Tips to speed up invoice payments

Taking care of invoice and billing payments can often be an onerous task for many small businesses. However, very few things are more important in the business industry than getting paid on time, since delays in payments can disrupt a business’s cash flow quite seriously.

Business owners looking for best practice tips to get paid on time should keep in mind that often the most effective solutions are usually the most simple. Owners should make sure that their invoices are accurate, easy to read and include information such as:

• how to pay the invoice

• a clear description of goods or services provided

• the details of any discounts and how they were determined

• information about any outstanding payments

• delivery charges if applicable

If any queries should arise about the invoice or payment, owners should handle them fairly and quickly.

Making only a few simple adjustments to invoices can speed payment from customers so owners can focus more of their time on their business than on their bills. Some techniques to speed up payments include:

• Confirming the correct location and contact details so the invoices reach the right person.

• Clearly stating on your invoice that you reserve the right to charge a set late fee for overdue invoices.

• Contacting customers to tell them what corrections or adjustments are being made to their invoice before sending the amended invoice.

• Quoting any relevant customer reference number customers have provided.

• Including a credit card or online payment option.

Encourage employee engagement

Employee engagement is more vital than ever before to a business’s success and competitive advantage. Employees have greater flexibility on where, when and how they are working, so businesses need to keep their workers motivated and engaged. It is also more cost efficient for businesses to retain valuable employees, rather than having to pay the prices associated with recruiting new workers.

There are many factors that can impact an employee’s engagement; however, there are three key drivers. Engagement is affected by the employee’s:

• relationship with the immediate supervisor

• belief in senior leadership

• pride in working for the company

Traditional employee engagement programs involved surveys and reports which quizzed employees on whether they found their work meaningful, and were engaged in what they were doing for the business. However, employee engagement should be a stronger focus in business. It should not be a monthly survey; instead it should be a goal that managers and employers work towards every day. There are four key areas that managers and employers can focus on daily to encourage employee engagement:

• treat all employees with respect

• give credit when it is due

• communicate clearly, consistently and often

• offer benefits

Get the most out of your business insurance

No matter how hard owners may work to avoid them, disasters are an unavoidable aspect of life, and can strike a business at any time. Whether they take the form of IT system failures, floods, fires or earthquakes, unfortunately there is almost nothing a business owner can do to ensure that their business will be 100% protected from a crisis.

However, when it comes to claiming business insurance for a disaster, there are some ways to make the road to recovery run a whole lot smoother.

Take out adequate cover
Underinsurance can often be an issue at claim time since many small businesses mistakenly renew their policies without updating their cover. Hiring more staff, acquiring new property, stock and contents, increasing your revenue or taking on additional contracts means that a business’s policy must be updated. This includes any new purchases made under the revised small business tax write-offs.

Gather supporting documents
The more information a business owner can provide to their insurer, the better. This includes copies of receipts, financial records, photographs (if possible, before and after the disaster) and asset registers. Owners may want to consider keeping these records somewhere other than their business premises for extra protection, such as with the business’s accountant, backed up on a portable hard drive, or stored in the cloud.

Be patient
Some circumstances in disasters can slow down the claims process. For example, minor damage to a commercial vehicle can normally be fixed in a week, whereas major damage to a building will take a longer period of time to repair. If items have been stolen, the time taken to replace them depends on how easy they are to replace. Repairs can also be slowed down if there is a higher demand for builders or materials following a major disaster.

Splitting your super

Super splitting is a sensible, simple and strategic way of dividing contributions, managing the transition into retirement and maximising income. It involves transferring concessional or tax deductible contributions from the account of a fund member to their partner.

It is particularly beneficial where there is a reasonable age gap of around five years or more, or where there is a difference in incomes between the partners. It is also a great way of building up the super balance of a partner on a lower income, such as a spouse who is out of the workforce for several years raising children.

Splitting can also be used to obtain early access to the super of the partner who reaches pension age first. This can help preserve accumulated funds as the working partner continues to contribute.

Splitting contributions to a younger spouse also improves your Centrelink position. Although it is not an instant fix, it can be valuable if used as part of a long-term strategic plan for retirement.

Super splitting is done by completing a short form that is supplied by the pension provider, or through a certified financial adviser. Couples should be aware of amounts that cannot be split, including benefits rolled over from another fund and lump sums paid from a foreign superannuation fund.

Building the instant tax deduction into your business plan

With the 2014-15 financial year at an end, business owners should now be planning for a tax regime that includes a $20,000 instant asset depreciation.

Since the government’s introduction of an instant tax deduction on up to $20,000 of capital items in the May budget, business owners should integrate the new rules into their cash flow and tax planning.

The instant deduction gives business owners the ability to claim the total amount of a capital purchase up to $20,000 in one go as a tax deduction. Business owners no longer have to depreciate capital purchases with a schedule or claim partial deductions over a period of four to five years. This essentially means that an owner can bring forward deductions where they wouldn’t otherwise have been able to do so.

When building the deduction into their planning, business owners should only make capital purchases if they are productive assets. If assets do not contribute to the production of revenues, they are unlikely to be eligible as business deductions.

Owners must also understand the actual benefit of the purchase in both a cash flow and taxation sense. If they run at a loss, then the instant deduction is not very useful. The instant deduction reduces the amount a business owner is taxed on. If owners are not in profit, they can carry forward some losses but then the effect of the instant deduction is gone.

Business owners planning for this year must also be aware that the instant deduction does not apply to plants or capital works such as construction. Owners should consult their accountants rather than making assumptions in regards to this.

Business owners must know exactly what the tax benefit is if they are using the rule changes to make a purchase decision. If used wisely, the instant deduction can be a real benefit to profitable small businesses that were planning on purchasing assets. But it is best for owners to speak with their accountant to be sure.

Management styles that develop productive teams

It is the responsibility of the leader of any team to develop the capability of their team members to become highly efficient and effective workers. Teams who are efficient and effective are highly organised, clear on their goals and complete their work to the standard of quality expected of them within the designated time frames.

Below are three management styles which can cultivate these kinds of teams through different approaches and ideologies.

Transparent managers are clear on their expectations and strategies used to achieve team goals. These managers know how important it is to communicate the business’s strategy, goals and explain how each team member’s role contributes to the business strategy.

Empowering managers don’t micro-manage their team. They invest their time educating their employees and give them the opportunity to make mistakes and learn. They encourage their team to be more independently productive and can ensure worker sustainability in the business.

Healthy managers tend to have a balance in their work and personal life, and are more relatable to their employees. These kinds of managers who put health and happiness first are more likely to encourage their employees to do the same. Happy and healthy employees are more productive than overworked or tired employees, and are more likely to build good relationships with others.

Dispute resolution

When drafted properly, expert determination clauses can result in cost-effective resolutions for business disputes and avoid delays in court proceedings.

Expert determination involves hiring someone who has the expertise required to determine the outcome of a dispute when a business relationship goes south. It is a kind of alternative dispute resolution (ADR) which involves appointing an independent third party to decide a dispute’s outcome.

Unlike arbitration, courts have limited control over the activities of the expert. And although some uncertainty can arise surrounding the expert determination, the advantage of hiring an expert is that the determination can be short and relatively cost-effective. The earlier a dispute is resolved, the cheaper the outcome for both parties in the long run.

Expert determinations are binding unless the contract clause states otherwise, or it is found that the determination does not follow the requirements of the contract.

Claiming deductions for employee training courses

Business owners sometimes need their employees to develop their expertise or skills in a particular area. While training courses like seminars and one-day intensives can be a worthwhile investment, there are still a few things employers should consider from a tax point of view.

Although employers can claim deductions for the full costs incurred when providing education to employees, including aspects like travel costs, many owners tend to forget to consider FBT implications.

Paying for employee work-related course fees generally constitutes as a fringe benefit and is subject to FBT. However, FBT law allows a full or partial reduction of FBT payable provided that the ‘otherwise deductible’ rule is met. The ‘otherwise deductible rule’ implies that if the employee had incurred the expense themselves, they could claim a deduction for the expense.

An education expense is considered to be hypothetically deductible to the employee depending on the type of course or education studied by the employee. The course must have a satisfactory connection to an employee’s current employment, maintain or improve the skills or knowledge required for the employee’s current role, or result in an increase in the employee’s income.

Employees cannot claim a deduction for education expenses if there is no connection to their current employment, even if it assists them gain new employment.

Supercharge your super

An individual’s superannuation is typically one of their biggest assets along with their home. So while it is natural to start thinking about how you can boost your superannuation balance leading up to retirement, putting in the effort well before then can make a big difference to your retirement lifestyle. Below are four simple ideas to supercharge your super:

Make additional contributions: Although employers are legally required to contribute to your chosen superannuation fund, relying on these contributions alone means it can take quite a while for an individual’s super balance to grow. Making additional, voluntary contributions, also known as salary sacrificing, is a popular way to boost an individual’s superfunds. With salary sacrificing, individuals can contribute a maximum of $30,000 if they are under 50, or $35,000 if they are over 50 years old.

Pool resources with your partner: Combining your super with a partner in a joint SMSF can provide an individual with an even larger amount of money to invest. Combining super also means you may pay less in fees, as one set of fees typically covers all the members of an SMSF.

SMSF tax benefits: There are quite a number of tax advantages for some asset classes or investments held within an SMSF. SMSF trustees also have the ability to manage the taxation implications of investment transactions on member accounts.

Shop around: Because an SMSF usually offers more investment options than a managed superannuation fund, individuals can often boost their super by shopping around for better returns. Although cash, property and shares are the most popular asset classes for SMSFs, there are other options such as investing in other listed securities or managed funds, bonds or warrants.

Beware segregated pension traps

Applying the segregated pension method for an SMSF can result in cash-flow issues caused by the division of earnings and expenses.

While the decision to segregate assets in an SMSF into pension and accumulation mode may be due to tax purposes, there are still a range of important issues to consider.

Bank accounts are usually the biggest issue with segregating an SMSF into pension and accumulation pools. If an SMSF trustee has one account, they must be able to keep track of everything since every dollar earned from every asset will go into that one bank account. However, two separate bank accounts can also be problematic. Having two accounts can make it hard to determine how you direct the right income to the right bank account.

Since dividends are paid to bank accounts, SMSF trustees may also have to provide the share registry with two accounts. This means two different broking accounts are required for shares from the same company.