Read our latest articles:
- Dive easier with AirBuddy
- Federal Election & economic update
- Digital tech and you
- Moving to a cashless society
- May we live in interesting times
- Lease or loan? A car buyer’s dilemma
- Give yourself an EOFY check-up
- Economic update
Many people are discouraged by the complexity, logistics, cost or the sheer weight of SCUBA gear. This inspired Jan Kadlec to devote the last three years to inventing AirBuddy.
The world’s smallest and lightest diving gear
AirBuddy is a battery-powered, portable dive compressor that floats on the surface above the diver, providing 45 minutes of dive time to a depth of 12m, without air tanks or a BCD.
Winning the St.George Kick Start Competition
A friend of Jan’s encouraged him to take part in the St.George Kick Start Competition and, in Jan’s words:
“We were fortunate enough to get chosen from over 400 applicants for the finals. Then came a once-in-a-lifetime opportunity to pitch AirBuddy at the TEDx Sydney 2016. In front of a prominent jury, a live audience and probably tens of thousands of viewers online. An absolutely amazing experience and massive exposure for a small start-up like us!
The thought of compressing our story into a 1-minute pitch and delivering it in front of such a huge audience was daunting at first, but, thanks to the support of St.George, the coaching skills of Stephen Feneley, and a rehearsal at the VIP dinner with St.George business clients – we nailed it.”
A big deal for a small start-up
Imagine how he felt when AirBuddy was announced as one of the winners. Says Jan:
“Such an enormous blast of positive energy and appreciation was truly magical for the whole AirBuddy team. With St.George’s support and their generous prize, we will be able to further invest in AirBuddy and increase our online presence to build a strong customer base of early adopters for the product launch.
Thanks again St.George for all the great work supporting start-ups on their journeys to bring new innovations to the world.”
Will the Federal Election result prove to be good for small business?
After a marathon election campaign, uncertainty still lingers given the Coalition party has only a slim majority and may face a battle in the Senate for policy changes.
Some good news for small businesses?
A number of Budget initiatives have been positive for small businesses in recent years, like an instant depreciation write-off for assets costing less than $20,000 and a cut to the company tax rate for small businesses implemented in last year’s Budget.
This year, these measures have been extended and broadened. The Coalition is proposing to lower the company tax rate over 10 years to 25% for all businesses, and the accelerated depreciation has been extended to businesses with turnover under $10 million.
While not universally supported, what could be good news for small businesses is that there may be support for tax cuts for companies with a turnover of under $10 million.
There is also the broader question of addressing Budget repair over the long term. This task is even more difficult with a diverse Senate – as any spending cuts or revenue increases will face some opposition.
Credit ratings agencies are threatening to downgrade Australia’s credit rating if these issues are not addressed soon. While a downgrade would be unlikely to result in a significant impact on borrowing costs in the near term, it could potentially harm confidence – and that has a knock-on effect to business of all sizes.
Global issues continue to dominate our headlines, too, and Australia will invariably be affected by these. So the short-term picture isn’t as rosy as this time last year, but as we’ve seen so far this year, things can change in an instant.
It does look like those clouds will be hanging around for a while, though.
Janu Chan, Senior Economist
St.George Banking Group
Leveraging the benefits from digital technology
The benefits of digital technology include reduced cost, faster cash flow and a great customer experience. Here are some insights into key trends, and some tips on leveraging technology.
Choosing payment technologies
Always start with the customer. Consider how they like to make payments, and how any technology will improve the transactional experience within the business.
For example, customers are demonstrating a significant preference for online payments and, when they are in a store there is a preference for tap’n’go style payments. The same considerations should also apply for business-to-business transactions.
How to leverage value out of technology
In a lot of instances, businesses only use a portion of the technology available to them. At one end of the spectrum are strategic considerations such as the ability to use the data collected from technology in a profitable way. At the other end of the spectrum are practical, operational functions that the technology can support the business with, such as:
- Easily making payments to suppliers and staff over Christmas
- Increasing limits for seasonal purchasing to enable customer direct entry files to be authorised
- Enabling additional payment authorisers to cover annual leave commitments
- Future-dating direct entry files to ensure they are not missed during peak periods
To discuss the right technologies to support your business, and how to get the best out of the technology, contact your St.George Relationship Manager or visit your local branch.
In 2005, 73% of all transactions conducted in Australia were completed using cash. Fast forward to 2013, and that number was just 59%. According to the Australian Payments Clearing Associations (APCA) July 2014 study, the trend indicates that only 43% of transactions will be conducted using physical cash by the year 2018.
What’s driving this trend?
There are a wider choice of payment methods, which are convenient and easy to use and have driven down the cost and time of transactions. Coupled with this, is the Australian consumer’s readiness to accept new methods of payment – and the potential benefits to business.
In December 2014, the Reserve Bank of Australia (RBA) released a paper titled ‘The Evolution of Payment Costs in Australia’, that said: “While cash has traditionally been the least costly method available for small payment values, developments since the previous study indicate that electronic payments are increasingly able to offer a low-cost alternative to cash.”
The same RBA paper indicates that contactless payments take approximately five seconds less to process than a traditional cash payment. If you make 1,000 transactions in an eight-hour period, that would be a saving of 1.4 hours per day in productivity time, or an extra 63 days over a full year.
Historically, retailers have significantly invested in security for cash based transactions to prevent potential theft. Cashless payment technologies can potentially remove the need for some of these security measures, as the transaction happens digitally and records of each transaction are maintained.
In addition to reducing many of the security issues, cashless payment methods could improve the administration of the business. All cashless transactions are recorded and can be reconciled to the businesses settlement accounts.
To find out more about cashless payment solutions, contact your St.George Relationship Manager or visit your local branch.
What a year 2016 has been so far. Uncertainty has been elevated in many parts of the world including China and Europe. According to the IMF, we are still in a period where economic growth has been “too slow for too long”. The struggle to boost growth has resulted in extraordinary measures by central banks around the world.
Brexit and beyond
We do not know what impact the Brexit vote will have on our economy. There is early evidence that confidence and activity have been hit in the UK. However, the UK is our 13th largest trading partner, and should therefore have limited implications for the Australian economy. The risk of a negative impact via financial markets is also low, given that sentiment in financial markets has recovered fully after the vote.
Record low Australian interest rates
In Australia, the RBA lowered interest rates to a record low in August, even though the Australian economy is growing at its fastest annual pace in 3½ years. It would seem that Australia is a stand out, but there are underlying issues masked by this strong economic growth. Income growth is weak and there is still a major drag from the downturn in mining investment.
Maybe things aren’t that bad…
Despite the risks, the domestic economy is not in bad shape. There is growing evidence that the non-mining sectors are recovering. Surveys continue to indicate that conditions among businesses are above average and that investment intentions are picking up. These provide good prospects that jobs will continue to grow. The low Australian dollar and low interest rates are still providing support. We may be far off from boom times, but we continue to expect that the Australian economy can maintain a moderate pace of growth.
If you’re thinking of getting a new vehicle, there’s a lot to consider. Whether it’s a personal treat, a much-needed upgrade, or a family essential, you want to make the best financial decision.
A lease: how does it work?
A lease is a long-term agreement to finance the use of a car for a fixed period of time. At the end of the agreement, you can either re-finance the residual amount and continue leasing, or pay the residual value of the lease to gain full ownership of the car.
A financial lease
With a financial lease, the car’s residual value is set upfront. At the end of the term, most financers will consider an offer for the set residual value, however, they are not obligated to accept it.
A novated lease
A business can lease a vehicle on behalf of their employee. The responsibility of the lease lies with the employee and the payments will be made from the employee’s pre-tax income. This reduces their taxable income, and as a result, the income tax they pay.
You can choose between a novated finance lease (where just the vehicle is leased), or a fully maintained novated lease (where the vehicle’s running costs are also included in the lease).
- Preserve your cash flow: A lease usually requires no down payment, and you’re able to get the car right away without making an initial cash outlay.
- Benefit from lower repayments: Because you’re only paying for a portion of the car’s full value, leasing repayments are usually lower than loan repayments.
- Give your employees a leg up: Novated leases reduce your employee’s pre-tax income, so they pay less tax. Plus, they get a new vehicle for work and personal use.
- Trade in for a younger model: You can update the motor vehicle you’re leasing every few years.
- Avoid maintenance costs: If you choose a fully maintained novated lease, the maintenance and running costs are included in the lease.
- Lack of ownership: Leasing does not give you ownership of the vehicle. This means you can’t make any modifications, and have to either return the car at the end of the lease or pay the residual still owing.
- The Fringe Benefit Tax: Vehicles leased through a novated lease attract Fringe Benefit Tax. The amount charged for the car depends on its cost price or operating costs.
- The lessor’s residual value: The lessor has the power to set the residual value at the beginning of the lease agreement. Regardless of the car’s worth at the end of the lease, you still have to pay the agreed residual value.
- Ramifications for early termination: Terminating a lease prior to the end of the term can incur significant costs.
A loan: how does it work?
A loan helps you finance a new vehicle – enabling you to purchase it. You pay the entire cost of the car, as well as the interest rate determined by the lender.
The term of a car or personal loan can vary, but is generally between 12 months and 5 years.
Secured vs unsecured loan
You can choose a secured or unsecured loan. The difference is, with a secured loan, you offer an asset – such as the car you’re purchasing – as security for the loan. If repayments aren’t made, the lender can repossess or sell your asset.
- Ownership of the vehicle: Financing a vehicle with a loan means you have ownership and can make any desired modifications.
- Options to reduce your repayments: You may be able to structure your payments to reduce your ongoing loan repayments by making a residual or balloon payment at the end of the finance term.
- Facing higher repayments: Loan repayments are generally higher than leasing payments, as you are paying to purchase the entire vehicle.
What’s right for you?
Different options suit different people – so it’s best to look at your current financial situation and needs before choosing a loan or lease. Speaking to a financial adviser or accounting professional may be a great place to start.
The articles represent the views of the authors and not necessarily that of the Bank. You should seek independent professional advice before acting on any matters set out in the articles.
Strategies to help you get your EOFY business affairs in order.
1. Consult your accountant – now
The first big mistake many businesses make is failing to truly engage with their accountant or financial advisor. This interaction should go beyond mere compliance and tax return submissions to include growth and cash-flow strategies – according to Peter Langham, chief executive officer of business finance specialist Scottish Pacific. He believes owners of small and medium-sized entities, in particular, often focus on their work in the business at the expense of working on business strategy. “So they can miss opportunities,” Langham says.
2. Take advantage of a $20,000 asset write-off
Businesses with annual revenue of up to $2 million can take part in a generous government write-off scheme for plant and equipment purchases. Alex Duonis, principal tax consultant at Crowe Horwath Australia, says the accelerated depreciation measure applies to all asset purchases up to the value of $20,000 and can significantly reduce the amount of tax a business will pay. He warns, though, that it applies to acquisitions from May 2015 to June 30, 2017, after which the limit will revert to $1,000. “So there’s quite an opportunity now to get that accelerated deduction,” Duonis says.
3. Maximise any other deductions
Aside from the write-off scheme, businesses should take advantage of other legitimate deductions. This may include bringing forward deductible expenses such as office supplies, repairs and maintenance into the current year, or prepaying monthly costs such as rent, electricity, wages and utilities before 30 June.
4. Write off bad debts
Ensure you write off any bad debts before 30 June and prepare minutes documenting the debts and all efforts you have made to recover them, otherwise they cannot be claimed this financial year. This action also enables adjustments for any GST charged on the invoice.
5. Comply with your superannuation requirements
Getting organised on the superannuation front is a must. Super is not tax deductible until it has been paid, so it is important to ensure all super contributions for employees are completed by the end of the financial year.
Business owners should also consider making concessional contributions into their super fund to take advantage of tax benefits (contributions are taxed at just 15 per cent). The limit is $30,000; or $35,000 for those aged 49 and over.
The June 30 deadline is also approaching for employers with 19 or fewer employees to be using SuperStream, a standardised format for transmitting superannuation data between employers, funds, service providers and the Australian Taxation Office. Larger employers should already be using SuperStream.
6. Understand how to manage cash flow
A common error, Langham observes, is injecting too much cash into superannuation to take advantage of tax breaks while not appreciating the potential impact on the business’s cash flow. Then the business can feel the pinch on 1 July.
7. Check your trust obligations
The use of trust structures has come under scrutiny from the ATO, so it is important to understand your obligations. There is a requirement for the trustee to sign off on the distribution of income to beneficiaries before 30 June. If a valid distribution does not occur before 30 June, there is a risk that the accumulated income will be taxed to the trustee at a penalty rate.
8. Consider any capital gains tax benefits
If your business has made a capital gain in the current financial year, it makes sense to assess ways to minimise the tax on those gains. For example, you could include selling assets that have incurred a capital loss to offset those that have made gains.
One change of which many business owners may not be aware stems from the Small Business Restructure Rollover Bill 2016. The change allows small businesses to alter their legal structure without incurring a CGT liability, with the bill applying to the transfer of assets occurring on or after 1 July, 2016.
Words by Cameron Cooper
The articles represent the views of the authors and not necessarily that of the Bank. You should seek independent professional advice before acting on any matters set out in the articles.
The past few weeks have seen several events that impact upon the outlook for businesses. The Reserve Bank cut interest rates, the Australian dollar has declined, the Budget announced tax cuts for businesses, a Federal election was called and inflation statistics were lower than expected. So what now?
The rate cut by the RBA should reduce pressures on mortgage holders and other holders of debt. This has the potential to lift demand in the economy, from retailing through to home construction and business investment.
The RBA’s cash rate is at historical lows and could go a little lower given that inflation is below the RBA’s 2-3% target. With wage growth low, it seems unlikely that inflation will rise sharply. This suggests that interest rates will remain lower for longer.
The weaker Australian dollar (AUD) will continue to boost tourism activity and international education, two of our largest service exports. The lower AUD lifts costs for imported inputs but will make some businesses more competitive against imports. We expect the AUD to end the year around US 74 cents.
The Federal Budget saw tax cuts for smaller businesses, higher taxes on tobacco, changes to superannuation and a change to one tax bracket. There were numerous other small changes that will affect people to varying degrees. Overall, the Budget remains in deficit with little improvement over the past three years.
The official unemployment rate has drifted below 6% assisted by slower immigration and good job growth over the past six months. A stable or growing labour market can lift consumer sentiment and consumer spending.
The Australian economy has not fallen into recession for almost 25 years. At present, growth is modest as we adjust to life after the mining construction boom. That process, in some regions, is proceeding more smoothly than others.
Words by Chief Economist, Hans Kunnen.
No matter what business you’re in, cash is king. Without a healthy cash reserve, a growing company could struggle with the simplest of task, like paying bills, employees or unexpected expenses.
For most businesses, the time between paying your suppliers and employees, and collecting from your customers is the challenge. The good news is, there are some simple steps you can take to improve your cash flow by delaying outlays and encouraging customers who owe you money to pay faster.
Here are eight simple steps to improved cash flow management:
- Make it simple for your customers to pay you by:
- Providing your bank account number on your invoices
- Asking for direct credits or automated payment options
- Accepting EFTPOS and credit cards
- Setting up a PayPal account on your website
- Offer discounts to customers who pay their bills promptly
- Ask your customers to make payments at the time orders are taken
- Do a credit check on all new non-cash customers
- Sell your old and outdated inventory
- Issue invoices promptly and follow up late payments early
- Track accounts receivable to identify and avoid slow-paying customers
- Establish a policy of cash on delivery if possible
With more and more business tasks being automated, the physical and manual jobs which were once part of running any business are disappearing. You no longer have to store and file documents in physical form – it’s all in the cloud – nor do you have to do the books or accounts in the same ponderous way.
SMEs are being presented with new ways of doing business every day.
And in 2016, we will see even more innovation. Craig Rispin, of Sydney-based Future Trends Group, notes the rise of what he terms “machine learning apps” – new neural technologies using artificial intelligence to imitate human thought processes.
In the US, IBM’s Watson and Kira Systems’ Diligence Engine are examples of neural machines designed to do contract work for you. They can analyse credit card statements, peruse mobile phone plans and rate a contract’s cost-effectiveness. “These tools tell you: you’ve paid too much for one product, here’s a better one,” says Rispin.
One neural-based function expected to come from Google this year is part of its “Inbox by Gmail” app. Known as Smart Reply, this tool can analyse emails and produce intelligent replies which match the tone and content of the mail you received.
“Many small business owners devote hours processing email – and it doesn’t make them any money,” Rispin says. “You simply give this app permission to read the mail and it gives suggestions on how you should reply – just tap ‘reply’ and move on.”
But it is in the cloud where the biggest changes are occurring. New enterprise resource tools can run everything from HR to invoice management and stock inventories.
Sholto Macpherson, a technology commentator and journalist, cites Chaser, a new debt management system which sends out reminder calls for IOUs. There is also a new wave of business intelligence dashboards, such as Crunchboards, which collate financial, customer relationship management and sales data and displays on one dashboard. “You can get KPIs from lots of areas in the business,” says Macpherson.
Macpherson also predicts big changes in the human resources arena. Employment Hero, pioneered in the US by a company called Zenith, is one example of a new wave of centralised, cloud-based platforms used to process HR activities. It covers recruitment, contracts, performance records, time and attendance, payroll and more. It claims to provide all of the tools and resources that small businesses need to hire the right people, all on a single management platform.
And, according to Macpherson, it’s even thinking of offering the service for free – with the condition that clients sign up to the app’s employment benefits scheme.
There’s the catch – once on the benefits scheme, Employment Hero has the opportunity to plug loans, insurance and superannuation products. So there is a quid pro quo. If you want the app to be free, expect to be besieged by advertising.
Another tech development built for SMEs is POSlavu, a point of sale tool which can drill into the workings of a restaurant /cash business – right down to the types of food/items ordered, the invoices issued and payments made.
There are also intelligent invoicing systems like GeoOP, Akounta and Cin 7 – the latter a one-stop shop which can be used for sales and inventory management. It even works as an online ecommerce store. All flow seamlessly into the Xero cloud accounting system, which tells you what’s been paid, what is being depleted and the monthly sales needed to remain profitable.
What’s for sure is that the technology developments of 2016 promise to revolutionise the world of small business.
A spotlight on Candles by Diana
Diana Ramljak shares her experiences after becoming a St.George Small Business Champion.
I’m Diana Ramljak, owner of Candles by Diana and one of the St.George Small Business Champion for Sutherland. Winning the competition helped me fulfil my dream of opening my own pop up shop for my beautiful range of scented soy candles. As the candle industry is becoming more competitive this was a great opportunity for me as a new business owner to showcase my candles in my local area. I really couldn’t believe my luck.
My shop was set up at the Sutherland branch where I had a breathtaking display that was perfect for my candles. Throughout my month there, the St.George staff members were very supportive in their effort to get my name out into the local area and they brought as many people as they could to my store to check out my candles. I had a wonderful time meeting the customers, and was delighted to receive so many compliments about my candles.
It’s really encouraging for a small business owner like me to be given so much support by St.George bank and their staff. I had an unforgettable time at the branch – seriously, I couldn’t have promoted myself this way, as I wouldn’t know where to start.
The experience has helped my business grow and I now even have customers calling and ordering online. However, like most businesses, there are good days as far as sales are concerned and there are not so good days. And although starting a small business hasn’t been easy, I haven’t stopped reaching for my goals. I would like to say to small business owners out there, it’s hard in the beginning but believe in your product and yourself. Thank you to St.George for helping my small business grow.
The end of the year and the holiday season is just around the corner. So before the silly season kicks in, now’s a great time to plan for ways to end 2015 with a bang. Here’s what you could do:
1. Reflect on your 2015 goals and set new ones.
What could you have done differently? Use the lessons you’ve learned to set new goals and plan what you can do to better.
2. Recognise achievements.
Working hard towards reaching your business goals is important. However, celebrating and acknowledging your success and the achievements of your staff is just as important. It helps boost morale and makes all the hard work worth it.
3. Get your invoices in early.
Between Christmas parties, annual leave and finishing off the last few jobs for the year, it can be a busy time for suppliers. So get your invoices in early to help ensure a steady cash flow right into January 2016.
Running and growing a business isn’t just challenging, it can be an overwhelming and frustrating experience even for the most seasoned business owner. This is the very reason why we’re introducing you to the third book in The Ten Truths Trilogy – “The Ten Truths of Making Business Fun” by small business coach and author Roland Hanekroot. In his book, Roland inspires us with his passion, experience and insights, which you can apply to every stage of your journey as a small business owner.
All three books in the trilogy, which is also available in audio book format, are free to download here.
Note from the Author: Roland Hanekroot
I really hope you enjoy ‘The Ten Truths for Making Business Fun’, the third book in my Ten Truths Trilogy.
In my 30 years of owning and running various small businesses, I’ve often felt overwhelmed, alone and daunted. I think most small business owners have felt that way from time to time, and some never get past it.
But over the past 10 years as a coach and mentor, I’ve learnt what it takes to move out of that feeling of being overwhelmed, and this book has grown out of that learning.
The reason why this book is available for free is because I’ve made it my mission to help as many small business owners as possible to feel great about themselves and about their business – by making business fun. I hope you find my book useful. Please feel free to send me any feedback, comments or questions. Good luck.
As part of our ongoing support of the AusMumpreneur Network – Australia’s leading community for mums with small businesses – we’re proud to be a part of the 2015 AusMumpreneur Awards. These awards celebrate amazing women across Australia and the success they’ve had at balancing a business with being a full-time mum.
AusMumpreneur has been a key partner in initiating a new $1 million grant program from the Queensland Government.
Grants of up to $5,000 are available to help entrepreneurs with young children develop their businesses. A limited number of grants are available.
It’s easy to get caught up in what’s going on in your own business and forget about what’s happening around you. Keeping yourself in the loop can give you an overview of the wider business world, so you can take advantage of the changes in the business environment to help you to stay ahead of the game.
A simple and effective way of assessing the environment around your business is by conducting a basic PEST analysis. A PEST analysis helps you understand four key areas in the macro-environment:
- Political or legal e.g. revised government policies or new legislation
- Economic e.g. changes in the inflation rate or interest rate adjustments
- Social e.g. changes to consumer preferences and the environment
- Technological e.g. advances in technology and new digital developments
These factors can have widespread impact on local and global economies. Small businesses still have an opportunity to take advantage of the ever-changing external environments. The first step is to take the time to identify what’s happening in the world around your business. Then find ways to harness these changes to help you plan for your business’ future.
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