Short-term vs long-term financing

Maintaining healthy cash flow can be challenging; between ongoing expenses and bills, poor cash flow can severely impact your customers, staff and bottom line.

Business owners need to understand the differences between short and long-term financing when developing a cash flow strategy.

There are various sources of finance available and each source of finance is useful for different situations. Choosing the right source and mix of financing options is crucial for good cash flow, so it is important to first determine your needs and then match a financing option to meet those needs.

Financing options are often classified into two categories based on time period: short-term and long-term. Below are the key differences:

Short-term financing
Short term financing (working capital financing) relates to the finance needs that arise to finance current assets – for a period of less than one year. Working capital is used in the business’ day-to-day trading operations. Short-term financing can help you to pay suppliers, increase inventory and cover expenses when you do not have sufficient cash on hand.

Depending on your business’ requirements you might consider using one of the following options:

Overdraft: extends your cash resources and protects your business’ credit rating.
Line of credit: funding when you need it, to be paid back when you have surplus cash – offering flexibility, value and control.
Business credit card: a convenient, fast payment method.

Long-term financing
Long-term financing options can help you invest in overall improvements to your business, for a period of more than 5 years. Capital expenditures, such as upgrading equipment, buying additional vehicles and renovating are funded using long-term sources of finance.

Businesses can use one of the following options:
Leasing: structuring a lease to match the useful life of the asset. This will help to preserve your cash and working capital for other uses.
Term loans (from financial institutions, government and commercial banks): allows you to accurately forecast your monthly cash flow through regular monthly payments.

Tips to building credibility as a leader

Quite often, an employee’s level of satisfaction can be traced back to his or her leaders. Indeed, research shows that only 49 per cent of employees trust their senior managers.

As all leaders should know, trust goes hand in hand with credibility. Credibility is something that all leaders must aspire to obtain, as it positions leaders as highly dependable sources of expertise and information.

Here are some suggestions new leaders can use to build their credibility:

Engage in active listening
When you’re responsible for managing people at work, tuning out of what they’re saying can be dangerous, as you risk missing important information like feedback or updates. If your staff also believe you’re not listening to them, they won’t confide in you in the future, which can prevent them from producing their best work.

Actively listening isn’t an easy task at first, but can be learned with a few healthy habits. Keep distractions to a minimum or move the conversation away from computers or mobiles when colleagues are speaking to you.

Get straight to the point
With studies now showing that humans have shorter attention spans, as a leader, when you speak to your team, cut to the chase to ensure they remember all the important parts. While you’re keeping things brief, make sure your team knows that you’re also receptive to questions and feedback.

Remain consistent
An important thing for leaders to think about is consistency. When you are consistent with your staff, you gain credibility. Therefore, make sure you can do what you’ll say you do. Before making any promises, consider if you can take it on. Knowing when to say no can create a balanced sense of priority among your team.

Converting property into super

Individuals can minimise capital gains tax (CGT) when selling an investment property where proceeds are contributed to superannuation.

Those who sell their property can contribute up to $500,000 as a non-concessional contribution into their superannuation, which means that no tax will be payable. Non-concessional contributions, or after-tax super contributions, are super contributions for which an individual hasn’t claimed a tax deduction.

However, since selling an investment property is a type of capital gains tax event (unless it was acquired before 20 September 1985), sellers will need to calculate their capital costs to add to the purchase price to establish the property’s cost base. The sales price minus the cost base will form their taxable portion.

Individuals who have owned the property for more than 12 months will receive a 50 per cent discount on the taxable portion. For properties owned in joint names, the taxable portion may again be cut in half. The remaining taxable portion is added to each owner’s taxable income for the financial year in which they exchanged contract.

To further reduce CGT, individuals should consider their eligibility to contribute up to $35,000 as a concessional contribution to super, as this can help lower a person’s taxable income by $35,000 a year and reduce their potential capital gains tax liabilities.

Individuals should keep in mind that proposed changes to Australia’s superannuation rules may affect this strategy since concessional contributions may decrease to only $25,000 a year.

Making most out of your LinkedIn profile

LinkedIn is usually the most important social media platform for B2B marketing which can also be a valuable way to recruit and network. It is also a great educational resource, as small business owners and entrepreneurs can learn from interacting with other business owners.

Like all social media sites, LinkedIn is a pretty crowded platform, so putting in a little extra effort to stand out can go a long way. Here are some tips for making the most out of LinkedIn:

Get your photo right
Your profile picture should be current, high-definition, and representative of your business persona. You should not use a photograph of you in a social situation if it does not accurately reflect what you do in the business world.

Make sure your recommendations accurately depict your achievements
Do not be shy about asking people for recommendations; that is what LinkedIn is there for. Similarly, going out of your way to give people deserved recommendations will help you to boost your network.

Be vocal
Write posts or start groups to talk about the things you are interested in. An active and presence is the best way for you to increase your exposure, and it is likely that you will learn something in the process.

Getting started with an SMSF

Starting a self-managed super fund (SMSF) may be a good idea for those after more control over investment choices and fund running costs.

However, those considering an SMSF need to ask themselves some key questions such as:

• if they can do a better job investing their super than the trustees of their existing super fund

• if an SMSF will be cost-effective compared with large super fund options

• if they are ready to take responsibility for the fund’s investment strategy

An SMSF can have no more than four members. All members must be trustees of the SMSF or directors of the trustee company (if a corporate trustee is in place).

Those who are an undischarged bankrupt or have been convicted of an offence involving dishonesty are considered disqualified persons. Such people cannot become an SMSF trustee.

SMSFs are regulated by the ATO, so those in charge need to meet compliance obligations such as lodging annual returns, storing fund documents, preparing paperwork and signing an SMSF trustee declaration.

Before trustees can arrange for their employer (or themselves) to make super contributions to the SMSF, the fund needs to be established. This includes:

• drafting a trust deed

• appointing trustees and admitting members

• applying for the fund to be regulated by the Superannuation Industry (Supervision) Act 1993

Those in charge will also need to draft an investment strategy and invest their super in accordance with that plan.

Those wanting their employer’s superannuation guarantee contributions to be paid to the SMSF need to check if they have fund choice.

Those who have fund choice must complete a standard choice form (SCF) outlining the SMSF’s details and give this to their employer.

The SMSF must have an electronic service address (ESA) which enables it to receive an electronic contribution data message from an employer. SMSF members who are self-employed do not need an ESA.

SMSF trustees also have to decide what happens to their super benefits from their previous super fund. Trustees can arrange to transfer those benefits to their SMSF via the ATO or arrange partial transfer using a form available from the previous fund. Before transferring existing super benefits, it is important to consider the implications the transfer may have on any life insurance cover from the previous fund.

ATO crackdown on work-related expenses

The ATO is currently targeting work-related expenses by taking a closer look at unusual deductions and claims that are higher than expected.

The Tax Office will be looking for expense claims that are much higher than others who are in the same occupation and will be contacting employers to validate these claims.

When claiming work-related expense deductions, taxpayers must ensure that the expense is related to their job; they were not reimbursed for the money spent and have a record to prove it.

Here are some things to keep in mind when claiming deductions:

Car expenses
You can only claim a deduction if you use your own car in the course of performing your job as an employee. You cannot claim the cost of travel between home and work as it considered private.

The ATO is focusing on the transportation of bulky tools as carrying unnecessary equipment is not a legitimate claim if equipment is already supplied.

Self-education expenses
You may be able to claim a deduction if your study is work-related or if you receive a taxable bonded scholarship. A deduction cannot be claimed if a course does not have a sufficient connection to your current employment.

Internet and mobile phone expenses
If you use your own mobile phone or internet for work purposes, you may be able to claim a deduction. If you also use them for personal use, you will need to apportion the percentage that reasonably relates to work use.

Recognising and rewarding staff

Acknowledging and rewarding the efforts of your staff can go a long way in ensuring employees are engaged and fulfilled within their role.

Recognition acts as a tool to reinforce desired behaviours and helps to create an environment where staff feel appreciated for their accomplishments. Rewarding staff does not necessarily need to be costly or a financial reward; often non-financial rewards can have a stronger impact.

Developing a reward system for both performance and behaviour is a great way to acknowledge employees and encourage them to work towards the business’ goals. Here are a few ways to recognise the contributions of your staff:

• Acknowledge the efforts of a staff member at a staff meeting.

• Post recognition notices on a section of your website.

• Send a personal email or card expressing your appreciation.

• Provide a small token of appreciation, such as a gift card to a coffee shop or a movie pass.

• Stop by the staff member’s desk to convey your appreciation.

Reinventing your business

Small businesses should always be open to the idea of reinventing themselves to stay relevant to today’s customers and marketplace.

Business owners who resist change and leave it too late to reinvent risk stumbling behind and at worst failing. Instead, businesses should focus on a proactive approach to growth for optimal business performance and success.

Making a commitment to reinvention before the need is obvious does not come naturally; it requires planning. Here are a few ways to make sure your business does not get left behind:

Continually forecast
Industries are continually shifting – competitors are introducing new products, customer needs are ever-changing and technology is transforming the way business was traditionally performed. Forecasting changes is essential to be a competitive leader in your industry. High performing businesses exploit existing businesses that have not yet peaked and recognise untapped markets. High performers also understand that remaining competitive means some form of risk taking is necessary.

Focus on strategy
Strategic planning is imperative to make reinvention possible. Businesses need to detect shifts in their industry ideally before they happen. The best way to predict these shifts is to involve line managers, frontline employees, store managers etc into the strategy process, as they often pick up on insights business owners can easily miss. For a business to reinvent itself, it needs a permanent strategy which continually scans the market for unsolved problems and untapped customer needs.

Invest in top talent
Successful businesses need teams of talent to run and grow the business effectively. Business owners need not only hire the right type of candidate but they must strengthen and prepare individuals for the challenges that will arise when reinventing. Businesses need to invest time into developing their employees to enable them to succeed in their work. By first looking at what their employees are required to do day to day, business owners can assess what factors are fueling (or limiting) their success.

ATO warns pre-retirees on SMSF tax schemes

The ATO has its sight set on individuals participating in an increasing number of aggressive tax avoidance and retirement planning schemes in self-managed superannuation funds (SMSF).

The Tax Office has launched Super Scheme Smart, an initiative designed to help inform individuals and advisers about illegal retirement planning schemes. The program is a result of an increase in schemes designed specifically to target those approaching retirement.

Individuals approaching retirement are most at risk, in particular, those aged 50 or over, looking to put significant amounts of money into retirement. SMSF trustees, self-funded retirees, small business owners, company directors and individuals involved in property investment are particularly at risk.

In addition to severe penalties, individuals caught using an illegal scheme may risk losing some of their retirement nest egg and their rights as a trustee to manage and operate a self-managed superannuation fund.

Improving your landing page conversion rates

Landing pages are different from general websites. They are single pages designed for single objectives, and are used to prompt a certain action or result. Unfortunately, there is no such thing as a ‘one size fits all’ solution when creating a landing page that will produce a high rate of conversions for a business.

Creating a competitive landing page depends on a variety of factors, such as the business’s target audience, the page’s purpose and the product a business is promoting. But regardless of these factors, there are landing page elements that need to be included no matter the business’s product, service or conversion rate goal. Below are several tips that businesses can easily use to help improve their landing page conversions.

Be consistent
Businesses should aim for consistency in the information they provide and the design of user experience on the landing page. Any data a business provides for the public, such as testimonials from ‘happy customers’ should be consistent across a business’s websites and landing pages. Users should feel comfortable exploring the landing page content in a manner that leads them to where the business wants them to go.

Stay focused
Businesses need to be clear about the goals of the landing page. Too much information can be distracting and may cause confusion for online users. Businesses should limit their landing page offers and promotions to only a couple of lines.

Use the right language
Language can have a huge impact on a business’s landing page conversion rates. Language that is too pushy or gimmicky can ruin the entire experience. Businesses should use phrases that are straight to the point and encourage customers to move in a certain way.

Include directional cues
Some businesses can lose potential customers due to them getting lost in the information provided. Avoid this by directing customers to where you want them to go using directional cues. Using arrows or reminders can direct customers to the information you want them to see.