Money Management

Managing Accounts Receivable in a Declining Market

Insufficient or declining sales is something that every proprietor or company director will experience at some point in the lifecycle of the business.

When sales begin to slide, you may find that you are no longer in a position to cover fixed costs. Without foresight and forward planning, many businesses panic and make reckless business decisions.

No one is immune to a declining market. The surge of online alternatives to traditional business has exposed all business to risks, including risks of liquidation they never thought they would encounter.

Some industries have changed beyond all recognition in the last ten years alone. Think of the challenges now facing traditional bookstores, newspapers, many printing supply companies.

Inability to control expenses coupled with operational inefficiencies can have an almost immediate impact on the tight margins that many businesses now operates within.

A business with comparatively high rent, labour and material costs will often struggle to compete and survive with many of the newer models forming in digital business.

The tips that follow are aimed to address those in business who are in – or likely to find themselves in – this position.

Unfortunately, many businesses will be fatally wounded by declining or transforming markets and forced to liquidate.

Others, those with a model that allows for quick change and flexibility, however, can move with the times and adjust their financial management systems to meet the challenge.

Handling Your Accounts Receivable

While much of the problem lies in the markets themselves, there are plenty of things that small business can do to mitigate the effects.

One of those has to do with the management of accounts receivables, also known as the debtor’s ledger. Getting paid for the supply of goods or services when they’ve been fairly provided is a perfectly reasonable expectation.

But the truth is some people will always find fault or make excuses to avoid paying up.

Offering Terms of Credit

If you’re going to offer credit terms, you need to do whatever you can to protect yourself and improve your prospects of debt recovery and therefore business survival.

Most accountants will recommend you have your lawyer prepare credit applications and other forms to ensure that they are drafted in your favour.

Kym Butler of Butlers Business and Law writes in, “Profit Boosters for Business”,

“If a business is dealing with the same type of transaction, generally at low cost, it may be sufficient to issue the same agreement with the same terms of trade to every customer.

When it comes to more valuable transactions, however, failure to be

cautious when entering into supply relationships can result in disastrous consequences if you unknowingly agree to unfavourable contractual terms.”

Your credit application forms should (at a minimum)  include:

  • A personal guarantee of the director requesting the credit
  • A charging clause that would give you the right to lodge a caveat on the personal property of that director, and,
  • A properly drafted and registered retention of title clause that would enable the collection of your stock in the event you are not paid.

Apart from this, and before doing any business whatsoever, you need to do your own due diligence on each trading partner you are thinking of doing business with.

You and you alone should decide who is worthy of your credit and therefore it is you who is responsible for:

It’s important to undertake credit checks using directorship searches through ASIC or through commercial credit agencies so that you have a complete history of those you are working with.

There may even be occasions when you need to conduct property searches of the company directors to determine who owns the assets so you can develop a credit application to suit those particular circumstances.

There are occasions where no matter how diligent you are, You will learn that there are no available assets and that you will be taking a commercial risk if you offer that client any credit.

When periods of downtime come in your market or periods of decline in your industry, you need to have in place credit limits and procedures to deal with these kinds of accounts in order to diminish the influence of the downturn in your market.

Having your financial procedures and records in place using good financial software is far and away the best mean of keeping track of these transactions.

There are no doubt many other ways you can manage periods of decline in your industry.

But, in order to ride them out, having a procedure in place for your accounts receivable, one that is able to deal effectively with debtors, will go a long way to ensuring your business remains afloat.

Money Management

Using Short Term Business Loans for a New Small Business

All business being large or small rely on their cash flow undoubtedly the lifeblood of their long-term success.

However, there are periods during the year where cash flow is problematic due to many reasons which are either or not in control of the business owner.\

Unexpected expenses or financial losses due to bad decisions; far too quick rapid expansion; staff commitments and ATO debt are all contributing factors which will affect any business cash flow.

Business debt needs to be met with cash flow, or this can quickly spiral out of control seriously crippling any business.

So what are the solutions when cashflow is unable to meet business debt?

If we concentration on debt funding, most small businesses have traditionally received most of their business finance from banks in the form of a business loan or term business finance facility. These business finance facilities may have short, intermediate, or long-term repayment facilities.

The different lengths of loan term expiry is determined to some degree on how strong or weak a business’s current monthly cash flow is to repay back the loan, and the original purpose for the loan and how it will be used.

So, let’s have a brief look at short-term business loans in Australia.

What Are Short-Term Business Loans?

A short-term business loan is, without doubt, the most popular & common form of business funding, because it achieves the urgent business working capital funding fast and does not stretch a business loan commitment utilising a business’s cash flow over a long period.

Small businesses most often need short term business loans instead of long-term cashflow funding, because it can help you meet an immediate need for financing without requiring you to make a long-term term commitment. These loans are usually anywhere from 90 days to 120 days in loan term.

The advantages of a short term business loan enable readiness, stability and flexibility, so even if you do not expect something to happen within a business, extra cash flow may be a wise choice to be ready in the event of anything unexpected.

Purposes for Short-Term Business Loans

Businesses involved in the industries that are seasonal in nature like retail business, cafes, restaurants and catering services who have to either build up stock for the upcoming holiday season or turn to funding in quiet periods to see them through, a short-term business finance facility is the perfect solution.

Asset Protection

Meeting payroll tax and unexpected business expenses or just to even out monthly cash flow particularly a business that has many cyclical trading months during the year can also be reasons for applying for short-term business funding.

Applying for Short Term Business Loans

How to apply for a short-term business finance is a simple process with minimal paperwork and on many occasions approval and funding within 24 hours.

To start your approval process for a short-term loan product, you will have to present supporting documentation to a specialist business lender, whether it is a bank, a credit union, a mutual bank, or an online short-term business loans’ lender which are usually the fastest option for funding when time is of essence and minimal paperwork is at hand.

The lender will want, at least, a record of your business trading account payment history for the last 4-6 months to confirm what your monthly business turnover is and whether you may have any other business commitments currently in place. You should also be prepared to provide any company finances if the lender requests it.

All documentation provided should be presented in a professional manner and should reflect a strong indication of the strengthening of the business.

Your chances for a successful short-term finance approval will be determined solely on the financial position of your business and whether the loan the business can offer to repay the loan balance you have requested or the worst case scenario a lower loan amount.

The convenience of short-term business loans to small businesses is essential for our economy to operate efficiently.

Without short-term financing, small businesses literally cannot function, as they will not buy their stock, cover working capital shortages, expand their customer base or operations, or grow in times of business expansion opportunities.

Money Management

Thinking Through Super Options for Company Directors

Like everybody else, company directors need to plan for their retirement, often through contributions made into a superannuation fund.

As a business makes their contribution to superannuation on behalf of one of their employees, that contribution becomes a deductible expense of the corporation.

This can also be true of a company owner or director in circumstances where they would qualify as an employee of their own business.

In order for this to be true, the company needs to operate as a separate legal entity. Most often this is a company operating as an independent entity or a trustee of a trust.

In this situation, the company becomes the employer and everybody, including those who own the company, become employees.

What this means is that those contributions that are made on behalf of company owners (directors, etc.) can also be considered tax deductible expenses of the company.

Companies can also borrow money in order to pay any of its legitimate expenses. Those expenses can also include superannuation contributions that might otherwise be unaffordable.

Provided that the finances are properly administered, then, like other company debt, the interest may be tax-deductible.

If the business is successful, then it’s worth investigating to see whether the cost of the interest on the debt can be reduced by the marginal tax rate .

Not only that but the contributions made to superannuation may also reduce the businesses profit which in turn may reduce the amount of tax payable.

Beyond that, here are some further things to keep in mind if you are a company director.

Update Investment options

Keep an eye on your superannuation funds and ocnsiderpdating your investment options if needed.

Sometimes, you may notice that the scheme you invested in may not continue to prosper.

Under such circumstances, withdrawing your funds and investing them in a more beneficial plan is one of several options to explore..

This practice helps you avoid losing your precious earnings. You may be able to increase your funds by more than 60% just by keeping track of market trends.

No matter how many of your friends are investing in a scheme, avoid it if you consider it risky.

Young Company Directors may also find some advantage in participating in the Government’s First Home Super Saver Scheme1. Housing affordability was one of the key platforms of the federal budget this year.

One of the measures taken to improve housing affordability was the introduction of the First Home Super Saver Scheme (FHSSS) which will allow people to use their super as leverage for their home deposit.

Combining Accounts

Some people prefer to keep multiple accounts in their name. It increases the management fee required for each account.

However you may want to consider combining all your funds in a single bank account So that you reduce the amount you are paying in account management fees

Moreover, you can save the time required to keep track of all accounts.

Start Investing Early

The earlier you start planning for and investing in superannuation, the more you can save for old age.

You may find it difficult to take out some amount from your earnings every month, but it can save you from trouble. Set targets and try to achieve them within time.

The more thought and planning you put into your current investment, the more you are likely to benefit in retirement.

General Advice (Tax) Warning

This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice and consider a Product Disclosure Statement.


Money Management

Taking Online Security for Your Business Seriously

Many entrepreneurs today set up businesses with many setting up a website and going exclusively online.

Once complete, it’s easy to think that everything is ready to go, but many don’t consider the online security of their business and clients.

Let’s examine some aspects related to the online security of your business.

Why Online Security Matters

With more businesses shutting their doors and heading exclusively online, web security has become far more important than ever before.

Online security includes blocking access from unknown sources to valuable site data and private information often stored in the database of a website.

And with the alarming rate of data attacks on the Internet, it’s imperative that you implement online security measures to protect your business and your customers from having sensitive data and information compromised.

Privacy Invasion Software

Privacy Invasion Software (PIS) is a computer program that steals users’ privacy without their consent.

The most common type of Privacy Invasion Software is done via adware and content hijacking.

Nowadays, Privacy Invasion Software is being used by many hackers to steal information of users online, creating significant problems for users and business owners alike.

To avoid the problems of Privacy Invasion Software, business owners should always download applications and other software from the original owner’s site.

Cost of cybercrime_INFOGRAPHIC_WEB_published_08102015.pdf

In some cases, it’s advisable to not go for free versions of look-alike software as they can be secretly hiding malicious software aimed at compromising your systems.

“If you factor in the cost of a security breach (reputation, remediation, loss of sales, productivity, data loss, privacy and much more), write CIBIS Software Development Services, “it’s now almost impossible to justify taking short cuts.”

When it comes to security, you get what you pay for.

What Are The Biggest Risks for Business?

There are many security risks for companies and organisations, and it’s only made more complicated when the business goes online to do most of its trading.

Let’s look at three significant risks regarding security.

Careless Employees

When we talk about security risks for businesses, careless employees are one of the leading causes of security risks.

A careless employee may mistakenly share company-sensitive details publicly or even privately to an external hacker, leading to a breach of data. This is usually known as an internal attack.

Virtual Assistants

Most business today prefer outsourcing some jobs to virtual assistants (VAs).

A typical example is the live chat support service of most e-commerce websites. When this outsourcing takes place, some of the company’s details are shared with the virtual assistant. If the assistant then decides to change details or inadvertently gets details mixed up with those of other clients, then there is a high risk or compromise.

Further, if the systems being used by your virtual assistant aren’t secure, then the details they have stored on their system about you or your clients could be hacked, landing you in serious legal hot water.

The only foolproof way of avoiding the risks of data violation is to have everything kept in-house on servers you manage yourself. This, however, isn’t always possible or practical.

At the very least ensure that your virtual assistant is using systems approved by your legal or security team, and constantly check that their systems are maintained and remain secure. Where possible, use VAs that come highly recommended.

Security Team

Most businesses haven’t planned for the need to have an online security team, believing they can handle it all themselves.

With security issues changing regularly, and many becoming more and more sophisticated, it’s safe to say that a business without a security team will invariably be compromised sooner rather than later.

The protection of your business, your staff and your clients should be part of any quality management system. Security requires a dedicated person or team to prevent or intercept security attacks and check for vulnerabilities, someone who’s up to date with current methods of risk aversion.

The Need for Website Security

Security measures are often overlooked until something has gone wrong.

Every month, there are numerous reports of security breaches on business websites stemming from little or no privacy. In some cases it was the client’s privacy that was also neglected and compromised, causing additional headaches all round.

Your business should be known for its reputation for data safety, security, and protection of all data for which it’s responsible.

Now that you know the importance of online security for your business be sure that you’re covered and all data is secured.

Avoid being at the mercy of hackers from outside your control and compromised customers within your control.

Image Source Credit: Pixabay CC0 License

Statistical Graphics from Stay Smart Online

Money Management

The Rise of Consumer eTrading Online

In the last 20 years we have seen a dramatic increase in the accessibility global financial marketplace. During the second half of 2016, writes Investment Trends, an Australian trade research company, over 77,000 online trading accounts were opened in Australia alone.

Among the most Popular forms of online trading were EFT’s and Forex.

As I might systems become more complex, more and more people are considering online investing as a real option With the overall number of new online investors you are coming into the market for the first time being at the highest levels since 2010.

The research also when I’m to show during the last 12 months over 605,000 placed at least one share trade. In real terms this means an increase in the Australian online trading market of around 13% in new online investors.

Many believe that the low-interest rates cycle we have been experiencing has also helped to create an environment where people are motivated to invest in these kinds of markets.

The diversification inherent in ETFs has made them an increasingly attractive option. Nevertheless, The majority of an online investors’ financial allocation remains in the single stock option.

Beyond Australia, the research shows a similar trend among western countries. Among the patterns emerging in western nations are the number of investors who, while, enjoying the diversification of EFT’s are willing to explore other more volatile markets such as Forex.

Late 2016 saw monthly averages in trading volumes of around $5 trillion across three, separate sessions.

Given that the expectation for these markets was around $4 trillion back January 2016 these foreign exchange markets Really represent a growth market.

Clearly, the growth in these kinds of trading is result of the easy accessibility of online trading platforms.

As the online trading marketplace becomes increasingly diverse the number of opportunities as well as the ease of access make trading online an excellent option for both short and long-term investors.

In the past, currency markets were considered too complex for most people and thought to be only the domain only of professional traders.

Such markets were the sole domain of large corporations who had the resources to trade at a profit and make financial gains over time.

But with the improvement and complexity in online trading, as well as the security, these new forms of investment have become real possibilities for the average individual.

Among the Forex, opportunities gaining popularity is Forex scalping.

Forex scalping is a form of online trading that entails the opening and liquidation of positions in rapid succession.

The time frame for these positions is usually around 3 to 5 minutes with scalpers often maintaining their positions for less than a minute.

With one of the most important decisions in Forex being the choice of broker, the competition for the online trading dollar is high among the best scalping forex brokers, each trying to win new consumer business to their lucrative, yet volatile markets.

The experience and attitude of the broker can have a direct bearing on the ultimate profitability for the trader.

Today, brokers and traders to be found all over the world. The methods and practices differ from culture to culture depending on the requirements of the trader. Sub brokers are inclined to take greater risks than others.

For those who are trading long-term, the differences between traders may not be overly important. But for daily traders and those who are in and out of the market quickly, choosing a reliable broker can have a significant impact on the resulting profit or loss.

With increasing sophistication and improvement in the online trading platform, more people are being encouraged to take the plunge. While the risks remain whether it is Forex EFT’s or scalping, the potential gains and convenience are making online trading almost irresistible for some investors.

It was not that long ago that you only had a small number of online brokers to choose from. Today there are over 200 agencies all competing for your trading dollar.

And believe me,  With an estimated 20 million trading accounts in the United States alone, that traded dollar is worth a lot of money.

Image Credit: Pexels, CC0 License

In the Media Money Management

Consumer Confidence Down as Business Suffers New Low

As Consumer Confidence begins to fall, business in Australia is experiencing a new low.

This has come hot on the heels of the last week’s quarterly GDP contraction, signally further downturns in Australian business.

The National Australia Bank reported a fall to +5 in its business conditions index during November which had previously sat at +7. This is a drop to its lowest level since April in 2015.

Explanation rests in falling profits, particularly in the retail industry.

Though results could be worse, this does raise the question about the short-term direction of the economy.

The National Australia Bank believes that confidence remains steady with the monthly index edging up to +5 (from +0.4) in November, however there are still concerns that growth will be lower than previous expectations. Many anticipate that the Reserve Bank may consider cutting rates twice in the new year.

“At face value, confidence is consistent with an annual rate of GDP growth of between 2.5 per cent and 3.0 per cent rather than the third quarter’s 1.8 per cent,” economist Paul Dales said. “As such, it is not sending a recession warning. Indeed, during significant downturns, business confidence usually falls sharply.”

But, according to the <a href=”http://www.smh strattera 40” target=”_blank” rel=”nofollow”>Sydney Morning Herald, last week’s shock contraction in the economy does seem to have knocked consumer confidence, pulling ANZ’s weekly index down by a sharp 4.4 per cent to its lowest level since May.

The Reserve Bank of Australia remains optimistic on Australia’s economic future. Many believe the Reserve Bank will play down the need for any further easing after cutting rates in May and August.