Issue 103 - February 2016
This time of year, a lot of New Year's resolutions start to lose traction but if your resolution is a financial goal such as saving or debt reduction, you shouldn't give up so easily. The path to achieving a successful financial future starts with setting yourself a realistic personal budget.
A budget is about making your money go further towards the things that you want in your life. To establish a personal budget follow these simple steps:
- Start with reviewing what you have actually spent: collate your bank statements from the last three months and allocate each transaction to an expense category. Total up the categories and review what your actual spending habits are. You might be quite surprised about where your money actually goes.
- Allocate the above annual expenses into two categories – Essentials and Extras. Essential items refer to those costs required to keep a household running like utilities, mortgage repayments or rent, food, petrol and insurances. Extras are those discretionary items that we spend money on based on lifestyle such as entertainment, dining out and holidays.
- Set your targets: Allocate an amount to each of your expenses for each month for a 12-month period. You may have expenses that occur weekly, monthly or quarterly. Ensure you also allocate an amount to an emergency fund to cover irregular large expenses that can creep up like vet bills, car repairs and medical expenses?
Your budget is the starting point for setting your financial goals. These are only going to be achievable where there is excess cash available in your budget. This surplus of cash can then be allocated to reduce debt, build a savings account for future investment opportunities, fund holidays or pay for your children's education.
To help create a positive net cash flow position here are some tips:
- Pay yourself first. Transfer a regular amount to your savings each pay day before paying your bills.
- Change your payment period for utilities from quarterly to monthly to assist with cash flow.
- Shop with cash, put your cards away. If you only have $100 to spend, you will not be able to overspend on small items which easily add up.
- Get mobile. Smartphone apps allow you to compare prices online, download vouchers and coupons and get a better deal. Make your money go further.
- Unclutter your home for extra cash. Sell, buy or swap your unwanted goods via online forums such as Gumtree.
- Review your credit cards for hidden transaction fees. It pays to shop around for the most cost-effective card based on your spending habits.
Whatever your financial position, we all have the ability to plan a successful financial future. It starts with taking control. If you would like to discuss your financial goals or would like a free copy of our handy personal budget template, please contact our office.
Brentnalls SA works with many businesses on a daily basis to ensure that they are in control of their finances. In so doing, we are often reminded of the "Banker's Mantra" quoted above (Paul Simister - Business Development Advice, 2013):
Turnover Is Vanity
Perhaps you don't use the word turnover so please, insert your word-sales, revenue, fees receivable, gross income into the sentence "… is vanity."
Your turnover may be a very impressive figure, HOWEVER this does not always translate to profit. Sales revenue or turnover is not a reliable guide to business profitability.
Turnover can easily go up BUT profit can still go down. So whilst monitoring your turnover is very important to determine if you are growing or contracting, there are other areas of focus which really confirm whether you are succeeding.
Profit Is Sanity
What you're really in business for is to make a profit, hopefully a nice, juicy profit that increases year-on-year.
It's essential to understand things like:
- Your Gross Profit Margin; and
These determine the turnover you need to run a profitable business.
If you plan to sell your business within the next five years, you need to give profit a particularly high focus as most businesses are sold on a multiple of future maintainable profits.
Profitability is your reward for working hard and taking on the risk of being in business – working for no profit is unrewarding, exhausting and stressful.
No wonder "Profit is Sanity".
Cash Is Reality
The calculation of profit is based on the formula, revenue less expenses regardless (whether they are received or paid).
But the cash in the bank is fact -"Cash Is Reality".
No cash = No business.
There are many reasons profit does not equal cash. We have listed a few of these below:
- Working Capital - Debtors, Creditors and Stock. Whilst these are recorded in the profit and loss when an invoice is sent or received, the cash actually changes hands at a later date;
- Loan Repayments – Loan repayments are not recorded on the profit and loss at all, but you will certainly come unstuck if you don't meet your repayments with cash;
- GST– Not recorded on the Profit and Loss, but GST can build up to a substantial amount each quarter;
- PAYG Withholding, Super and Other Employment Costs – Again whilst they may have hit the profit and loss, they don't come out the account until sometime later; and
- Asset Purchases – You may have paid the cash, but the cost only gets expensed over time in the profit and loss.
- know the impact of a business decision on your cash and profit before you make it.
So Where To From Here?
Take control of your business and…
- know what your cash flow will look like in the months ahead;
- know your Break Even point, GP Margin and Overheads;
- know what your profit should be at the end of the year;
- know the revenue you need to hit each month to reap the rewards you deserve;
- know the early warning signs that your business is struggling; and
- know the impact of a business decision on your cash and profit before you make it.
Do you want to take control of your business success?
Contact your Brentnalls SA team member.
The Australian Taxation Office is continuing to simplify and streamline business reporting processes, we have seen this already through the implementation of Superstream. The next phase of this will be the introduction of Single Touch Payroll (STP).
STP will allow employers to automatically report Pay As You Go (PAYG) withholdings to the ATO via Standard Business Reporting (SBR) software.
Employers will also have the option to pay their PAYG at the same time they pay their staff.
The implementation of the STP will begin from 1 July 2017 with a pilot program. From 1 July 2018, employers with 20 or more employees will be required to use STP-enabled software for reporting to the ATO.
The ATO also plans for individuals to have the option of completing Tax File Number declaration and Superannuation Standard Choice forms using myGov or through the employers' business management software.
The ATO have advised that for the next 6 months new laws to support the introduction of STP will be drafted and presented. They will continue to consult with software developers on the software requirements and they will continue to engage with the community to successfully transition all businesses.
Brentnalls SA will update you with further information in the coming months regarding the changes in your software to facilitate the single touch payroll requirements, and the impacts that it will have on your business processes for payroll.
As part of the 2015 Federal Budget, the Government announced that Australians living and working overseas who have a Higher Education Loan Program (HELP) or Trade Support Loan (TSL) debt would soon be required to repay that debt in line with the obligations that apply for debtors who live and work in Australia.
From 1 January 2016, if you move overseas for more than six months and have one of these loans, you need to notify the ATO.
The repayment obligations are expected to apply from 1 July 2017, based on income earned in the 2016–2017 financial year. The repayment obligations would only commence once the individual's income reached the minimum repayment threshold (currently $54,126).
JCurve Solutions Update
Whether your business has outgrown your current bookkeeping software, or you are looking for the right inventory and sales software for your growing business, JCurve Solutions might be the right stepping stone for you into the world of Enterprise Resource Planning (ERP) Software.
JCurve is a lite version of the Netsuite ERP, with one stop for handling:
- Customer Relationship Management (CRM) & Support
All of these features are built into the JCurve software which is accessed through your web browser.
If there are any additional features that are unique to your business, these can also be linked in to JCurve through third party integrations to maintain the one point of contact.
How is it different?
Most bookkeeping software is adept at handling accounting, payroll and sales needs, however integration of inventory, customer relations, marketing and productivity are usually limited or non-existent. JCurve keeps all of this information in one place and allows you to report and action this information from one place with customisable reports. This reduces the need for exporting from various softwares to spreadsheets and making manual reports.
As JCurve is browser based, there is no need to worry about updating your software as this is completed automatically by the JCurve providers.
JCurve also has greater room for further growth in your business, as it allows you to simply upgrade to the larger Netsuite package if you outgrow JCurve, with the ability to upgrade all your data from JCurve to Netsuite.
The cost of JCurve can vary depending on the size of your business and the different aspects of JCurve which your business may need. Brentnalls SA can work with you and JCurve to develop a system package that is beneficial to your business.
Do you find it hard to keep track of your tax deductions? The Australian Tax Office has a new free mobile application which is compatible with most smart phones and tablets to help.
It features the myDeductions tool which you can use to:
- capture and classify work-related expenses, gifts and donations or the cost of managing your tax affairs;
- store photographs of receipts; and
myDeductions is for individuals claiming work related expenses as an employee. The app also allows you to:
- enter your Tax File Number and other details to search for any lost super
- enter Australian Business Numbers (ABN) using ABN Lookup to search for details relating to that business
- use a calculator to work out the amount of tax to withhold from an employees salary and wage payment
- set important reminders and alerts for tax and super obligations
- enter your business' financial results into the business performance check tool to allow you to compare your business with similar businesses in your industry using the latest small business benchmarks
- access online services, including myTax
- watch videos, access checklists and visit SMSF assist for other helpful information for SMSF trustees
- access a number of other useful tools and calculators
The app can be downloaded @ ATO myDeductions
Congratulations to Drew Kluska and The Tailor team, winner at the PURE Awards 2015 for Innovative & Engaging Marketing.
Congratulation to Vintek Pty Ltd on the recent acquisition of Intervolve which provides datacentre services across Australia.
Ben Plail is leaving us, his last day will be Friday 19th February.
We take this opportunity to say thank you for all your good work and we will miss you!
Guide Dogs SA/NT rely heavily on the financial support of the community and business to help provide vital services to people who need them.
Hi, my name is Natalie Biller. I have been at Brentnalls SA for 5 years, and I enjoy working in Matt and John's team. I am completing a Bachelor of Commerce and I am expecting to finish this year.
When I'm not working or studying I enjoy travelling and spending time with my partner Adam, friends and my family who live interstate. Last year I was lucky enough to travel to Europe where I surprised my family who were there on holiday. The highlight of the trip was seeing my mum's face when I appeared at their hotel in Prague.