The first quarter of the 2010/11 fiscal year is over. Christmas is around the corner and we are proud to introduce our first edition of e-newsletter. Following late practices and trends on the financial market Talbot’s have been busy with making sure that as a part of our valuable clients you receive the most useful tips and tool for your business growth. Before finishing off 2010 the year, it is always a good idea to review your business' activities relative to variety of issues, such as:
- financial performance - actual versus budgets;
- key performance indicators;
- benchmarking your business against comparable businesses or against industry benchmark;
- debtors' days outstanding;
- stock and work in progress levels;
- stock turn rates; and
- cashflow position.
How are current events affecting your business?
- Interest Rates - there is speculation that this month's rate increase by the Reserve Bank will not be the last. Have you factored in the increase in interest costs in your forecast?
- Exchange Rate - the relationship of the Australian versus US dollar is in an abnormal situation. This is the first time in 28 years that there has been parity (or near parity). If you are an exporter, it will be affecting your business. Should you be taking currency contract covers?
- Consumer Law Changes (commencing 1 January 2011). Have you reviewed how the changes will affect your business?
- What does your forward order book look like?
- There is evidence of higher inflationary pressures. Are these affecting your business?
- There are still potential problems in Britain, Europe and the USA which could cause upheaval in international financial markets. What can you do about all of these factors?
- Debtors - Now is an appropriate time to review your debtors, especially debtors' days outstanding. Have you done all that you can to reduce the debtors' days outstanding? Should you be talking to your bank, or a debtors' financing/factoring organisation about raising debtors' finance?
- Now is a good time to review your cashflow forecast, factoring in higher interest charges.
- Its good management practise to brief your bank on the performance of your business for the first quarter and present a summary of your expectations for business activities in 2011.
If you would like our assistance in conducting a review on your current business performance, please do not hesitate to contact us.
The Australian Taxation Office's benchmarking process is now being used to check taxation assessments. SMEs need to keep accurate, clear records of their business affairs to satisfy taxation officer's reviews.
If you fail to keep proper records and the business' financial performance is outside the benchmarks established for a particular industry, then the onus will be on the individual operator to prove that the Australian Taxation Office should not apply the industry benchmarks to that particular small business. This will prove to be extremely difficult if proper records have not been kept to support transactions for the business. The ATO is using the benchmarks business evaluation as part of its monitoring of the "cash economy". The ATO have instigated a program whereby thousands of small businesses will be monitored over the next 12 months and, if a business appears to not be performing within the "norm" established by the ATO benchmarks, then the small business owner will probably be subjected to a "finely tuned" audit.
The ATO has issued guidelines as to how they will undertake benchmarking audits. These include:
- a letter will be sent to the taxpayer, with a copy to the tax agent, advising that the taxpayer's business is outside the benchmarks for that particular industry;
- if deemed necessary, the ATO will request the client's records be submitted to the ATO for review. If the records are found to be acceptable there will be no further action taken by the ATO. (This highlights the necessity to ensure that proper records have been kept of all business transactions).
- should the ATO deem that records are inadequate, the taxpayer will be advised that he/she will need to produce further records to support the variation from the ATO's benchmark for that industry. Without proof, or other compelling reasons, the ATO will then apply the benchmark to determine the taxpayer's assessable income.
- if a small business receives a request from the ATO, relative to a benchmark audit, the taxpayer will have 14 days to respond to the request.
If you have any concerns as to how your business will perform against the ATO's benchmark for your industry and you would like us to conduct a review of your business systems and records, please contact us.
For more information contact us for a copy of the paper “Australian Taxation Office Small Business Benchmarks”.
From the 1st January 2011, Australia will have a single National set of laws for consumer protection. The new Federal Legislation replaces the individual legislation previously held by each State and Territory. There are three key areas in the National Consumer Laws affecting small businesses, these include:
Unfair Contracts: If a clause is unfair, it can be struck out by a court. It is recommended that you review the wording of your contracts, including warranties and conditions of sale.
Consumer Guarantee: This covers items such as remedies, refunds and fixing defects.
Best Practice Reforms: This includes mandatory cooling off periods and clauses relating to lay-by sales.
The National Consumer Laws are monitored by ACCC, ASIC (Australian Securities Investment Commission) and the State Consumer Departments. There are substantial penalties that can be incurred for breaching the National Consumer Laws.
The government has indicated the benefits for small business from the National Consumer Laws are reduced compliance costs, especially relative to businesses that are trading in various parts of Australia, because they will now only have to comply with one set of national rules. This should provide a more level playing field for businesses.We recommend that you have discussions with us and we could put you in touch with a relevant lawyer to review future effect of the National Consumer Laws on your business' operations.
Talbots Team wishing you all the joys of the holiday season and a Happy New Year!
