The Corderoy Times March 2017
The Corderoy Times
CAS Quarterly Newsletter | March 2017
Buona Pasqua Aranga hari Joyeuses Pâques Frohe Ostern
復活節快樂 Felices Pascuas イースター、おめでとう hauʻoli lā pako
What’s Happening at CAS
‘The more you praise and celebrate your life; the more there is in life to celebrate.’ Oprah Winfrey
And we are celebrating here at CAS – it’s our Tenth Birthday!
The champagne’s on ice and the party whistles are ready for indeed its time to celebrate our achievements. When you’re deep in the day to day running of a business it’s easy to forget how far you’ve come. And a birthday is the perfect time to reflect.
This milestone has not been without its ups and downs – fast growth, then the ‘GFC’, technology updates and the yearly change that comes with the ‘budget’. However we look forward to the next 10 years with as much enthusiasm as when we first started – as sure as ever that there will be lots of change acomin’.
Grow & Improve
Business Start Up Corner – How To Get Off To a Flying Start
Business Start Up Corner – How To Get Off To a Flying Start
Starting a business can be a maze of research, registrations and red tape. No amount of passion can guarantee your business success but the proverb, ‘failing to plan is planning to fail’ serves as both great advice and a warning for new entrepreneurs.
Preparing a business plan is an important step and the plan should provide an overview of your current business position, where you plan to go and how you intend to get there. Within the plan, you need to demonstrate your current financial position and how it will change over the next few years. To fund your business start-up (or expansion) you’re almost certainly going to need a business plan to convince the bank or investors that your business is a good financial risk. Accordingly, your business plan should demonstrate how much money you need, why you need it and when your investor is likely to get repaid.
It should instil confidence in your business and management skills to persuade your bank, financier or investors to lend you the necessary funds. To raise substantial capital your business plan must be clear, complete and realistic. While a poorly prepared business plan will impact on your chances of receiving the funding, your business plan can deliver more than just a document to satisfy your financiers. It can serve as a roadmap for your business that both business owners and staff can refer to for guidance and direction. Without a business plan you can’t measure your progress or establish your priorities.
Most business owners fail to make a start on their business plan because they are either too busy or don’t understand what is required in the plan. Too often they are working IN the business dealing with day to day issues instead of working ON the business with strategic planning. Devoting some time to work on your business is an investment that can pay substantial dividends. You need a clear vision for your business that outlines where you want to take the business in the medium to long term and can be expressed as a series of objectives. So many business owners fail to put pen to paper because they are waiting for more certainty regarding their funding, financials or sales. Your business plan should steer your activity, not the other way around.
Most business plans contain these 5 key components:
❶ Business Description – You need to provide an overview of your business operations and keep it simple. Assume the reader has virtually no knowledge of your industry or operations. Outline your products and services and describe your ideal type of customers.
❷ Competition – Clearly describe who your competitors are and why they have the lion’s share of the market. You should also explain how they achieved their status and how you intend to win your share of the market. Be realistic but conservative with your estimates and paint the picture based on best, worst and likely scenarios.
❸ Marketing – Provide a detailed description of the marketing strategies, techniques and tools you plan to use to achieve your market share. Highlight your key points of difference, your focus on niche markets and provide an insight into the unique features in your website, the search engine optimisation techniques and marketing collateral you plan to create.
Cover off on your branding, launch and ongoing marketing activities given it could be the difference between boom and gloom. Convince prospective investors that you are not only confident and serious about increasing your sales but you also have the skills and marketing collateral to achieve your targets.
❹ Personnel – Success in business can boil down to 3 key variables – strategy, tools and people. Without pro-active people on the management team the best ideas and products can fail. Describe your management team and include resumes of all your key personnel. You should also list people in other employment categories like production, sales, finance and administration together with an organisational chart to illustrate total employment numbers.
❺ Financial Data – Illustrate your current financial position (balance sheet) as well as your other income sources including salaries. You then need to prepare projections for start-up costs, your first year’s trading results and a cash flow budget. They are designed to illustrate where you are going financially and ideally your projections should span several years.
Cash flow budgets are obviously critical to the lender to highlight the inflow and outflow of cash in your business and project bank balances at certain points in time. All of your projections should be supported by realistic assumptions that form part of the financial statements.
Get To Know Your Profit Margins
A substantial increase in your sales is not the only way to make more profit in your business. For example, business owners often focus on increasing sales to new customers but if you can improve your ‘conversion rate’ so you convert more prospects into customers, you will also see a boost in your bottom line.
Another way to increase profits is to increase your profit margins. By maintaining your level of sales, using your existing systems and without adding to overhead costs or increasing staff levels you can grow your profits. Here are some tips to help you increase your profit margins:
1. Do You Know Your Gross Profit Margin?
Firstly, start by knowing your current gross profit margin. Relying on estimated inventory figures or last year’s financials isn’t good enough. Prepare some interim financial statements and do a physical stock take. Use industry benchmark figures to see how you compare to the industry average and adjust your prices accordingly.
2. Investigate Your Profit Margin Further
Now that you know your overall gross profit margin you need to break it down for each of your products. Additionally, analyse your gross margins over different business divisions and product categories. By doing this, you can identify your low margin items and also identify the profitable activities or products. This can be challenging if you discover some of your favourite products just aren’t contributing to your bottom line and are soaking up resources. You might need to stop selling low margin lines and promote the ones that drive your profit.
3. Analyse Your Pricing
As business owners we find this difficult because we are often more worried about price than our customers. Overheads do increase over time and you might lose the odd customer, but these may be your D grade customers. If your margin is 50%, a 10% increase in prices means you can lose 17% of your customers yet be no worse off! Have you increased your prices to match supplier price rises and kept up with the competition?
4. Don’t Offer Discounts
Discounting destroys your margins. At that same margin of 50%, if you cut your prices by 10%, you will need a 25% increase in sales just to maintain your bottom line. It might be a strategy you only use for slow moving or obsolete stock items.
5. Don’t Use Price as Your Differentiator
By offering superior value, going the extra mile or reducing paperwork or other time consuming aspects of doing business with you will be more effective than competing on price.
6. Subject to Cash Flow, Always Take Cash Discounts From Suppliers
If cash flow permits, taking cash discounts from suppliers is better than trying to delay payment, even if you are using borrowings.
7. Prevent Theft
Losing cash or stock is costly. Do you have anti-shoplifting or theft prevention systems in place, even for staff? Do you balance your tills? Who does your banking? Theft erodes your bottom line.
8. Watch Supplier Bills
Check your supplier bills carefully. After a while you’ll get a ‘feel’ for things which aren’t quite right. Don’t be surprised to find that you’ve been overcharged for goods or services you haven’t received or been billed at the wrong prices. Monitor price increases carefully as you may need to pass these on with your prices.
9. Use Inventory Systems
Knowing and controlling your inventory levels will mean less working capital tied up in inventory, less theft and stock obsolescence. Being on top of stock running low for products selling well is critical. You need to know exactly how many of each product you have on hand and their cost without having to wade through old purchase invoices.
Food for Thought
The state government currently occupies 18.8 per cent of total office space in the Perth CBD and West Perth, taking up more than the next largest industry, oil and gas.
Accountants WARNED on VERY SERIOUS tax debt laws
Despite some believing a degree of leniency will be applicable, accountants have been urges to help clients get their tax debts under control ahead of changes to the ATO’s ability to disclose tax debt information to credit reporting bureaus or risk serious and inescapable consequences. The 2016-17 Mid-Year Economic included to key tax changes, one of which allows the ATO to disclose to credit reporting bureaus the tax debt information of businesses that have not effectively engaged with the ATO to manage these debts from 1 July 2017. The measure will initially only apply to businesses with Australian Business Numbers and tax debt of more than $10,000 that is at least 90 days overdue. CreditorWatch managing director Colin Porter said businesses that fail to address outstanding tax debts prior to FY2017-18 should expect their credit rating to be adversely affected. “The information that’s being disclosed is tax debts over the value of $10,000, which is actually in default” Mr Porter told Accountants Daily. “ Then it’s on their commercial credit file for five years. It’s a very SERIOUS default”.
Important dates to remember
Superannuation third quarter due 28th April
BAS lodgment: Paper due 28th April
Business portal due 12th May
Agent due 26th May
2016 Tax return deadline 15th May
April PAYGW Monthly 22nd May