income.  In Australia alone over the last few years we have seen an incredible stream of data now fed directly to the tax office from banking institutions and public companies.  This isn't necessarily a bad thing for clients who lose documents as finding and tracing income has been much easier. 

But be warned, as IT progresses and globalisation takes hold so too does our government's ability to tap into our every transaction, no matter how complex your structure.

In the last 12 months, the tax office has undertaken a program to target international activities.  No longer will Australian residents be able to "hide" assets or income in offshore accounts.  Specifically, the tax office has entered into Tax Information Exchange Agreements (TIEA) with various countries overseas for the purpose of elimination tax avoidance and evasion practices.  Mauritius being the latest of 27 countries to sign up.

If you are hiding income and think you are home free, think again.  Seek advice from a tax lawyer.

Tax Office Help for Qld Flood Victims

1. Extension of deadline for December monthly acitivity statement - now due 21st February 2011

2. Reasonable Estimate for Documents Destroyed in natural disaster:  Use this form if you have lost documents in the floods

3. The Tax Office can also help those affected by the Qld floods by:

• fast tracking refunds
• giving people extra time to pay debts – without interest charges
• giving more time to meet BAS and other lodgement obligations – without penalties
• helping reconstruct tax records where documents have been destroyed, and make reasonable estimates where necessary
• offering visits from field officers to help reconcile lost records, and
• helping them claim tax hardship concessions.

Ring the tax office on 1800 806 218  or contact your accountant

Help for Flood Victims in Qld

Help From the Tax Office
The tax office has automatically granted an extension for the December monthly activity statement, normally due 21st January 2011, to 21st February 2011.
The tax office is also implementing General Interest Charge stoppers for businesses and tax payers.

Make a donation
If you would like to help support those affected by Queensland floods, donate and receive a tax deduction.  Visit any NAB branch or donate via internet banking using the following EFT information
Account Name: Premier’s Disaster Relief Appeal, BSB: 064-013 Account Number: 1000-6800

Business Basics

In business the first impression can be the most important. A good first impression is important to the success of any business and cannot be underestimated.


An impression about you and your business is made in the first few seconds. This may seem hard to believe, and even unfair, but this is simply human nature; try putting yourself in the shoes of a new 'buyer', to find out how important this concept is. It can be a subconscious impression, but it is this impression nevertheless which forms a belief or an opinion. The reason why a 'buyer' will proceed comes down to the opinion they form and how good they feel about what they see and/or hear.

Making the best first impression applies to everything about your business: you, your staff, your product, your advertising and marketing etc. And all of these things just don't happen automatically. All of these things require careful and meticulous planning.

1. In planning your business it is essential that you start with a budget to set your guidelines. A budget is the foundation to a successful business giving you control and a true understanding about where you are at any point of time, what you can and can’t afford and what is selling and what isn’t. A budget can mean the difference between financial freedom and utter despair.

2. Your image, your product and/or service must be consistent with your values. Be clear of your image before you launch your business. What is the product or service and how does this compare with your personal image. In other words, do you match what you are trying to sell? A really slick product presented by someone who is dishevelled creates a confused state of mind for your customer regardless of how brilliant your product is. Likewise, a professional service presented by someone attired in beach clothing automatically suggests the service lacks seriousness or sincerity. By representing yourself in the wrong manner, you are inevitably creating more (unnecessary) work for yourself to sell your service or product. Quite simply, don’t make it harder to sell.
Your image is not only how you look (your hair clothes and shoes) but also your attitude. Starting a new business can be exhausting and stressful and certainly takes its toll mentally and physically, but regardless of how you might feel, you must always present yourself and your staff in the best possible manner. Every encounter with every customer is important and unfortunately it is often a bad encounter that will receive more air play than a good encounter.


3. Repeat business. If you consistently deliver a good service or product of a high standard this inevitably will lead to repeat business. Consistency equates to trust which again can never be underestimated. It is therefore crucial that you and your staff understand exactly what is required and expected each time you present your service or product. Having checklists or procedure manuals are internal controls you can implement to ensure consistency. These don’t need to be difficult or lengthy documents. It is the simple stuff that is often the most important, for example, how you present yourself (uniform etc), how you greet a customer, how you package a product, how you present your shop front.


4. Building a solid reputation – one of the best ways to attract new business is by word of mouth. This is extremely powerful marketing – something that doesn’t cost anything but is invaluable.


If you are starting a new business stop and think about what is you are doing, what you are selling and what it is you want to achieve. Plan. Budget. Succeed.

Be Smart Online

The government has a website with free information on how to be safe online this Christmas season

Click here for general tips

Click here for online shopping tips

Risk Management to avoid Crisis Management

Collaterised Debt Obligations (CDOs), hugely risky and yet not fully understood by most who invested, brought the global financial system to it's knees.

Donald Rumsfeld said in his 2002 known knowns statement "there are known knowns, these are things we know that we know.  There are known unknowns.  That is to say, there are things that we now know we don't know.  But there are also unknown unknowns.  These are things we do know know we don't know".

The known risks in business are easy to understand and control.
Getting a handle on the unknowns isn't easy but necessary. 

So what is unknown risk?  The World Economic Forum's Global Risks 2010 report explores just that.
This report examines potential risks that share a potential for wider systemic impact.  Now more than ever, unrelated fields in other countries can have a big effect locally.
Some of the risks discussed are:

• economic risk
• geopolitical risks;
• environmental risks from extreme weather; and
• technological risks

The report offers a framework for decision-makers and different stakeholders to better understand and manage these types of risk.

Knowing your risk can also help identify opportunities.

Don't Ignore Money Owing to the ATO

Over the last few years the tax office has implemented tight measures to recover outstanding tax and GST debts including the use of debt recovery agents and issuing of legal proceedings.

However, with the recent financial crisis and cashflow problems experienced across the board for small businesses, the tax office is allowing interest free terms for repayment of debt under certain conditions.

Want more information?  email me at sarah@willoughbys.com.au

Going Into Business Doesn't Need to Break The Bank

Setting up a new business?

Working for yourself has many advantages and is becoming increasingly popular with our desire to achieve a work/life balance.

But going out on your own does require some thought and organisation.

A Business Plan, Budget and Correct Structure are a must.  It is money worth spent seeking advice from your accountant prior to starting your business.  Getting these things wrong can mean the difference between business success and business failure.

There are also many IT, printing and advertising solutions available on the Internet that can save hundreds (even thousands) of dollars for first time business owners.  For example, business cards, business signage (including design and logo) can be done on the net at a fraction of the price.  IT solutions such as web based storage and backups are also a cost effective way to manage your data.

Below are a couple of useful sites

Telephone Systems
Business Cards
Signage & Office Stationery

And this one is for your personal photos - backing up photos on the web protects against theft or fire.  Picasa Web