Boost your businesses immunity to COVID-19

Tony Walsh • Mar 18, 2020

As the Coronavirus COVID-19 continues to unfold, the economic fallout is fast hitting home.   Whilst Western Queensland has (to this point in time) been insulated from the virus, it is clear we will not be protected from the potential devastating financial impacts.   For small business, now is the time to act, NOT wait.

Business in hospitality, retail, events, personal services and tourism are directly impacted now, but everyone will feel the indirect effects.   It is fairly clear at this time that the 2020 tourist season will be late at best, and non-existent at worst.   For businesses coming off a long 'off-season', you must do all you can to protect cashflow now.    

Some immediate  actions you can take in your business:

  • Start revising cashflow projections now using assumptions for a reduced turnover if you think this applies to you;
  • Plan how you can reduce costs at least over the next quarter but possibly longer;
  • If you already have existing debt with ATO and banks/lenders, start talking to them now about revised cashflows and payment arrangements (the banks have today announced small business loan repayment deferrals for 6 months, but you will need to confirm this applies to you);
  • Discuss with the ATO possible delayed payment plans for the upcoming BAS lodgement;
  • If you rely on particular suppliers, ensure they are in a position to keep providing to you;
  • If you have 'business critical' owners or staff, have a plan in place if they are forced to quarantine;
  • Investigate your insurance policies to see if there is any coverage relating to this crisis.
  • Discuss with your landlord possible deferral or payment arrangements

If you are in one of the 'high-risk' industries requiring customers coming in the door, you will need to be proactive in keeping a customer base:

  • Look at how you can offer differently e.g. are you set up for web sales, can you deliver or do takeaway rather than have customers in the shop/cafe?
  • If you are able to offer a different type of service, start advertising now
  • Ensure you are following all health advisories for public safety, and advertise these regularly in shop and social media.

There have already been government incentives offered.   Some will be automatically provided, and others will be by application.   It is important to be prepared if you think you are going to apply for assistance.   For instance, if you need to apply to borrow to get through this period, it will be vital to have up to date projections and cashflows available as soon as possible.

Once details of various incentives are available, we can unpack these and publish, but information is in short-supply at present.

Hopefully, we will all support each other to stay healthy and keep our local businesses going, but as we have seen already in other areas, some businesses are going to struggle to survive.   Now is the time to do all you can to come out the other side.

As always, please consult with your Accountant for advice as it relates to your circumstances.

 
By Lionel Walsh 25 Jul, 2023
Why is the business for sale? There are many reasons why an owner might want to sell a business. Make as many inquires as you need to ensure that you are not buying a lemon. Is this a good industry? Think of the people who bought a camera shop just before digital cameras came on the market; or those who bought a shopfront music store just before digital music and the streaming platforms. Every industry has a lifecycle. Identify where the relevant industry sits in its lifecycle. Have you done your due diligence on the business? The checklist is almost endless. Engage an accountant, a solicitor and an insurance broker to minimise the risk of overlooking vital checks. Do you have a business plan? You will have your own methods of operating the business and it is unlikely that these will be the same as the current owner's methods. Your accountant will have a checklist which you can follow to develop the business plan. This checklist will ultimately be used to prepare the essential cashflow forecasts. Do you have the necessary staff? Many businesses experience staff shortages in these days of low unemployment. Do not assume that the existing staff will stay with you. Meet with them. Have one-on-one conversations with key managers or employees As always, we are here to help.
By Lionel Walsh 23 Jul, 2023
The Partnership Chapter 2 Fiona’s cake sales had increased to the extent that she could no longer meet demand in the kitchen of her rented flat. She scoured the town looking for commercial premises. Her sales were not yet high enough to support a shopfront or a waitress or kitchenhand. At this stage she was still restricted to making cakes for pickup or delivery. She was lucky to find vacant premises in an industrial area where the rent was cheaper. These premises already had a kitchen which, with modifications and additions, would meet her needs. The difficulty was that the renovations and additions were going to cost $50,000. Fiona was lucky to have $1,000. She decided to consult her accountant Michael to work out the best way forward. Michael had become a regular customer. As usual, Fiona took her best friend Angelo along. Angelo told Michael that he had offered to lend Fiona the money. His father was happy to release $50,000 from Michael’s trust fund, but Fiona would not accept his offer because she did not want to take advantage of their friendship. Michael had prepared a cash flow forecast before the meeting and told Fiona that it was unlikely that she would find a bank which would lend her $50,000. Fiona pondered this and said “I would accept the money from Angelo if he became a partner. Then he could have half the profit and I would not simply be taking advantage of his friendship”. Michael heard a few warning bells and said “Fiona, you would be better off just accepting the offer of a loan with a rate of interest at least equal to the bank rate. Angelo would be rewarded with the interest. It is nice and clean and easy to untangle when you can stand on your own two feet”. Fiona was stubborn. Their friendship was deep and long-lasting. She did not want even a skerrick of suspicion that she might be using it for her personal advancement. Michael sighed and said to Angelo “Do you realise that if become a partner you could not only lose the $50,000 that you contributed but, if the worst happened, you could be responsible for any amount of money, even millions that insurance won’t cover? Debtors will attack the partner who has the money. If Fiona has nothing, they can take it all from you.” Angelo said “Fiona is not going to fail. She has a special talent and she is careful. Besides, Dad has brilliant lawyers and they will make sure that everything is watertight. I do not even have access to my trust fund for another two years so at worst I can only lose $50,000 and even that is not going to happen.” Michael though that, to a 23 year-old, two years is probably forever, so he tried a different approach. “Fiona, if you succeed (and I think you will) your business might be worth a million dollars one day. Michael has contributed $50,000 and would be entitled to a return of $500,000 without lifting a finger. How would you feel about that?” Fiona said, “I should like it above all things. Without his help I would never have succeeded” Michael said “What if you find the right man and get married. How do you think your husband would feel about you giving away $500,000 to another man?” Fiona said, “I would explain to him at the beginning that I had this commitment”. Michael said “Angelo, if you got married, how do you think your wife might feel about your business relationship with another woman? You know women can be funny about these things.” Angelo said “Same as Fiona”. Michael had seen too many cases where best friends had become worst enemies because one thought the he had put in so much money and was not getting any reward and the other thought that he was doing all the work and his partner was taking half the profits. It rankles. He thought about relating some of these stories to Fiona and Angelo, but he looked at the glow on their faces and decided that he would be wasting his time. He sighed and said “I will apply for an ABN and tax file number for the partnership. Angelo, I presume your Dad’s lawyers will draw up the partnership agreement.” In bed that night, Michael thought about the interview. Could he have handled it any better? He was not nearly as sanguine about the partnership as he had been about the sole trader. On the bright side, as he slipped into slumber he thought “They are good cakes, though”.
By Lionel Walsh 15 Jul, 2023
The all-important sense of direction Have you ever been woken at first light by your cat mewing triumphantly and presenting you with a mouse, dead or alive. Isn’t the cat crushed when you yell “Get that thing out of here”? Imagine you are a mafia boss. Crime is your game, but you are very religious and would never commit or sanction a crime on Sunday, the day you go to church. One of your henchmen robs a bank on a Sunday and brings you the loot, anticipating the old-fashioned hug and the standard twenty percent commission. Be fair. You can hardly give him the traditional concrete dunking if you have never told him that you do not approve of Sunday bank robberies. These two real-life examples demonstrate why your employees crave a sense of direction. They want to do the right thing but the right thing for one employer might not be the same as the right thing for another. You have to tell them. You can (and should) do this by communicating your vision, your business plan and your policies. However, these alone are not sufficient, especially if they sit on a shelf unrefreshed for periods of time. You need to communicate your values and your preferred methods on a daily or weekly basis either face to face in the huddle or by training or work-shopping actual issues. The best way of all is by example. Never be a “do what I say, not what I do” employer. Employees who use their initiatives generally have greater job satisfaction. You also stand to benefit by delegating but, in doing so, do not throw your employees to the wolves. It is common decency to make sure they feel safe by giving them all the training and information they need to make the decisions you would want them to make. Communication is the key. Remember, no blame. If they occasionally get it wrong (as you do) follow the correct procedure, as follows - How do we fix it? How do we reduce the risk of it happening again? Admittedly, it is difficult to train a cat.
By Lionel Walsh 14 Jul, 2023
The federal government has announced a small business energy incentive in the 2023-24 Federal Budget. This allows a small business a 20% bonus deduction for expenditure that supports electrification and the more efficient use of energy. The additional deduction will be capped at $20,000 (20% of $100,000). Eligible expenditure To be eligible for the bonus deduction the expenditure must be eligible for a deduction under another provision of the tax law and must be first used or installed ready for use (or the improvement cost incurred) between 1 July 2023 and 30 June 2024. Depreciating assets The eligible expenditure includes a range of depreciating assets and upgrades to existing assets, including upgrades to more efficient electrical goods. Depreciating assets which use electricity instead of fossil fuel; use electricity more efficiently or facilitate energy storage, efficiency or demand management may qualify for the bonus deduction. Improvements Asset improvements which allow an asset to use only electricity, be more energy efficient or allow for energy use to be monitored, reduced at specific times, or confined to specific times may qualify for a bonus deduction. Exclusions Certain exclusions will apply, such as: • assets which can use a fossil fuel • assets which have the sole or predominant purpose of generating electricity (such as solar panels) • capital works • motor vehicles (including hybrid and electric vehicles) and expenditure on motor vehicles • assets and expenditure on an asset where expenditure on the asset is allocated to a software development pool; and • financing costs, including interest, payments in the nature of interest and expenses of borrowing Electric and hybrid vehicles may be eligible for other tax incentives such as the FBT exemption (conditions apply). Claiming the bonus deduction For depreciating assets first used or installed during the 2023–24 income year, businesses must claim the bonus deduction in the 2023–24 income year. For improvements made to existing assets, entities must claim the bonus deduction in the income year in which the improvement cost is incurred. Early and late balancers may claim the bonus deduction across more than one income year, provided the eligible asset was first used or installed, or the improvement cost was incurred, during the bonus period. Any expenditure incurred in excess of the $100,000 cap may still be eligible for other tax deductions under small business depreciation rules. This measure is currently in the exposure draft stage. We will keep you posted. Please feel free to contact our office if you need more information about this tax incentive.
By Lionel Walsh 10 Jul, 2023
The no-blame workplace This is really a subset of feeling safe but it is so important that it deserves its stand-alone spot. Attitude is such an important factor in any work environment and positivity is a big part of attitude. Blame, on the other end of the scale, is one hundred percent negative. When I was in the first year of my first job, I had a boss who wanted to do something that I knew the Board would not like. I begged him for his own sake not to do it. He did it. I was not senior enough to attend board meetings but I had my spies. When the Board thumped the table, he went to water and told them that I did it. I have never forgotten how I felt when I found out. I had feelings of betrayal, of injustice and of downright fear. It was only by the greatest stroke of good luck that I had fluked this job and I did not want to lose it. I can still remember where I was standing and which way I was facing when I thought “Nobody deserves to feel like this. If I ever become a boss I will never blame anyone”. Decades later, I have, by and large, kept that promise. A little later, the Deputy Chairman, Ted Seaby, lowered his voice and said “Don’t worry, we know it was him and not you”. There is a good example in the NRL. When a player drops the ball, his teammates rush in to tousle his hair or pat him on the back. They are sending positive messages. “Bad luck, mate”. “You’re ok”. “Let’s go”. That is not a natural first reaction but all sixteen teams do it, so that tells me the psychologists have been at work. Blame is destructive, on the football field or in any other workplace. It took me a little longer to convince myself that my no-blame policy applied to me too. I used to beat myself up when I made a mistake. Now, I simply ask “How do I fix it” and “How do I minimize the risk of it happening again”. I never say “How do I stop it happening again” because there is no perfect person on earth, or if there is she is keeping herself well hidden. Obviously, it could not be a man.
By Lionel Walsh 09 Jul, 2023
As a small business owner you might be requested to provide statutory accounts or management accounts to your bank or a government agency. In these circumstances "statutory accounts" is a confusing term because the chances are that you can prepare your accounts any way you want. The Australian Taxation office does not care as long as you can produce evidence to justify the amounts that you have entered in your tax return. A simple spreadsheet might suffice. 1. What are statutory accounts? For a small business company, the term statutory accounts is code for the following Directors' report – giving an overview of business strategy and performance, key achievements and the company’s overall financial position. It will also cover shareholder information, dividends and broader information about the company. Profit and loss statement – to outline the income coming into the business, and the expenditure going out over the course of the year. This is the key indicator of the profitability of the business during the preceding year. Balance sheet – to give a snapshot in time of the assets, equity and liabilities in the business. This is an indication of the financial health of the company on the date that the accounts are produced and is a useful report for lenders to review. Statement of Cash Flows – so you can see your cash inflows and outflows over the course of the period and reconcile them to your operating results. Statement of Changes in Equity - to show how your equity has changed from the start to the end of the period. Notes to the Financial Statements – which contain supplementary details on your accounting policies, significant estimates, disclosures, and other relevant information for a comprehensive understanding of the financial statements. 2. What are management accounts? The term "management accounts" usually means a Profit and Loss Statement and a balance sheet drawn directly from the accounting software you use to enter your transactions, prepare your bank reconciliations and your business activity statements. In most cases you would provide the management accounts yourself but you would engage your accountant to prepare statutory accounts. 3. Both are useful Management accounts provide you with useful information to assess day to day performance. You can see trends in revenue and expenses. You can see whether your bank balance is increasing or decreasing. You might even like to develop a dashboard to highlight the key performance indicators which are important to you. A dashboard can save you having to plough through figures every week or month. Statutory accounts take time-related issues into account and can provide much more accurate and in-depth information about performance and business health. These accounts might make adjustments for debtors, changes in stock levels, prepayments, depreciation, creditors, GST and income tax liabilities, provisions (for doubtful debts etc.) contingencies and so on. Sometime the statutory accounts can be a significant reality check. They are also designed to ensure that you comply with taxation and other laws. Need help? We are a click away.
By Lionel Walsh 02 Jul, 2023
First of July is the best day to start your preparations for your financial statements and business tax return. Second of July is the second-best day and, following that logic, the thirty-first of January next year is the 215 th best day. Everything is fresh in your mind on the first of July. Take the opportunity. You will be glad later that you did. Here is a suggested checklist to get you started. Reconcile your bank accounts. This is usually much easier than it was years ago because outstanding deposits and payments are becoming rarer. Take a copy of your bank statement to give to your accountant. He or she needs it for quality control purposes. Check your debtors. Are they real? Will they all pay? Are there some that can be written off as bad debts? You are supposed to write them off by 30 June if you want to claim the deduction in that year. Stocktake. If you have trading stock and you are required to do stocktakes (some are not) the best time is now and it is, fortunately, a weekend this year. Write-down or write-off damaged or unsaleable stock. Livestock. If you have livestock, the best time to complete your livestock schedule is definitely now. Months later you have to work backwards, taking into account recent sales, purchases, births and deaths. It is so much easier on 1 July. A man once told me that his accountant asked him how many cattle he had and he said “About 700”. His accountant said that he needed to know the exact number so, tongue-in-cheek of course, he said “Ok. You got me. I have 697.4 cattle”. His accountant wrote down 697.4. Check for prepayments. Did you prepay anything or did someone prepay you? It is more common than you might think, especially at 30 June. Advise your accountant, because prepayments might have a different accounting and tax treatment from ordinary payments. In particular, there are circumstances where you do not have to pay tax on prepayments you have received. Depreciation. Did you buy any depreciable plant, equipment or motor vehicles during the year? Provide the details to your accountant. Even better, when you buy, ask the salesman to send a copy of the invoice to your accountant. That only takes five seconds. I timed it. Otherwise you have to chase through paperwork months later to find the invoice. Then you have to post or scan and email and this usually takes a lot longer than five seconds. Besides, your accountant has the clock ticking while chasing you for the paperwork so you can save yourself some money by getting in first. Financed assets. Did you finance any purchases? If so, same story as in the dot point above. Sale of assets. Did you sell any assets? There might be capital gains tax issues or depreciation adjustments. Advise your accountant. Creditors. Do you have any creditors (accounts payable)? Often these are tax-deductible even if you have not paid them by 30 June. In most cases creditors will not be recorded in your accounting system. You will have to wait until the invoices arrive. You can send copies to your accountant or send a list, remembering to include the GST status. Business Activity Statements. Lodge your June BAS as soon as possible. This is necessary in order to reconcile your GST and PAYG Withholding balance. Any PAYG Instalment paid in the June BAS is taken into account when your business tax return is being prepared. Sales. It is not a bad idea to scroll through your sales transactions. It is surprising how often a deposit is posted to sales even though it might be a medicare refund or a Lotto win or some other non-assessable deposit. Your accountant will scroll to identify these issues but nobody knows your business better than yourself. Do not pay tax unnecessarily. Payroll. If you have employees, you are required to finalise their payroll information via Single Touch Payroll (STP Phase 2) by 14 July, but earlier is better. Check that your total gross payroll in STP agrees or reconciles with the wages total in your profit and loss account. Super guarantee. Pay super guarantee payments as soon as possible but no later than 28 July. Remember that the super guarantee rate increases to 11% from 1 July 2023. This checklist will not cover everything but it is a good start. I hope it helps. Give us a call if you have problems. The number of ways that something can go wrong in accounting is unlimited. You can have five firewalls in place and every now and then all five will fall over. We are here to help.
By Lionel Walsh 02 Jul, 2023
How to be a good employer (1 of 3) In order to be a good employer, you first have to know what an employee wants. Your first task is to listen. As Richard Branson says - “Listen deeply and always act with empathy”. Different employees might tell you that they want higher wages or a company car or flexible working hours or weekend work or no weekend work, overtime or no overtime, fringe benefits or the option to work from home, a path to promotion, extended leave, fringe benefits and so on. As the economics textbooks say, human wants are endless. The above wants are all legitimate and you would do well to try to deliver them to the extent the budget and workload allows. However, the most important want is something else. Here it is. Employees want to feel safe. I am not so much referring to physical workplace health and safety. That is virtually taken for granted these days. Even if employers are not empathetic, the big stick encourages them to comply with workplace health and safety rules. Nowadays, nobody pours concrete into the walls of a five-storey building without scaffolding or a harness. I am focusing on other forms of safety. For example, employees want to feel safe from bullying. whether by bosses, fellow workers, customers or the public. There are insidious forms of bullying such as being sent to Coventry. Listen deeply. Employees want to feel safe to use their initiative, safe from recriminations if they make a mistake, safe to tell the boss if he or she makes a mistake. Safety is like money and sex in one respect. Those who say these things are not really important are mostly those who have plenty. I have sadly witnessed even people with strong personalities reduced to wrecks when they are continually made to feel unsafe. The overwhelming reason why you should keep your employees safe is because it is common decency. However, there is icing on the cake. A safe employee is a more productive employee. When I first started work, one of my duties was to do the payroll for seventy employees. One of them would, without fail, come in on payday and argue that she should have been paid more. If I did make a mistake in the pays it would usually be with hers. It was not a coincidence. I now understand that I was so worried about her coming in that I was not wholly focused on the calculations (which were all manual in those days). I will bet that you have said, or have heard others say “It would have to be him” or “It would have to be her”. You know why. The type of employer who says “I am the boss. You do what is say.” is now a dinosaur or at best a very small operator. If your business is to grow, you must delegate, otherwise you become the bottleneck. Employees will not use their initiative if they do not feel safe to do so. You will have to make all the decisions yourself and as you are unlikely to be the only perfect person on earth your own resources will be limited. There will be a threshold where your business will start to grind down. Trust your employees and if they make a mistake, well….. Next time. The no-blame workplace.
By Lionel Walsh 02 Jul, 2023
The start of the new financial year is upon us. For most of you, this means finalising your general ledger accounts in order to get the necessary information to us to prepare your final 2023 accounts and tax returns. Below are the key compliance dates for July and August. KEY TAX DATES – JULY/AUGUST 2023 14 July 2023 – Payment Summaries – Provide payment summaries to employees if you do not use Single Touch Payroll 21 July 2023 – GST – Monthly Activity Statement and payment for June 21 July 2023 – PAYG withheld – Monthly Activity Statement and payment for June 21 July 2023 – PAYG instalment – Activity Statement and payment for monthly reporters for June 28 July 2023 – GST – Quarterly Activity Statement and payment for the April to June 2023 quarter if you do not lodge with us 28 July 2023 – PAYG withheld, FBT instalment and PAYG instalment – Quarterly Activity Statement and payment for the April to June 2023 quarter (We have extended dates if you have difficulty lodging on time) 28 July 2023 – Superannuation guarantee – Lodgment and payment of superannuation guarantee statement 14 August 2023 – PAYG withholding – Due date for lodgment of annual PAYG withholding report for employees 21 August 2023 – GST – Monthly Activity Statement and payment for July 21 August 2023 – PAYG withheld and PAYG instalment – Monthly Activity Statement and payment for July 25 August 2023 – BAS – Quarterly Activity Statement lodgment and payment due date for the April to June 2023 period if you are lodging with us 28 August 2023 – Taxable payments annual report – 2022–23 lodgment of taxable payments annual report if you are in the building and construction, courier, cleaning, road freight, information technology and security, investigation or surveillance industries and you pay contractors to complete work for you. Anything keeping you up at night? We are here to help.
By Jamie Walsh 24 Jun, 2023
It’s nearly time to make a finalisation declaration for Single Touch Payroll (STP). There is no need to issue payment summaries to employees whom you have reported through Single Touch Payroll. Employers must complete the finalisation declaration by 14 July. Employers with a mixture of employees and closely held payees have until 30 September to make the declaration. Small employers (fewer than 19 employees) who only pay closely held payees may have an extended due date. You may have some payees who have not been reported through STP. You will still need to issue a payment summary for these employees. You will also need to submit a payment summary annual report (PSAR). Once the STP finalisation has been sent to the ATO, the employees' information will be released to their myGov accounts and listed as ‘tax ready’. STP Payroll Checklist Prepare as much as you can in advance so that you are able to finalise your data by 14 July. Check that your business details, including ABN, registered name and address and authorised contact person are correct in your software. Review any terminated employees. Is the correct termination date recorded in your software? Are Employment Termination Payments (ETPs) coded correctly? Review salary sacrifice payments to superannuation for Reportable Employer Superannuation Contributions (RESC) amounts. Check with us for any Reportable Fringe Benefit Tax (RFBT) amounts that should be included. Check that all payroll categories are assigned to the correct ATO reporting category. This includes all ordinary earnings, loadings and penalties, allowances, commissions, bonuses, leave payments and termination payments. You may have other unusual payments such as those made under a voluntary agreement for contractors or labour-hire arrangements. Check that you have reported them correctly. Finalising Single Touch Payroll It is important to verify all payroll figures before finalising Single Touch Payroll in order to minimise the chance of errors. The finalisation process is the same whether you are using STP Phase 1 reporting or Phase 2. Once the payroll year is completed at 30 June, you can cross-check the total payroll amounts for each employee against the wages account in your profit and loss statement. This is an excellent way to identify errors. Contact us Talk to us today if you would like us to make the STP end of year process easier for you.
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