Sometimes less information can be a lot more informative. This is usually the case when it comes to producing meaningful reports from your accounting software.

Don’t get me wrong, detailed reporting can provide tremendous insights for management. However, for many small businesses, too much detail results in too little information that’s genuinely useful.

Just because your accounting software comes with a seemingly endless Chart of Accounts, does not mean you should use every one of them.

There’s a fundamental convention in accounting known as ‘materiality’. Typically information is material if its ommission or misstatement could influence the decision of users. Materiality ensures that information is sufficiently precise without including unnecessary detail. Of course, what’s material for one business may be incidental to another.

Here are a few examples of counter-productive (and time consuming!) practices that have crossed my desk in recent weeks.

Example #1.

Separating duties within insurance policies and then posting them to their own accounts.

While it is important to claim the right amount of GST (there’s no GST on the duty portion), having these listed separately on the Profit & Loss is not helpful at all. Remember, the whole idea behind these reports is to provide relevant and meaningful information.

Whether financial data is material or not depends not just on its users but on its purpose. Presumably, the first purpose here is to accurately monitor details of income and expenses for the owner to access easily.

The business has no control over the duty portion and it simply forms a part of the insurance cost. Being over-zealous in this way has made it impossible for the business owner to simply see what their actual insurance expense is. In order to get to this figure, they would need to add the Insurance and the Stamp Duty accounts together again. They have spent more time in making the report less useful.

Dissecting the data in this way has made what should be simple-to-access information, far less accessible.

Example #2

Separating the cost of a postage stamp from the envelope it was sent in and allocating costs between postage and stationery.

This might be relevant information for your business. In our own business, postage often represents several thousands of dollars and I do track it independently from any other expenses.

However, for many small businesses, it may be more useful to simply include the occasional postage stamp with stationery/office supplies.

I was trawling through a 4 page client-provided P&L the other day when I couldn’t help notice that postage of $1.80 for the year (representing less than 0.002% of total expenses) had a whole account of it’s own. If you’re a typical small business with a 4 page Profit & Loss, you’d benefit by consolidating some of those insignificant accounts.  Ditch the information overload and embrace the KISS principle instead…. you’ll get a lot more out of it.

There are times when pinpoint accuracy should take a backseat to common sense.

Example #3

Separating the florist’s delivery fee from the actual cost of the flowers and tracking the costs between a Freight account and a Customer Gift account.

If sending floral tributes is an important part of your client service strategy and you have some control over delivery costs, this might be materially relevant to you.  For the average business who occasionally sends a gift to a customer (and has little option but to use the delivery service provided by the florist), tracking freight on gifts in a whole other account is a pointless exercise.

Although it may be technically accurate,  it fails to simply provide the relevant information  - in this case, the cost to the business for client gifts. To get this information, the user would have to add back the Freight expense to the Gift expense.  Including the delivery expense in the Gift account with the cost of the flowers paints a far more accurate and clear picture. Management could then see at a glance the real cost of sending customer gifts.

Keep it simple. Use your judgement and consider whether it is really “significant” or “material” to your business to split accounts a certain way. After all, you don’t want to make extra work for yourself (or for the person you’re paying by the hour to do it for you). Most importantly, you want to produce information that’s accurate, fast to find and meaningful for you.

Remember that all employee superannuation guarantee contributions for the December quarter should be paid into funds by 28 January, 2012.

Employee super contributions actually paid by this date will be eligible for a tax deduction. It is important to meet the 28 January deadline in order to qualify for a tax deduction and avoid having to pay the super guarantee charge.

The December quarter covers the periods of October, November and December, 2011. Please note that the super guarantee applies to all employees; including directors in receipt of a wage.

The Tax Office is focussing much of their compliance efforts on uncovering instances of employers not understanding and meeting their super obligations. Common mistakes identified by the ATO include:

• paying insufficient super contributions for eligible employees
• missing the quarterly cut-off dates
• not understanding that in some circumstances super should be paid for contractors
• not keeping accurate records
• not passing on an employee’s tax file number to their super fund
• not lodging a Superannuation guarantee charge statement if employees’ super is not paid into to the fund by the due date or is not the correct amount.

If you have any questions or wish to speak with us about your obligations, please do not hesitate to contact our office on 1300 35 22 35.

A new Bill has been introduced into parliament to establish a payroll tax rebate scheme which is intended to encourage the employment of people with disabilities (as opposed to the general dis-incentive payroll tax offers for employing people).

The Payroll Tax Rebate Scheme (Disability Employment) Bill 2011 will provide employers with a payroll tax rebate of up to $4,000 per eligible employee.

The $4,000 rebate will be paid in 2 equal instalments – $2,000 after 3 months of employment and a further $2,000 after 6 months of employment.

Eligible workers are new employees that have completed the Family and Community Services funded Transition to Work program and are working a minimum of 12 hours a week, on average.

More information on how to apply for this rebate will be available later in the year and so we’ll keep you updated.

Anyone who reads the blog knows that I love online tools and calculators. I was very excited to hear of the launch of PayCheck Plus, an online tool provided by the Fair Work Ombudsman, designed for employers and employees to quickly calculate base pay rates, allowances, overtime and penalty rates under modern awards.

As an employer, you can also use ‘Check my payroll’ – a feature that allows you to match and calculate pay rates for multiple employees. 

I’m not sure how great the tool actually is when it comes to identifying which modern award an employee falls under. I test drive it by selecting details related to an entry-level receptionist (where the only option was Animal Care and Vet Services award) and an assistant accountant (where it offerred up several unsuitable options including the Black Coal Mining Industry Award). Why no mention anywhere of the popular Clerks (Private Sector) Award? It did, however, successfully find the right award for several other occupations.

If you already know the right award and want to check on base rates or penalties, the ‘check my payroll’ option could provide a quick and simple solution. I quickly played around with this feature with mixed results – mostly positive. 

All in all, it looks like it could be a handy little tool for employers to calculate various pay rates. A word of caution: double-check the award and rates before relying solely on the tool. 

Give it a spin yourself at Fair Work’s PayCheck Plus page.

TaxWise Business News is published each quarter. The September, 2011 issue of TaxWise Business is now available from the main site.

This quarter’s issue includes the following articles:

• ATO Compliance Target Areas 2011-12
• Taxing Carbon
• Managing Tax Debts
• Proposed Not-for-profit Reforms
• Car Fringe Benefits Rules Changed
• Excess Super Contributions Tax
• CGT Small Business Conscessions Tool

Remember that you can subscribe to the Enewsletter version of TaxWise Business News to have it emailed to you each quarter. Simply head to the newsletter sign up page or enter your details into the Subscription Box on your right.

Did you know you can still access previous editions of all our newsletters in our newsletter archive? Check them out below.  

TaxWise Individual News

TaxWise Individual News is currently published bi-annually and emailed (or snail-mailed) out to all interested personal tax clients. You can download each issue in PDF format or click the links to read through individual articles online.  

Go there >

TaxWise Business News

TaxWise Business News is produced quarterly and emailed (or snail-mailed) out to interested clients. Visitors to our site can access individual articles online by using the links provided or download complete issues in PDF format.  

Go there >

Business Plus+ Newsletter

The aim of this newsletter is to give you some useful articles, tips and pointers that will make a difference to your business, irrespective of it’s size or ownership structure. Follow the links to browse through individual articles or download the latest edition in PDF format.  

Go there >

Tax Update Monthly

Our monthly Tax Update newsletter is written in an easy and relaxed style to keep you up-to-date with important tax changes. This particular newsletter is available exlusively to clients for download. Please log in for download links.  

Go there >

The start of a new financial year is a great time to do some thinking and planning as to what is happening in your business. A good place to start is - What is the purpose of my business?

How much do you want to earn? How many hours are you prepared to work? What is your overall objective? 

It’s always a good idea to start out with the end in mind.

• Are you trying to build up the business to sell it?
• Are you wanting to franchise or open other similar offices/stores in other locations?
• Are you wanting to build a lifestyle whereby you can employ managers to run the business, but you don’t have to be there every day?
• Are you operating a business that you want to operate for the rest of your life… because you absolutely love what you’re doing in your business?

The strategies you develop to operate your business will be determined on which of these questions you’ve answered positively.

We’ll look at each of these in more detail in upcoming posts. Until then, give some thought to the question, “What is the purpose of my business?”

Periodic Financial Accounts – Each month we consider questions related to the preparation of a business plan. This time we’re looking at periodic financial accounts.

• Are periodic financial accounts prepared throughout the year?
• If so, how often?
• Are other periodic accounts prepared on a detailed management basis to assist management to “drill down” into the figures?
• Do you compare your performance for a month (or quarter) against budget expectations?
• Do you compare your emerging financial performance against benchmark organizations?
• Do you prepare Key Performance Indicators on the business’ performance?

There are over 50 questionnaires relating to the preparation of a business plan……… in the next post of this series we will consider Budgets/Cashflow Monitoring.

Business Plans – Some Questions to Consider

FOLLOW THE WHOLE SERIES

This post is part of the 50-part series “Business Plans – Some Questions to Consider” (yes, there will be 50 of them!).

Be sure to read the other parts of the series to get a full picture. You can follow the series along on the blog or read them first by subscribing to our popular Business Plus+ newsletter.

Taxation - Each month we consider questions related to the preparation of a business plan. This time we’re looking at Taxation.

• Have adequate systems been implemented for recording transactions relative to income tax? 
•  Pay As You Go installments?
•  Pay As You Go withholding amount (withheld from salaries and wages)?
•  Pay As You Go withholding amounts from payments to businesses which have not quoted an ABN?
•  Fringe Benefits Tax?
•  Goods and Services Tax (GST)?
•  Has your system been reviewed to ensure that your organization would be able to satisfy a taxation audit?
•  Is your business conducting a research and development activity? If so, is the business operated as a company?
•  Have adequate systems been implemented for recording transactions relative to income tax?
•  Has the business instigated systems for a proper recording of research and development?
•  Have you had a review undertaken of any trust deed to ensure that the trust deed is up to date and still applicable with current laws and interpretation of the laws?
•  Has a complete review been made of all benefits that the business is paying staff, to ensure that the Fringe Benefits Tax return is being accurately prepared?
•  Are all employee packages properly documented so that you are aware of all fringe benefit requirements?
•  Has staff been made aware of their responsibilities relative to completing their motor vehicle log books, proper recording of expense claims, documentation of travel expenditure, documentation of entertainment expenditure, documentation of overseas travel expenses, recording of annual kilometers on the odometer on the 31 March each year?

 There are over 50 questionnaires relating to the preparation of a business plan……… in the next post of this series we will consider Periodic Financial Accounts.

Business Plans – Some Questions to Consider

FOLLOW THE WHOLE SERIES

This post is part of the 50-part series “Business Plans – Some Questions to Consider” (yes, there will be 50 of them!).

Be sure to read the other parts of the series to get a full picture. You can follow the series along on the blog or read them first by subscribing to our popular Business Plus+ newsletter.

New tax thresholds were introduced at the start of the financial year for payroll tax in NSW. The annual payroll tax threshold is now $678,000 and the rate is currently 5.45%.

From 1 July 2011, the monthly threshold is:

Remember that your monthly payment is due just 7 days after the end of each month. Annual reconciliations are due 21st July.

I was at the NSW Office of State Revenue website earlier in the week and noticed they have an online payroll tax course to help employers unnderstand payroll tax. I must admit, I haven’t had time to check it out yet  but if you are registered for Payroll Tax (or think you might need to be), it could be worth a look at http://elearning.osr.nsw.gov.au/payrolltax/.

The NSW Government is also introducing the Jobs Action Plan from 1 July as an incentive for businesses to employ more workers (as opposed to the big, fat dis-incentive payroll tax offers you ). If your business employs staff in positions that are new jobs, you may be eligible to receive a payroll tax rebate.

For more information on the new scheme and to find out if you’re eligible for the Jobs Action Plan, visit the Rebate Scheme (Jobs Action Plan) page at NSW OSR.

Please remember that all employee superannuation guarantee contributions should be paid into funds by 28 July, 2011.

All employee super contributions actually paid by this date will be eligible for a tax deduction. It is important to meet the 28 July deadline in order to qualify for a tax deduction and avoid having to pay the super guarantee charge.

The June quarter covers the periods of April, May and June, 2011. Please note that the super guarantee applies to all employees; including directors in receipt of a wage. 

The Tax Office is focussing much of their compliance efforts on uncovering instances of employers not understanding and meeting their super obligations. Common mistakes identified by the ATO include:

• paying insufficient super contributions for eligible employees
• missing the quarterly cut-off dates  
• not understanding that in some circumstances super should be paid for contractors
• not keeping accurate records
• not passing on an employee’s tax file number to their super fund
• not lodging a Superannuation guarantee charge statement if employees’ super is not paid into to the fund by the due date or is not the correct amount.

If you have any questions or wish to speak with us about your obligations, please do not hesitate to contact our office on 1300 35 22 35.

ASIC fees are being increased based on the Consumer Price Index for the March quarter 2011. This includes a rise in late payment fees. The following are a few of the more common fees which will be increasing from July 1st:

Registration of a Pty Ltd increasing to $426 (up from $412).

Change of company name is going up to $351 (from $340).

First late payment fee is rising to $69 (currently $67).

Second late payment fee now $287 (currently $278).

On 1 July 2011 there will also be an increase to the annual review fee for companies. Proprietary companies can expect to pay ASIC $226.50 for the Annual Company Review.

Budgets and Cashflow Forecasts – Each month we consider questions related to the preparation of a business plan.

Budgets and Cashflow Forecasts seem especially relevant at the moment as more and more banks and requiring this information from small business before considering finance arrangements.

• Do you prepare budgets on a monthly basis to cover the next 12 months?
• If you are in a manufacturing type business, do you prepare production budgets?
• Do you prepare sales budgets?
•  Do you calculate the required investment in stock at the end of each month?
•  Do you prepare a wages budget analysing every aspect of the business including production, sales, distribution, marketing, administration management?
•  Expense budget – has each expense item been examined to determine the likely cost for the next 12 months?
•  Are all of the expenses necessary in the business?
•  Are individual expenses subject to review, quotations etc, in an attempt to reduce the costs of that particular expense item?
•  Have you prepared a debtors’ budget based on the sales forecast?
•  Have you reviewed the projected debtors’ days outstanding to compare to previous debtors’ days outstanding achieved?
•  Have you analysed the projected stockturn to see whether this would be satisfactory?
•  Have you prepared a cashflow forecast which incorporates the items from the various budgets and then incorporates other key information, such as loan payments, lease payments, taxation payments etc.? The cashflow forecast can be significantly affected by changes in debtors’ days outstanding, stockturn rates, creditors’ day outstanding etc.

That should give you some food for thought…

There are over 50 questionnaires relating to the preparation of a business plan……… in the next issue we will consider Taxation.

Business Plans – Some Questions to Consider

FOLLOW THE WHOLE SERIES

This post is part of the 50-part series “Business Plans – Some Questions to Consider” (yes, there will be 50 of them!).

Be sure to read the other parts of the series to get a full picture. You can follow the series along on the blog or read them first by subscribing to our popular Business Plus+ newsletter.

From 1 July 2011, the Paid Parental Leave Scheme will become mandatory for all businesses. Paid Parental Leave Scheme provides eligible working parents with 18 weeks pay at the National Minimum Wage  (see recent changes to minimum wage).

If you have eligible long-term employees who have or adopt a child from this date, you must register for Paid Parental Leave.

Once you’ve registered, funds for Paid Parental Leave will be provided to you before your employee’s usual pay cycle. Your employee can choose to receive Parental Leave Pay before, after, or at the same time as employer-provided paid leave such as recreation leave and employer-provided parental leave.

I recently registered our own business online for the PPL Scheme and found it relatively quick and painless (I expect the real pain will come with the additional paperwork burden and payroll requirements later on).

Centrelink  has a wide range of information on Paid Parental Leave, including:

• an employer toolkit  outlining what you need to know about the scheme and how to implement it in your workplace
• a range of useful publications  for employers
• frequently asked questions .

You can register for Paid Parental Leave online through Centrelink’s Business Online Services  portal. You will need your business’ ABN, registration details, and contact details to register online. The service required me to have an Auskey or ATO digital certificate installed on my computer. If you don’t have this, follow the instructions online (you may need to register over the phone).

Benchmarking - is very important to enable the small business to compare its business operation with other similar businesses. Does the business have its performance figures compared to other businesses?

Benchmarking comparisons can assist in measuring your business performance in a wide range of key performance indicators including:

•  income per employee;
•  wages cost percentage to turnover;
•  gross profit percentage;
•  net profit percentage;
•  sources of income;
•  key expenses for the business;
•  rent percentage of income;
•  advertising percentage of income;
•  investment in working capital items;
  • debtors;
  • stock;
  • work in progress;
•  key calculations;
  •  debtors’ days outstanding;
  •  stock turn

Running a small/medium enterprise business can be a lonely affair. The effective use of benchmarks can enable a small business operator to have a far better idea of how his/her business is performing as measured against similar operating businesses.

There are over 50 questionnaires relating to the preparation of a business plan……… in the next issue we will consider Budgets & Cashflow Forecasts.

Business Plans – Some Questions to Consider

FOLLOW THE WHOLE SERIES

This post is part of the 50-part series “Business Plans – Some Questions to Consider” (yes, there will be 50 of them!).

Be sure to read the other parts of the series to get a full picture. You can follow the series along on the blog or read them first by subscribing to our popular Business Plus+ newsletter.

by Stuart Ayling from Marketing Nous

Consider this real-life example:

A dog day-care business offers a special half-price offer for the first day trip. Clients love the service… and so do the dogs! Unfortunately the business owners have trouble convincing these first-time clients to re-book (and pay double the rate they did the first time). Clients offer many reasons why they don’t re-book, but they rarely do.

Why do you think that is?

Promoting cut-price specials attracts cut-price clients

This is especially the case for service-based businesses.

Here’s another one. See the flyer below promoting “Professional and friendly accounting and business advice at affordable prices”.

What do you think the problem will be for this firm?

Hint: They are trying to attract price-conscious people (cheap clients).  

It’s not all bad. This firm offers special events on specific topics – very valuable for their clients. They also promote a network amongst clients – very thoughtful.

But then we look at all the price-focused offers.

 There are:

• Discount offers from network members.
• Entry to win a $100 Coles-Myer voucher.
• and… they also offer an extra 12.5% discount off their already low fees.
• Why do they offer the extra discount off already low fees?

What message is that giving potential clients?

I’ll tell you. The message implies their standard fees are be too high (that’s why they offer the extra 12.5% discount). The message also says they aren’t sure about the value they offer for clients (otherwise they would stick to their standard fee).

They also miss a trick because they have fallen prey to taking the easy way out. Discounting is a lazy way to promote your business. Plus it costs you real dollars every time.

A better solution would be to offer something extra that potential clients would find valuable. That’s right… something extra. Add value.

Don’t take away from your price… add something valuable that doesn’t cost you full-value

Example:
“Every new client that joins us this month will receive a free assessment of their record keeping procedures and recommendations to save you time and money in the future (valued at over $150). We’ve found that businesses can easily save hundreds of dollars in future fees by implementing these easy procedures.”

The idea here is to offer something at full ‘retail’ value that doesn’t cost you that much to provide. In this example the cost of providing the assessment is only the hourly rate of the staff member involved. You can minimise your outlay by creating simple systems for staff to use.

Plus, this offer will attract business owners who are keen to improve their business, not just ones who focus on getting the cheapest price.

What do you think?

Are you attracting cheap clients?