Plan Your Success in 2016 Can you believe we are nearly at the end of another year? For some, 2015 was a tough year and it’s a good time to take a step back and look at what’s working in the business and what needs working on. One thing we all understand is, if you keep doing things the same way, at best you’ll get the same results. This time of year can be pressurised and frantic but if you want to take your business to the next level you need to make some time to do a review. Below are our top tips for a prosperous New Year: 1.   Plot and Plan To prosper you need to have a plan that includes reading future trends in the market. You  can then formulate strategies to minimise the bumps in the road and capitalise on emerging opportunities. Unfortunately most business owners fail to plan, sometimes because they don’t know where to start. We recommend you think about where the business is NOW, where you want the business to be in the FUTURE, and develop an action plan to identify the steps of how you’re going to get there. 2.   Know Your Numbers Knowledge is power and while a lot of entrepreneurs prefer the product development aspect of the business, you can’t afford to ignore the numbers. In business, without a financial road map or budget, all roads lead to nowhere. A budget lets you forecast your future position and you can measure and monitor actual performance against your projections. It keeps things ‘real, and makes you accountable. It forces you to think about your business, your financial assumptions and then gives you a reality check when you compare actual figures against your expectations. If you need a copy of our free cash flow budget template, contact us today. Here are some key financial questions that you need to know the answers to: a)   Do you know your seasonal revenue lumps and bumps? When do sales peak, when do expenses peak? What strategies do you use to balance out the troughs? b)   What is your cash flow (or available cash) right now? Are you going to need an injection of funds to get you through the quieter months ahead? There’s no point running to the bank for finance at the eleventh hour. They are typically slow to respond and an impatient business owner is a sure sign of a business under stress. c)   What are your working capital requirements?  This is particularly important during a growth stage of your business and you can’t grow your business if you don’t know how much money you’re going to need to fund that growth. Is Your Business Structure Relevant? If you haven’t reviewed your business structure for a few years, it could be time. Circumstances change and key events like marriage or a major asset acquisition can mean your old structure is redundant.  Structures that worked years ago may no longer be relevant and changed to tax laws, your asset position and personal circumstance can trigger a review. If you need help putting your plan together for 2016, please contact us today.   Is it Time to Turn Your Business into a Company? Many business owners commence operation as sole traders because it’ s the easiest and cheapest way to get your business started. However, as your business grows, you take on several employees and you win bigger contracts, it might be time to   review   your   business   structure and possibly turn your business into a company.  This is a significant decision and certainly something you would need to discuss with us because     incorporating your business attracts more regulations and higher costs. Of course, a company is not the only option and a structure like a trust or partnership may be more appropriate for your business circumstances. Here are a few potential benefits of turning your business into a company: Debt Protection One of the most obvious benefits of incorporation is the protection of your personal assets. As a sole trader or a partnership your personal belongings and private assets are on the line if you were to get into financial difficulty. By contrast, with a limited liability company that gets into debt and cannot pay, that debt remains the responsibility of the company. There are several exceptions to this rule including Australian Taxation Office debts but a lot of people incorporate for asset protection reasons. Of course this does not mean company directors can wreak havoc and rack up debts all over town because as a company director you can still be held accountable for breaches of the law. In fact, the Australian Securities and Investments Commission says directors are required to be honest and careful in their dealings at all times and must make sure their company can pay their debts on time and keep proper financial records. Note that unless your company has its own assets or a strong track record, you as a director might have to guarantee its debts anyway which means you’ll still be personally liable. Tax Many people are attracted to the flat 28.5% company tax rate (from 1st July 2015) and assume they’ll be better off. However, there is no tax free threshold for companies, so your business would have to be profitable enough to take advantage of the lower rate. Remember, the highest rate in 2015/16 for an individual is 45% (plus 2% Medicare Levy). This is an area we can advise you on and the advantage of the lower company tax is that you can retain 71.5% of your after-tax profits to reinvest in your business or help with your cash flow. From an administrative perspective you will need to pay yourself a wage from the company and before you convert to a company structure you need to understand the capital gains tax implications. For example, companies pay full capital gains when they sell an asset, however, individuals receive a 50% discount if they’ve owned it for more than a year. The good news … Continue reading On The Money (December 2015)