Tag Archives for " First Class Accounts Ovens & Murray "

Should I focus on profits or cash flow?

Turning a profit is at the heart of running any successful company. But should profits be the only financial focus if you're looking to create a stable, long-term business?

Cash flow is the beating heart of your business. Without an even and predictable flow of cash into the company, you can't cover your overheads, you can't pay your employees and you can't run your day-to-day operations – let alone think about expanding and growing the business.

So, what’s needed is a healthy cash flow position AND a good focus on driving profits.

Keeping on top of the financial management of your business can be hard work, especially if you’re new to accounting and the technical terms that are used to talk about money.

Understanding your finances

But if you’re going to be in control of your financial destiny, it’s important to get your head around the important process of cash flow management. This is especially true in the current business landscape, where sales revenue may be less buoyant, cash can be tight and the market is going through a challenging time.

Let’s look at some of the key things to understand about your finances:

Profit is a by-product of a successful business

As the owner, you want to make profits, but profitability isn’t the only goal. A business can easily be profitable, but also be highly unstable in the longer term. What you want is stability and consistent revenues.

Cash flow is the blood that keeps your business alive

Good revenues (income) serve to bring cash into the business. Without cash to cover your operating expenses, you have no means to keep the lights on in the business. So cash really is king!

Know your cost base and overheads

The flipside of your cash flow position is your costs. In an ideal world, you want more cash inflows than cash outflows, so it’s important to know your expenses and costs and to manage them carefully.

Be proactive about spend management and easing expenditure

If you can take action that reduces your spending, that is hugely positive for your cash flow position. Choose cheaper suppliers, negotiate better deals and bring that cost base down.

Drive more revenue, through increased sales and marketing activity

If you can increase your revenues, you also boost your cash flow. So it’s important to be proactive about running targeted sales and marketing campaigns to increase your sales.

Keep the cash flowing and the profits take care of themselves

If you achieve the ideal cash flow position, the company sits on solid financial foundations, the cash is there for investment and the business can grow. It’s that simple.

Talk to us about improving your cash flow management

Whether you’re new to running a business, or a seasoned owner who needs some financial support, we can give you the cash flow advice you need.

We’ll review your finances, delve down into your cash flow and will come up with key ways for you to increase your cash income and reduce your cash expenses. It only takes a few small changes to achieve a far better cash flow position for your business – helping you maintain positive cash flow AND generate meaningful profits.

Get in touch to talk through your cash flow concerns.

Vaccinations and the Workplace

The Fair Work Ombudsman (FWO) has released guidance for employers on vaccinations and the workplace.

Currently, there are no laws in place that allow employers to order existing employees to be vaccinated against the coronavirus. The Australian Government policy is that vaccinations are voluntary. Each state and territory government is responsible for implementing vaccination plans.

There are some circumstances in which an employer may require existing or potential employees to be vaccinated, but most employers cannot enforce vaccinations. If there are state or territory laws that provide specific orders requiring vaccination of certain workers, then employers and employees must comply. However, the FWO states that no such orders exist right now.

Employers need to check Fair Work Act workplace protections and discrimination protections before making changes to any employment agreements to require vaccinations. Employers should also discuss any proposed changes to agreements with employees, including options for implementation and safe work practices.

The Fair Work Ombudsman COVID-19 Vaccinations & the workplace webpage has detailed information explaining rules about many aspects of vaccinations in the workplace. Visit the webpage to get details on when an employee can refuse, asking for evidence of vaccination, disciplinary action and lawful directions.

The Department of Health has a great tool to check eligibility for priority vaccinations for high-risk workers such as emergency services, border services, frontline healthcare or aged care and disability workers.

Safe Work Australia provides industry-specific information, including risk assessment and worker consultations. An employer has a duty to eliminate or minimise the risk of exposure in the workplace by cleaning, distancing and hygiene information.

Many employment situations may require legal advice before the employer can make any changes to vaccination policies.

Don’t get caught out by making unlawful changes to your workplace! Review your employment agreements and look at your options for keeping your workplace safe.

Choosing the right apps for your business

Software technology has evolved massively in the past decade, with cloud-based apps now fundamental to many of the internal and external processes in your business.

To ensure you’re getting the best from the available tech, it's important to choose the right apps for your business and in your specific industry or sector.

But how do you know if the latest ‘must-have app’ is really going to be an asset or just an additional software cost?

The Xero app store is a good place to start so that your apps integrate with your accounting system.

Choosing the right apps

Before you dive headfirst into the Xero app store, it’s important to do your homework and give yourself some firm foundations on which to base your app purchase decisions.

Decide on the main aims of your software systems

Look at the specific aims of the business and tie each app into the various operations within your business model. A construction company, for example, will need a site management tool, staffing solutions, health & safety tools and an inventory app, to mention just a few.

Make sure your apps integrate with Xero

Xero’s open API (application programming interface) allows all the apps in the app store to connect directly with Xero. This means that data and financial information can flow seamlessly between your apps and Xero, helping you keep all your management information up to date.

Look for opportunities to automate manual processes

If there’s a low-level manual process in your business, try to find a way for your apps to automate this. For example, a bookkeeping app, like Receipt Bank, will snap photos of your receipts and automatically digitise and code the contents.

Research the app market in depth

Look at online reviews, talk to your industry network and find out which apps your peers trust and would recommend. Where possible, try out free trials and demos, so you have had some hands-on experience of the apps in your shortlist. The more user time you have, the easier your purchasing decisions will be.

Look for an excellent user interface (UI) 

If you and your team are going to be using an app every day, it needs to be easy to use, with a small learning curve. Choose apps that have a great UI and offer a quality user experience. The sooner you can get up and running with your solution, the more value this app will add for the business.

Partner with apps who offer excellent customer support

The functionality and ease-of-use of your app are obviously important considerations when you’re looking to buy. But don’t underestimate the importance of solid, helpful and personalised customer support. Look for apps with phone support, good customer service ratings and a happy and satisfied user base – check app forums to get the lowdown on this.

Talk to us about your app requirements

Our job as your bookkeeper isn’t just to deal with your numbers.

We specialise in helping you review your operations, formulate the most efficient systems and choose the apps that can deliver the most effective and productive business performance.

If you’re looking for help in choosing the right apps for your business then talk to us

Is Your Business Eligible for JobMaker Payments?

The JobMaker Hiring Credit scheme is designed to encourage businesses to employ additional young jobseekers aged 16-35 years. The hiring credit subsidises an increase in employee headcount.

Eligible employers can receive the hiring credit for up to 12 months for each eligible employee engaged between 7 October 2020 and 6 October 2021.

Registration for the scheme has been open since December 2020. Employers can still register for the scheme now, even if you have already put on eligible workers since 7 October last year.

Is Your Business an Eligible Employer?

Various factors must be satisfied for an employer to receive the hiring credit payment, including:

• You must register for the scheme with the ATO by the due date of the first JobMaker period you are claiming.
• You must be registered for PAYG withholding.
• You must be up to date with income tax and activity statement lodgments for the previous two years.
• You must not be claiming JobKeeper in the same period.
• You must be reporting Single Touch Payroll.

The business must also satisfy payroll and headcount increase conditions by proving new employment positions have been created.

Payment Rates

• 16 to 29 years old - $200 per week
• 30 to 35 years old - $100 per week

JobMaker Claim Periods

There are eight JobMaker claim periods available for the scheme from 7 October 2020 to 6 October 2022. Single Touch Payroll reports must be submitted three days before the end of each claim period. Employers must also complete claims electronically through ATO online services.

The ATO JobMaker Hiring Credit scheme webpage has more detail about the scheme, including a calculator spreadsheet to estimate payments you could receive.

Want to Check if You can Receive the Credits?

The headcount rules are important to understand before registering for the scheme.

Contact us to discuss whether your business can access the hiring credits, and we’ll make sure your business can verify the payroll increase.

We can also take care of the ATO reporting and claiming process for each JobMaker period on your behalf.

Pricing Strategies

What's the best way to establish a price for your products or services?

Getting your pricing right is crucial. Put your prices too high and your customers may desert you; put them too low and you’ll generate sales but won’t have a large enough profit margin to create healthy revenues and cashflow for the business.

Whether you’re a new startup, or an established business, choosing the right pricing strategy is a fundamental part of designing your business model. As such, pricing is something that’s likely to take considerable thought, research, planning and analysis over the lifetime of your products.

So, how do you know what to charge for each product and/or service? And how do you decide a price point that’s both competitive AND profitable for the business?

Costs, margins and hitting the right price point

For your business to be viable, you have to know for certain that you can:

• Find and win customers
• Meet your project sales and revenue targets
• Cover your running costs, overheads and operating cashflow
• Generate profits and get a return on your investment.

But how does this all come together to define your final sale price? The answer is to have a granular understanding of your costs, your margins and your pricing – and also to know who you’re selling your product/service to.

Different ways a price can be worked out

Cost price

When you make a product, or deliver a service, you need to spend money to do that. This expenditure includes the raw materials, the business overheads and the labour costs of creating your product/service.

By adding up all these expenses and dividing them by the number of units you delivered, you get your cost price. In other words, it’s the total cost of the unit before any margin or profit is added.

Wholesale price

Your margin is the amount you add on to your cost price to make a profit.

So, if my cost price per unit is $5, I might sell each unit to a wholesaler at $7.50. By doing this, I recover the cost of making the unit (or ‘Cost of Goods Sold’ in accounting terms), and I make a profit of $2.50 on each unit I sell to my wholesale client. This is the wholesale price.

The wholesaler will then add on their own margin in order to sell it to a consumer at. Using the example above, if the wholesaler sold each unit for $10. You make $2.50 and the wholesaler makes $2.50.

Retail price

This is the price when you sell the product to a consumer. The retail price factors in margins and comparing prices within the market to ensure you're competitive but still turning a good profit.

So, if you sell direct to a consumer, at a price of $10, and your cost price is $5, then you’ll make $5 profit for every unit you sell.

This contrasts with $2.50 profit per unit if you sell to a wholesaler, although you’re likely to sell in bulk to a wholesaler and will make your profits through this economy of scale.

Premium or economy pricing

Knowing how to position your product/service in the market is important.

Are you selling a premium product, with a high price tag? Or are you selling an economy product, with a low price point? There’s a big difference between selling a limited number of units at a high price (and high profit), and selling a big number of units at a cheap price (low profit but larger sales).

Positioning your prices between these two polar ends of the pricing spectrum isn’t easy, and will take time, experience and plenty of experimentation to get right.

Knowing when to discount or increase your prices

Your price isn’t a static thing.

Costs of production will increase, markets will change and sales campaigns will require discounted prices. So it’s vital to continually assess, review and update your prices.

For example, you could run a discount to increase sales, decreasing your margin and selling more units. Or you could choose to put your price up to increase your margin and make things more profitable.

What’s important here is to know how price-sensitive your customers are, how loyal they are to the brand, and what they’re willing to pay for your specific products/services.

Pricing is a complex and difficult area to get right, so working on your pricing is something that should be done on a regular basis.

If you’d like to review your current pricing strategy, please feel free to talk to us. 

JobMaker Scheme - Key Points

The JobMaker hiring credit scheme is now open for registration.

Here’s a summary of some of the key points around the JobMaker scheme.

If you are considering applying for JobMaker, please take into consideration the administration of JobMaker can be quite complex, so we don't recommend attempting to manage this on your own. Talk to us about how we can assist.

For background, JobMaker was announced by the government in the October 2020 federal budget, and will operate until 6 October 2021.

Key points:

As mentioned at the start, this is a summary of some of the key points around JobMaker. There are many other requirements and a thorough understanding of those requirements are needed to ensure your JobMaker administration is correct. 

Talk to us if you need support in applying for or administering JobMaker.