A Cashed Up Business

Everyday business owners ask us “how do I get Cashed Up?”  We work with many businesses who are already well on their way to getting Cashed Up, but most are either drowning or just keeping their head above water.

My reasoning as to why so many businesses are so cash poor is because they don’t know their numbers – they are driving blind. Most business are started by very skilled technicians (an accountant, a PT, a psychologist, a Videographer, a Financial Planner, a Physio etc) with very little mastery in the key areas of business – sales, marketing, leadership and most importantly NUMBERS.  With no insight into numbers that matter, no advice from numbers people (accountants) and no knowledge of the how to create the numbers you want, it is no surprise to us that 3 in 4 businesses fail.

As a result of not knowing your numbers, most business owners –

• Give half their profits to the tax man, unnecessarily.
• Have revenue but wonder where the profit went.
• Come up short when bills are due.

So whether you are financially “drowning” or only just keeping your “head above water”, your primary job as a business owner is to get Cashed Up.  That means pulling more money, time and happiness from your business.

Everyone reading this has an opportunity to start again with a new sheet of paper and a new plan. You just need the desire to change and the courage to action.

So, if your business was Cashed Up here’s what would be doing:

 

Capture Your Profit

In a world where we spend what we earn, protecting your profit is essential.  If you don’t have a profit improvement plan, regardless of how much money you earn, you will always struggle.

• You’d get rid of any team members who you’d answer NO to the following question – “Would you enthusiastically re-employ each of your current employees?”.  One or two team underperforming team members could be chewing up $150k annual profits.
• You would be earning at least $250,000 or more revenue each year for each director in the business. Any less and you’ll struggle to take a decent profit.
• You would have a separate account (other than your main operating account) where you put no less than 15% of revenue aside for Tax & GST.
• You would have another separate account (other than your main operating account) where you put at least 15% of revenue aside Profit.
• You would be profitable by the end of this year.  If not, shut up shop and get a job.
• You would only pay your fair share in tax.  Not a cent more!
• You would donate at least 10% of your profits to a charity, a church or causes dear to your heart.
• You would consider yourself to be highly rewarded financially for your industry.

 

Control Your Cash

Simply growing your business is no longer enough, if you want to escape the cash crisis permanently.  You need to get paid faster and be in control.  In a time when “Cash is King”, are you ruling it or is cash ruling you?

• You would receive part or all of your revenue before you deliver your product or service.
• You could tell 3 months in advance if there will be a shortfall or excess of cash.
• Your revenue would come mainly from recurring sources (retainer, subscription, repeat order)?
• You would easily pay a BAS or Tax bill in full and on time, using money in your 15% tax reserve.
• You would pay everyone on time.
• Everyone would pay you on time.
• You’d have 3 x months of Operational Expenses in an emergency rainy day fund.
• No one client or customer would represent more than 20% of your total revenue.

 

Check Your Numbers

Business owners who know their numbers have a tremendous advantage over those who do not. Your financials tell a story – and understanding the story behind your numbers can be one of the most important ingredients for long-term success.

• You wouldn’t have to push your accountant for responses or ideas.
• You would have a real time business performance dashboard on your phone.
• You wouldn’t be afraid to call your accountant for quick phone calls, emails or meetings, out of fear of getting slapped with a bill.
• You would know your numbers.
• You would use Xero.
• Your bookkeeper would keep your accounts perfectly up to date by the 3rd of each month.
• You would sit down with your accountant in april each year to plan a significant tax saving. We’re talking tens of thousands in tax savings each year.
• You would be 100% up to date with all of your ATO payments and lodgements.

 

Cover Your Assets

Operating your business through trusts and companies is the easiest way to stop giving half your profit to the tax man and start protecting your house, car and livelihood.  Businesses with the right structure and strategy keep more of their hard earned cash.

• You would operate your business in a trust and / or company.
• You would review your structure with your Accountant each year for tax efficiency and asset protection.
• You would fully understand your structure, be able to draw it and understand the best way to take money out of it.
• On paper are you would be worthless.   Everything in your spouse name.
• You would know the differences between Companies, Trusts & Sole Traders.
• You would know the difference between a salary, a dividend, a distribution and a loan.

 

Concentrate Your Value

Most business owners actually own a job not a business.  Once you have an idea for what your business is really worth and you understand how to increase that valuation, making more profit becomes easy.

• You would have a current business plan that you and your team review each quarter.
• You would absolutely love working with every one of your  clients / customers
• You would fire every client / customer you don’t love working with
• You would have thousands of dollars a month appear in your bank account, seemingly magically, from recurring sources e.g. monthly subscription.
• You would have a recent independent valuation for what your business is worth.
• You would have have systems & procedures in place for how things are done in your business.
• No more than 20% of your revenue come from just a few key clients / customers.
• You would have already said NO to an offer to buy your business.

 

Compound Your Wealth

Turning your business profits and cash into wealth is the fastest way to avoid the time for money trap and spend more time doing the things you love.  The process is simple, rewarding and liberating.

• You would accumulate and protect your wealth in a SMSF (Self Managed Super Fund)
• You would max out yours and your family’s annual super contribution limits.
• You would implement a debt recycling strategy using a split loan to pay down non tax deductible debt first.
• You would use credit cards to earn you a family holiday each year but pay off the balance in full every month.
• Your net wealth would be at least $500,000 and growing….
• You would own more than one property, other than your own home
• You would own your business premises in your SMSF and effectively pay your business lease to yourself.

 

Create Your Lifestyle

Never get so busy making a living that you forget to make a life. Work a few days a week, take regular family holidays and give to worthy causes, all while knowing your cash machine is building a beautiful future.

• Outside of work and family, you would have hobbies that you regularly participate in?
• You would hardly ever work weekends or nights.
• You would be living in your dream home.
• You would regularly eat out at nice restaurants and often go on date nights.
• You would be fully present when you are at home with the family.
• You would take 8 – 12 weeks holiday each year.
• You would get 8 hours per night sleep.

 

As a result of not knowing your numbers, most business owners –

• Give half their profits to the tax man, unnecessarily.
• Have revenue but wonder where the profit went.
• Come up short when bills are due.

So whether you are financially “drowning” or only just keeping your “head above water”, your primary job as a business owner is to get Cashed Up.  That means pulling more money, time and happiness from your business.

Everyone reading this has an opportunity to start again with a new sheet of paper and a new plan. You just need the desire to change and the courage to action.

So, if your business was Cashed Up here’s what would be doing:

That’s what you would be doing if you had a Cashed Up business. If you really want to Save Tax, Boost Profits & Accelerate Cashflow it might be time to change accountants.

P.S. If you are thinking of changing accountants, first have a listen to the DENT Podcast that tells the story about how disrupting the accounting industry saw Ben Walker (founder of Inspire CA) become an award winning entrepreneur.

The top 9 Tax Planning strategies for High Income Employees

We recently had a question from a client, not about structuring for his business, but what his wife could do from a tax planning perspective.

The scenario is the husband runs a business, and earns a good $130k profit.  And through proactive tax planning, we ended up saving him over $35,000 in tax, keeping his average tax rate on the business income less than 20%.

Great!  He loved that, so what about his wife?

His wife earns $250,000 as an employee.  This means she’s paying 47% tax on a good portion of that income, but an average tax rate of about 37% on each dollar she earns.

Not cool.

Unfortunately there’s not as many things you can do to plan for tax as an employee then you can as a business.

And I would NEVER recommend spending $1 on something tax deductible to save 47 cents in tax just for the tax savings. (Although it sounds tempting – you lose 53% of what you’re spending money on)

As a refresher, for 2025 FY, the individual tax rates (including medicare levy) are:

 

So, what are the top tax planning strategies for high income employees?

1. Contribute to your Superannuation Fund

The first way you can reduce your taxable income (and therefore your tax on that income) is through additional superannuation contributions.

Be careful to not exceed your ‘Contribution Cap’ for deductible superannuation contributions.
These deductible super contributions include both your employer minimum (mandatory 11.5% they have to pay on your salary) plus any salary sacrifice or additional contributions that you do.

From 1 July 2024, the general concessional contributions cap is $30,000 for all individuals regardless of age.

Going over the caps mean you pay an effective tax rate of 47% in tax. Ouch!

Crunching the numbers, let’s imagine that your employer already chipped in $25k so far in the tax year as the minimum they need to on your salary, you have $5k that you could contribute, taking you up to the cap.
You’d have to contribute $5000 of money into super, but it would save you $2,350 in tax by doing so (if you were paying 47% tax on your salary).

Always talk to a good Financial Adviser to make sure this is appropriate for your situation.

2. Negatively Gear an Investment Property

Another very common scenario is that high income earners have a negatively geared investment property.

What this means is that the tax deductions they get from renting out the property outweigh the rent they receive from the property.

This could be $25k in rent received, less $20k in expenses paid for during the year (like interests on loans, council rates, agent’s fees), and then a further deduction of $20k for depreciation on the property.

Under this scenario, while the property ‘made’ $5k net in positive cash flow, the property made a taxable loss of $15k.

If you’re paying tax at 47%, this ‘negative gearing’ would reduce your tax bill by $7,050.

 

3. Get Private Health Insurance

Having Private Health Insurance (hospital cover) means that you do not have to pay the ‘Medicare Levy Surcharge’.

There’s often confusion when clients have hospital cover, but they still pay Medicare Levy.  That’s because there’s two types of Medicare payments on your tax:

1. Medicare Levy (all individuals pay this, and it is calculated at 2% of your taxable income if you’re earning more than ~$27k)
2. Medicare Levy Surcharge (additional 1% to 1.5% depending on your income)

You need to pay the Surcharge component if you’re single and earn over $90k, or have a spouse and together your income combined is more than $180k – and you don’t have private health insurance (hospital cover).

Of course if you, or you and your spouse do hold the hospital cover, you do not have to pay the surcharge component.

If you earn $300k, you’d be up for $4,500 in Medicare Levy Surcharge alone.

And Hospital Cover may only cost you $2,000 to take out!

On that maths, you’d be up $2,500.

So if you’re over the income threshold ($97k if you’re single, or $194k if you have a spouse, incomes combined), or are creeping toward it, it may be worth taking out cover.

And just as an FYI – Private Health Insurance (extras cover) does not remove the surcharge.

 

4. Salary sacrifice your vehicle

Some people salary sacrifice a vehicle that they use both for business and private use.

This usually looks like your employer organising a novated lease, operating lease, hire purchase or paying for your car.

There are many ways to structure it depending on what your employer is comfortable with – and we recommend getting advice on what option is best for you and your employer at the time.

This can usually shave a few hundred, or a few thousand off your tax bill.

 

5. Donate to Charity

If giving is something you do, or want to do, then consider making a tax deductible donation.

As an employee, you can claim a donation of anything over $2, to an Australian Deductible Gift Recipient (“DGR”), and as long as you get a tax invoice from them.

To work out if a charity is a DGR, you can check the Australian Business Register here: http://abr.business.gov.au/

Once you search for your charity and find it, you can look down the bottom of the search and the ‘Deductible Gift Recipient Status’ will show up:

Donating or ‘tithing’ to Churches cannot be claimed as a tax deduction on an individual tax return.

 

6. Income protection insurance

If you’re ballin’ on six figures or more of salary, it’s probably a good idea to protect your income.

Especially if you’re the sole earner in the family, or have loan repayment obligations each month that if you all of a sudden found yourself out of work, you’d have trouble paying.

You can do this through taking out income protection insurance.

While we do not offer advice on how much to take out and what cover you need, we know that if the policy is paid personally, we can claim the premiums as a tax deduction.

If you need help with this, reach out and we can put you in touch with some great people who can help.

 

7. Self-Education, Training or Executive Coaching

If extra study or developing your skills are of interest to you, then you can pay for self-education, professional development or training and claim this on your tax.

You could also hire an executive coach to help you perform better in your role.

Keep in mind that there has to be direct connection with the training and what you do as an employee.

For instance, if you have HR responsibilities at work, and want to do a training course on how to manage people better, then this would be deductible.

But if you’re in a sales roll, and want to learn how to fly a plane (which has nothing to do with your employment), then sorry, that’s not deductible.

 

8. Structure Investment Income Appropriately

We often see highly paid people build wealth over years.

It’s critical that the ownership of any investments (such as interest earning bank accounts, shares, investment properties) is carefully considered.

Whoever owns these assets and receives the income pays the tax on that.

So if the wife owned the assets, she’d pay 47% in tax on the investment earnings.
Compared with say the husband at a rate of 32% – a big difference.

Be careful with restructuring investments that you own at the moment, as shifting between family members or entities usually triggers capital gains tax, or stamp duty (or both!)…  Best to chat with an accountant who understands this stuff!

 

9. Change the way you get paid

The biggest and best way we’ve seen highly paid, high functioning people reduce their tax is through changing the way they get paid.

Most common is to start a business consulting to other similar businesses who need their skill, knowledge or service.

To make this worthwhile and beneficial from a tax perspective, you would need two or more clients.  

And one single client could not pay you more than 80% of your total income.  For instance, if you earned a total of $300k gross from consulting, your biggest client could not pay you more than $240k (or 80%) of that total in a year.

It’s also worth noting that the two clients cannot be related parties.  Even with two different ABN’s, if the businesses are related or associated, this cannot happen.

But if changing the way you get paid (such as starting a business) is a possibility, do let us know.

If you’d like a better understanding of how these strategies can work for you, feel free to book in a Test Drive – a rapid fire Q & A with a Chartered Accountant.

Lease Incentives: Should I take it as a fit out or rental reduction?

Question:

We’re negotiating our new office and discussing fit out etc.  The landlord is giving an incentive amount of $115,000 over 5 years. So we can either take this in rental reductions or a combination of rental reductions and fitout.

I’m wondering whether we should take a combo of rental reductions and fit out or pay for the fitout ourselves (i.e. $30,000 to $80,00) and get the incentive in 100% rental reductions. I figured if we pay for the fitout then we could claim perhaps depreciation etc.

Riz, we’re at the pointy end of negotiations. A quick response would be very helpful in securing this deal. I look forward to hearing from you.

 

Answer:

Great question – from a tax perspective it all boils down to this …

 

Which strategy gives you most tax savings soonest?

Here’s my take based on the info provided:

So boiling it down the pro’s and con’s can be measured again 3 key measures.  Tax deductibility, Current Cashflow and Ongoing Cashflow.

Ultimately we want business owners to avoid a lease altogether and be able to Use their SMSF to Purchase Your Business Premises.

But in the meantime, let us help you run the numbers on your scenario before you sign on the bottom line.

IS YOUR CURRENT ACCOUNTANT A DINOSAUR?

Your current account may be a dinosaur if he / she –

• Offers advice late or not at all
• Does only what you ask
• Basically just does tax
• Only sees you once or twice a year
• Charges you for a quick call or email
• Charges by the hour (or the minute)
• Charges like a bull (aka expensive)
• Doesn’t try save you tax pre-EOFY
• Doesn’t visit / call
• Doesn’t follow up
• Doesn’t embrace cloud & tech
• Doesn’t run a great business him / herself
• Is quite frankly, boring…
• Doesn’t explain things simply
• Doesn’t help with business advice
• Isn’t approachable
• Takes hours, days and even weeks to respond
• Is buried in paper
• Is about to retire
• Doesn’t give to charitable causes
• Passes you on to the junior accountant
• Communicates poorly
• Over-promises & under-delivers
• Let’s you know your BAS is due, on the day it’s due

Accountants that do the opposite of the above are priceless member of your advisory team.

Keep them close and never let them go.

Could You Do With Some More Business?

An important component of managing cashflow is to increase the amount of cash that’s flowing in. Which of course means getting new business through the door.

How is that going for you?  Getting enough enquiries and orders, week after week?

If you’re in the same boat as most business owners, you probably need more.

So have you any clues as to why more potential customers aren’t getting in contact?

In my 30+ years of providing marketing strategy and campaigns to small businesses,  I’ve found that it usually boils down to two reasons.

Reason No 1 Why More Prospects Aren’t Contacting You

The first reason is that your potential customers don’t know about you yet. They haven’t found you online or through any other form of marketing.  You’re virtually invisible.

The only way to fix this is to do some marketing.

However the kind of marketing you need to do to reach more prospects, is a big wide topic.  It will depend on

• who your target market is
• where they hang out
• what their needs are
• what they really really want
• what the decision making process for your kind of product or service usually is
• how you’re different to your competitors
• what your budget is

What I want to focus on now in this post is Reason 2 – because that is something you can fix fairly quickly at no or low cost.

Reason No 2 Why More Prospects Aren’t Contacting You

Your potential customers fear you could be risky.

They may have found your listing or website or social media page, but are wary of giving you a go. They aren’t 100% confident you can help them, or do so for a fair price, or provide stellar customer service. They really don’t know you so they are not happy about risking their money with you.

What to Do About It

There are several ways to easily overcome the doubts listed in Reason 2 and inspire people to contact you and give you a go.   It’s all to do with building trust and removing risk.

In fact we have a proven process which has had a big impact on our client’s results.   Our process has several components, and they all work together to increase new business enquiries and conversions.

One of our clients, a young couple who run a painting company in Brisbane, decided to give our process a try to see if it would improve their enquiry rate and reduce their expensive Google Adwords costs.

Here’s just some of their results.

• Since implementing four years ago, they’ve gone from 30% of new business coming from referrals – to a whopping 72%.
• They are booked out for 2-3 months in advance
• They’ve cut their Google Adwords advertising budget by two thirds

Special Invite – Free Masterclass on Getting More Business

I will be sharing details of our exact process on how to get more people to contact you, choose you over your competitors, and regularly refer you to their friends, in my How to Get More Enquiries, Business and Referrals Live Masterclass next week.

These are just some of the questions I’ll be answering:

• Where does 65% of new business come from?
• What do 85% of people do before making an enquiry or booking?
• What makes people choose one business over another?
• How do you get customers to refer you, over and over again, without having to constantly ask them?

This is knowledge that all business owners need to have if they want to take control of increasing the incoming cashflow.  Once you’ve got a bit of inside knowledge on buyer behavior, then the next step is to exploit it.  On the webinar, I’ll show you exactly what our clients are doing, and share further details of their results.

Places are limited so save your seat now here: How to Get More Enquiries, Business and Referrals  Masterclass

Author’s bio

I’m a loyal client of InspireCA, and also have a passion to help small business owners build a business that gives them the freedom to live life to the max and not just scrape by.  I love to inspire and help business owners to create the type of marketing and customer service that makes their business irresistible. I’m privileged to have a talented team at Commonsense Marketing who create and execute beautiful websites and engaging social media and email campaigns that deliver results. We love to work with the owners and teams of small to medium sized business who are motivated to become the best in their niche and achieve more than they ever thought possible.

Your online guide to making BAS work for you

Learn from mistakes without having to make them at our 17 Feb online workshop

The big difference between winning occasionally and winning almost always is not only knowing the score but understanding the factors that can and will influence it.

Ben Walker

 

For some, taking care of your BAS (business activity statement) is like a government-imposed quarterly check up at the dentist.  There may be some minor concerns but mostly everything looks okay on the surface, you pay some money, hopefully get a rebate of some sort and see you again in about 3months.  There.  Relatively painless and all is well… until a tooth drops out, rots, cracks or starts keeping you up at night.

That won’t happen with a really good dentist though.  They tend to look beneath the veneer, tell you to brush more often and give you a few tips on dental hygiene that’ll save you thousands of dollars over the coming year or so.

 

Smile, we’ve made it easier than ever to get BAS right and reap the benefits

Of course, there’s more to “getting BAS right” than merely satisfying the minimum requirements set out by the ATO.  The BAS process offers the in-the-know business owner valuable insights into:

• Growth building profit drivers – their effect and where they are coming from
• Vital course corrections – what’s going right and what’s costing too much and what to do next
• The state of play – are you winning, are you behind and why

 

This is all very important stuff, especially if you are driven by the achievable goal of using your business as the engine that powers a better life for you and your family.  That’s why we want to invite you to our “How to Turn Your BAS Deadline into a Business Lifeline” online work shop at xx.xx am/pm on Friday 17 February.

A BAS workshop that works

We believe that this workshop will be particularly valuable to you because it doesn’t simply focus on BAS (your scoreboard, if you like) but the factors that will affect your inputs.  There are three parts to the workshop that will have an impact on you and your business:

1. 5 common BAS mistakes and how to avoid them
2. Accelerating profit growth using your own:
   • Profit and Loss or P&L sheets
   • Balance sheets
   • GST report
   • Cash flow summary
   • Business budget
3. Getting the most value from your business advisory board

• Bookkeeper
• Accountant
• CFO (chief financial officer)

We’ve made it really easy to get on board and become involved in your own business development.  You can register at www.inspireca.com/BAS-March and or contact the team at hello@inspireca.com OR 07 3106 3320

 

Your investment in your business will go a long, long way

Your $77 plus GST investment entitles you to:

• Attend the 77 min LIVE Online Workshop + Q & A on Fri Feb 17.
• Access the 77 min ON DEMAND Workshop within 24 hours.
• Receive a $77 discount off the Become a Cash Rich Business [One Day Cashflow Acceleration Workshop] on March 24.
• $77 Guarantee – If you attend the workshop and hate it, we’ll give your money back no questions asked.
• Feel even better about your decision – some of your investment will provide 77 days of access to life-giving water for a family in Cambodia (check out our business for good proposition).

Remember, the “How to Turn Your BAS Deadline into a Business Lifeline”  is just 3 days (17 Feb) after Valentine’s Day so after you’ve done the right thing by your special someone, why not pay some special attention to your business.

We’d love to see you make the most of this opportunity

 

Cheers

 

Business Owner Checklist

Download the business owners checklist here

When you’re starting out in business it can be overwhelming with all the things you need to get in order.  The easy ones are business name, accounting software and logos.  But few realise how extensive the list of start up to-do’s really is.  So we’ve put together the ultimate checklist guide for NEW business owners to make sure they have everything in order from the beginning.

Get Paid Faster

It goes without saying that a business needs cash flow to keep operating.  If too many customers forget, delay or refuse to pay, your business could end up in serious trouble!

Debt collection is an aspect of cash flow management where a lot of businesses underperform.  However, it doesn’t have to be difficult.  If you have the right person for the job and develop a workable protocol, the process of debt collection can be made easier and it will have a positive effect on your cash flow.

Employing the right person

Admittedly, the term ‘debt collector’ has a negative connotation.  It conjures up images of harassment and fear!  Not only that, many business owners might assume that because collecting money comes under the umbrella of finance or accounts, then their bookkeeper should be an expert and enjoy chasing up outstanding bills!  That’s not always the case.

The responsibility of collecting money (known as ‘accounts receivable’) is likely to be suited to someone who is good with people – friendly and confident.  They should be well-organised, have good time management skills and be able to keep handy records of customers’ habits and tendencies when it comes to paying their bills.

Measuring effectiveness

Generating a report showing outstanding debts broken down into 30, 60 and 90 days columns won’t show the average accounts receivable days, that is, how many days it takes on average for customers to pay their invoices.  Businesses operating on payment terms of 30 days may not realise that in reality customers take much longer on average to pay their bills.

Working out the average accounts receivable days provides a useful indicator for your debt collector to measure their effectiveness, and can be calculated using this formula:

Accounts Receivable / Revenue x Time

For example, a business might have generated revenue of $95,000 for the first quarter of the year.  The outstanding invoices, or accounts receivable, on record for that period total $65,000.  Therefore, the days in accounts receivable are calculated as follows:

$65,000/$95,000 x 90 days

Monitoring this indicator from one quarter to the next, or over a 12 month period, will show whether debt collection efforts are improving, remaining the same or ineffective.  These results are helpful both to the person responsible for collecting debts and the business owner.

YOUR ACTION PLAN

• Designate a well-organised and amiable employee to be in charge of debt collecting.  Together develop a protocol for collecting debts and use the indicator to measure progress and performance.
• Schedule time in your calendar to review outstanding debts regularly!

 

3 x Debtor Collection scripts to cut, paste and send to your overdue debtors

20 October 2015

 

«ContactAddressee»

«PostalAddress»

«PostalCity» «PostalRegion» «PostalPostcode»

Hello «ContactSalutation»

Friendly Reminder – Overdue Invoice

This is a friendly reminder in relation to the overdue amount on your account for [$Amount].

We would appreciate your prompt attention to this matter and ask that you please arrange payment of your account as soon as possible.

Enclosed is a statement for your reference. Payment options are listed at the bottom of your statement.

If you have made the payment required within the last few days, please disregard this notice.

We look forward to hearing from you soon.

 

Kind regards

 

[Debtor Champion]

[YOUR BUSINESS NAME]

 

 

20 October 2015

 

«ContactAddressee»

«PostalAddress»

«PostalCity» «PostalRegion» «PostalPostcode»

 

Hello «ContactSalutation»

Urgent Attention – Overdue Invoice

We wrote to you on [Date] advising that your account of $[Amount] has been overdue since [Date].

We would appreciate your urgent attention to the payment of this account as it now exceeds our usual payment terms of 14 days.

Enclosed is a statement for your reference. Payment options are listed at the bottom of your statement.

If you have made the payment required within the last few days, please disregard this notice.

 

Kind regards

 

[Debtor Champion]

[YOUR BUSINESS NAME]

 

 

20 October 2015

 

«ContactAddressee»

«PostalAddress»

«PostalCity» «PostalRegion» «PostalPostcode»

Hello «ContactSalutation»

Final Notice – Immediate Payment Required

We have contacted you on numerous occasions requesting payment for the following outstanding debts:

• [Entity Name] – Invoice Number [Number] – $[Amount]
• [Entity Name] – Invoice Number [Number] – $[Amount]

Total Amount Payable: $[Amount]

It is unfortunate that you have not paid our Invoices on time, and you have not even proposed a payment arrangement with us.

Your lack of action has now resulted in us having to make a business decision. Unless payment in full is received no later than 7 days from the date of this letter, we will be engaging our Lawyers to commence immediate debt recovery procedures.

We have been more than accommodating in our previous requests, and therefore will be making no further extensions beyond this timeframe.

Enclosed are statements for your reference for each entity. Payment options are listed at the bottom of the statements.

 

Regards

 

[Debtor Champion]

[YOUR BUSINESS NAME]

Risks and assets – gotta keep ‘em separated! How to keep what’s yours

If you are planning to build, establish, grow and benefit from a small business, protecting your assets should be one of your primary considerations.  Too many times you hear about people that have done brilliantly in business, only for something to go horribly wrong.  Then you’re shocked to find them and their families enduring real financial hardship a little while later.  How does this happen?  How can business owners suffer such a dramatic and complete change of circumstances both commercially and personally?  Protection or lack of it would be one answer – and an all too common one at that.

Certain things just don’t go together

Oil and water, cigarette lighters and petrol, your hard-earned assets and commercial risks within or around your business.  All of these combinations have potentially explosive and very damaging consequences.  Lives can be altered forever, there can be a tonne of damage to people and property.  However, the separation and safeguarding of assets from risks can be managed with the sound advice of a good accountant.

They would tell you, as I am now, that if the point of owning a small business is to help build a wonderful life for your family, then once you’ve accrued assets, they should be protected.  Protected from economic peaks and troughs in world and local markets, supply and demand fluctuations in your own or even poor decision making by you or someone within your business.

One of the simplest ways to make sure that your family home, vehicles, sports memorabilia and other assets aren’t brought into play if your business hits trouble is by selecting the right business structure.

If your business is set up as a sole trader, you are personally liable for consequences that may not be of your own creation.  A disgruntled employee, a careless oversight or even just plain old bad luck could put your personal assets directly in the punitive firing line.  The same can often be said for partnerships, which can be trickier still because there will be at least two but often more people making decisions that may well effect your assets.

Keep in mind, we’re not talking about the bonus you were hoping to earn, dividends you wanted to distribute or even future earning capacity.  The potential tragedy lurking in the shadows of these business structures is that owners and/or partners can lose what they already own.

Protect what’s yours!

Okay, so due diligence is exactly that – it’s a must, it’s something you have to do and this by itself will keep you safe from a lot of the troubles that can beset businesses of any size.  But a great deal of help comes in the form of the in-built protections offered by business structures such as Trusts and Companies.  Here you have structures that recognise you (and your assets) and the risks associated with your business’s commercial activities as almost mutually exclusive (with just a few exceptions to muddy the waters).  All in all, far safer than betting the family home that you won’t ever put a foot wrong, nor your associates and that no one will ever come after your business with ill intentions.

At the end of the day, you have, or will have, worked very hard for what your family enjoys.  It’s worth protecting and can be, with the right advice and decisive action.  If you want to talk about keeping risks at a safe and respectful distance from your assets, talk to us – we want to help.

The truth about your P&L. Numbers never lie

Those that do not learn from the past are doomed to repeat it.  Heard that one before?  Your P&L (profit and loss) statement is an honest-to-goodness, no holds barred account of how your business performed over a predetermined period.  It is a record of fact and leaves very little room for ambiguity.  After all. Number never lie.  However, if you squint at them, in a certain light, you can fool yourself into thinking they are a little more favourable than what they really are.  But that’s our fault, not theirs.

We always talk about understanding your numbers so that you can have a solid grounding in what has worked for you and what looks like it could have been done better.  But the real beauty of the numbers that make up your P&L, is that in the right hands, they can map a path to where you could take your business, not just where it’s been.  While it’s stressed in the pages of many an investment prospectus, that past performance is not a true indicator of future earnings, past performance is still a wonderful tool.

Give it to me straight P&L, how’d we do?

A P&L doesn’t sugar coat anything.  That’s the first thing you need to realise – and appreciate.  For the unvarnished truth, a mirror to hold up to your business, nothing really comes close to the P&L.

The assumptions and truths (real and imagined) you build upon that most honest of foundations, is where the fork in the road appears and self -deceit muddies the waters.  You end up saying things like, “yeah sure, premium travel and massages represented a 25% increase in total costs BUT we’ll make that all back and more when our very impressed clients start queuing up for our services”.   You are dreaming – and wasting money.  That’s not how Cash Rich Businesses remain so, that’s how ego ends up sinking, or at the very least, hampering your profit-making potential.  And your P&L will reflect the damage, poor decision-making has done… without blinking… and with no apologies – a true friend.

On the other hand, you will also see how a 25% increase in staff performance-based bonuses led to a 55% increase in new revenue.  At first glance, the signs are all there, without additional noise or complication, terrific!  Of course from here, due diligence dictates that you investigate the cause and effect relationship more closely to ensure that it is what you think it is.  The good thing is that now, you’ll be fishing where the fish are as opposed to randomly dropping a line somewhere in the Pacific and hoping for the best.

Tell me, P&L, should I stay or should I go?

Thinking of expanding, making a play for a foothold in another territory or service offering?  A well prepared, honest-as-the-day-is-long P&L will tell you when and how much.

For example, how much cash on hand did you have to get you through the lean winter period as an ice cream shop owner?  What was your return on investment when you forked out additional advertising when the new apartments went up nearby last spring?  How much tax did we end up paying?  Really?!  Maybe it is time to time to talk to the good people at Inspire.

So, your P&L may not tell you how many storeys high your empire will be, but it will tell you, in no uncertain terms, how strong the foundation is.  Remember, your P&L is your pal and numbers never lie.