The Rules For Claiming Meal Expenses
Something that you can do as a business is to pay a meal allowance for your employees.
The reason why you pay meal allowances is if they went for a business trip, and you send them off for a seminar and you pay them a meal allowance. That meal allowance is usually included on your PAYG summary if it’s above a certain amount.
The ATO releases a ruling or guidance showing what a reasonable amount of allowance is. If it’s below the reasonable amount, you don’t have to include it in your PAYG summary. It’s not considered income but it’s still a tax deduction to the company.
If you’re a business owner, the big benefit of doing that is if you, as an employee of the business, and you work overtime, What they can do is they can pay the overtime meal allowance in their name, not get tax in their individual name but essentially get that deduction in the business as a meal allowance.
Here’s a question from Jen, “Can you claim the whole amount as a deduction as well?”
It depends on what level are you entering it at. If it’s above the reasonable amount, you just need to claim the expenses against that allowance. Obviously, those expenses have to happen in the first place for you to claim that. If it’s below the reasonable amount, you don’t even need to include in your PAYG summary. It’s not taxable.
Watch the full webinar, ‘Numbers for non-accountants’ at https://learning.benwalker.com/courses/NFN
The 5 Keys To Total Financial Control
When I was putting this together, I kind of felt there were five main things to talk about. And they’re in this particular order for a reason, because we can kind of build on each of the topics as we go.
The first one, bit of the old Simon Sinek, but I want to start with Why.
Why do you want to kind of talk about this stuff? Taking a bit of control of your numbers and that sort of thing. Often a boring topic, and the amount of times, if I had a dollar for every client who told me I’m not a numbers person, I would’ve retired many years ago. It’s interesting that so many people are keen to learn more about this, and I want to encourage that that’s a great thing.
The next topic is Bookkeeping, often an undervalued element in a business. I want to kind of stress the importance of getting this right. We got some interesting slides I want to share on that, and then five big mistakes I see as well.
Cash, I’ve got to say that out of all the feedback we’ve had for the webinar, cash and cash flow is one of the biggest elements that people wanted to learn more about. But we’re going to cover some interesting things that you may not hear from an accountant, or even us, when we’re doing the tax side of things, it’s definitely almost like a financial controller, and an element of what all of these things are, but just not your typical conversation about cash. The idea is to get you thinking a bit differently about your business.
Planning and Budgeting, That second word there, budgeting, might be a turn off for you. At the end of the day, what I want to emphasize is that it gives you clarity. So the result of a budget is clarity, and give you some really good tips on how to use this in your day-to-day management of your business.
And then the last one we’re going to have a look at is Reporting, I often ask clients “How often do you look at your Xero file or your reports?” And very rarely do we get someone who says, “Oh yeah, I review them on regular intervals, and here’s what I look at.”
Watch the full webinar, ‘Numbers for non-accountants’ at https://learning.benwalker.com/courses/NFN
The Acquisition Process - Deal Flow
What are you trying to do? Let’s get a strategy of how you’re getting this.
So you can work out what your targets are, What do they look like? Where are you going to find them? Go find your targets, understand a bit about the business to the extent that you can agree on commercial terms. How are you going to buy it, price and timing of payment. Then you put this out all together in a term sheet. And term sheets can be called so many different things, which is very exciting. You can call them term sheets, heads of agreement, memorandum of understanding, letter of intent, non-binding letter of intent, and so many names for them.
I did a podcast one day on this because someone called me and said “Oh no, not an MOU.” I mean, no, no, I’m talking about a commercial terms document.” I’m like, “Okay, stop! The industry has got to stop.” This is all the same thing.
Find the target, the commercial terms are like you have a conversation with them. Then you come to some sort of initial short two-page agreement. And in that, one of the things that you should be building in is making sure you have the period of exclusivity while you’re kicking in funds to due diligence.
You don’t want to be spending money on advisors if someone is just going to come and buy some business from under you. We get term sheets in place and they’re usually called non-binding but what we keep finding and which is important, some people don’t realise you need legal advice at this point, because we need to make sure it’s working right.
The right place is right in the beginning before you’re starting, because the best place to start with all of these is making sure your current business is strong enough to withstand an acquisition.
It is about making sure you’re super clear about what you’re doing. And I think at that point, you need to get together with your deal team, your accountant, and your lawyer to sit down and get clear on what your strategy is and how your business is looking from a strength perspective before you start it.
Watch the full webinar, ‘Acquiring a Business’ at https://learning.benwalker.com/courses/acquiring-a-business
How Does A Bucket Company Work?
In a recent webinar, we were asked the questions, “Must the distribution money need to be paid to the Bucket Company? If yes, when?”
Let’s say, the Bucket Company will receive a distribution this year. You say, “Look, you’re going to receive $30,000 in distribution.” Now, at 30 Virginia, Ryan Perook signed a trust distribution minute, and what happens is it becomes a trust distribution receivable in the Company. Now, you need to pay that cash into the Company because legally, it is the Company’s money. Once you do that trust distribution minute, wherever it goes it is legally that person or that entity’s money. If you don’t pay the money, it essentially means that you owe the money to the Bucket Company or in essence, you borrowed that money in a way by not paying it back.
There is what we call a ‘Division 7A’ loan that we need to consider. Now, if you don’t pay it before the next financial year and it becomes a Division 7A loan. This means that you need to make minimum repayments on that loan and also charge commercial interests for that. What happens is, we distribute the money and then if the money is used somewhere else (because that’s the profit in the business, the cash is somewhere) we suggest that the business owner transfers the money into the Bucket. Then you can still borrow that money if you need to invest it somewhere else. It just means that we need to draw up a loan agreement between the Company and wherever that money has gone.
Watch the full webinar, ‘Numbers for non-accountants’ at https://learning.benwalker.com/courses/NFN
The 3 Ways To Play The Game Of Business
Are there three ways to play the game?
The first way is ‘Drifting Business’, an example of this is like, “Hey, we got JobKeeper, we’ve got a good war chest, things are looking good. You know what? We’ll just maybe cruise. We’ll see what happens with the economy. We’ll just keep on doing what we’re doing.” If you’re thinking like that, you may not have a business by the end of the year because there’s still stuff that’s going on and some drama that’s going to be coming and it ain’t over yet.
Second way you can play the game is what we call a Dabbler. They have a Dabbling Business and they give it a go over this, “Oh, I’m going to learn how to do the new Facebook ad thing. I’m going to go over here and do this.” What they end up doing is become little junkies going around learning different things and thinking that they’re making progress. But in actual fact, they’re Dabblers.
They’re just putting their toe in, not fully committing, and not making decisions to really go for it. The next eight months is the time to go for it. The time to make decisions and you don’t have the luxury of time anymore because you’ve got a short window of opportunity. I’m going to encourage you to be very careful as a Dabbler Business, because you may be thinking you’re making progress but in actual fact, you’re not.
The good thing is you got the Inspire Team. I don’t know any accountants that are better than these guys, and we work with people around the globe. You’re fortunate that they’re going to give you a nudge, especially if you’re doing this.
I want to encourage you if you’re here today, you’re here for a reason. You’re here because you want to make a difference and you want to do something differently. I want to encourage you to be a Decisive Business. Go for it, because the difference it’s going to make, It will be massive to you not just now. You’ve got to plant the seeds and do the work now, but what’s going to happen in the future?
Have you ever tried to go on a diet or a health thing and then after a while, you just kind of let things happen and it’s not till three months later, four months later, you go “Oh man!” You wake up to yourself and it’s like, “I better get back onto it.” And what you’ve really lost, you’ll get the outcome eventually, what you’ve really lost is time. But time is not on your side anymore. Time is now to move. The time is now to be decisive.
The difference between a Dabbling Business, or a dabbler and someone who’s decisive, doesn’t look like a lot right now. But if you look at the passage of time, if we go fast forward three years from now, The difference is massive. The difference that you can see with the passage of time over the next three years, the gap that is created, becomes irretrievable.
Watch the full webinar, “How To Navigate 2021’ at https://learning.benwalker.com/courses/how-to-navigate-2021
Why 8-Figure Entrepreneurs Often Hate Their Business
What true scale really means is for your energy or money output to get a disproportionately higher return than what you did before that scale. Most people grow their businesses. Now, you can grow your mindset. You can grow your leadership ability, however, you want to be very careful about growing your business. You want to scale a business. And if you’re growing your business, then you may have seen businesses that are out there that grow, grow, grow, and then they’re gone. This is a dangerous time so you really need to dial it in and make sure you’re on point.
Every eight-figure business that we’ve ever worked with hated their business. Every single one! They were making more profit when they were seven-figures and having way more fun. They were usually, at this stage, between 80K to 350K. Most of the ones that say, “We are the most profitable, had the most fun,” was when they were here. They’re on this scale phase somewhere between 80K to 350K. Most of them around 350K a month. When they’re hitting that runway, they have it sweet. And if you wanted to call it a lifestyle business, they’ve got a lifestyle business. There’s one problem though, there’s still some friction. And that is, everyone’s still coming to them, they’re still the lead salesperson, they’re still the person who’s the major figurehead of the business and they have what we call, in this phase, octopus syndrome. Not that anyone here would know what that’s like. But octopus syndrome is really, really simple. And that is there’s one brain, there’s lots of tentacles, and everything sucks because it still relies on you. And you don’t need to do that. You can build a business that can move past it. Now, the interesting thing, if we come to this ‘herding’ phase. You’re starting to get a following. You’re starting to get a group of people that go, “Actually, we really like what these people are doing. We really like what that looks like. We’re loving the feeling that’s coming from this.” It’s cool. You probably won’t have a very saleable asset at this point though. Here, you could argue you’re on the borderline depending on whether you’re closer to the 80K or the 350K of just having a high-paid job.
The shift though, and this is the key, is moving into the next level. This is what I really like to encourage everyone to be thinking right now. If you’re in this phase, get excited! One of the things that you know is to look back in the past and look back when you’re in this startup and survival phase. Now, the funny thing is, if you’re in the hunt, the survival and startup phase, have a talk to someone who’s in this stability and scale phase. Because the interesting thing is, when you get into this phase here, especially at 80K to 350K, you look back on these days here and you know you used to say, “Geez, I’m busy.” It’s not till you get up here and you go, “Oh my God, I wasted so much time down here. I was not really busy. Now I’m busy. Now I’m seriously at a bottleneck and I’ve seriously got some friction even though I’m making good cash.”
Watch the full webinar replay at https://learning.benwalker.com/courses/how-to-navigate-2021
Why You Have To Understand Your Cash Flow Days
Cashflow days are made up of three components. We’ve got debtor days which is how long it takes you to get paid, basically. We’ve got stock days or inventory days or even invoicing days if you’re a service business let’s say you might not carry a physical stock and you invoice your customers. And so if you wait an extra month to invoice someone, that’s hurting your cash flow. And then on the other hand, you’ve got a creditor days or supplier days is maybe an easy way of saying that.
So, we’ll start with debtor days and this is how long it takes you to get paid. So there is a formula to it, and it’s basically what your average debtor balance is, and we divide that by your turnover. And an example here is, let’s take a business owner who has an average of $50,000 outstanding that clients owe them at any given time. And their annual turnover is half a million dollars, so it’s not a gigantic business. To simplify, If you’ve got a $3 million business, just times these numbers by 6, it’s kind of the same sort of principle. So this example here is we’ve got $50k outstanding on average, we divide that by $500k and times by 365 days in a year. And that means we’ve got debtor days of 36.5. And what that means in English is that it takes you on average just over a month to get paid from clients. So if you’ve got say 30 day terms, your average client pays you over that. If you’ve got seven day terms to pay your invoice, you’ve got very bad debtor management. If you’ve got 60 days that you give to customers, you’re doing great. So to see how it’s all relative.
The happiness and the business value kind of plays a part in this. If you’re feeling that you’re emotional, you can probably tell this by how many arguments you might have at home that are driven by your cash flow movements in your business. Perhaps check whether it’s every thirty-six days you’re grumpy, it may be because every thirty-six days you could get paid and everything feels good. And then you’re feeling down again when the money keeps dropping out. So it’s not necessarily that you don’t have profit in a business, it’s just that you’re holding your breath for 36 days just to get by. So this is kind of why it’s important to really understand your cashflow days. So you can reflect on why you may feel a certain way at a certain time of the month or the end of the quarter depending on how quickly you bill.
If you need to have a chat with an Accountant about your business – book in a free Strategy Chat with an Inspire Life Changing Accountant today.
3 Reasons For SMEs To Consider Acquisition
The idea that in a single signature, you can double or triple or quadruple the value of your business in comparison to decades of building a business is, I think, the number one reason for SMEs to consider acquisition versus organic, but of course you never stop with organic, but it’s just looking at that as an alternative to just having your blinkers on and only looking at organic, which is where most SMEs are, right? So this is about pulling off the blinkers.
Add more clients, achieve economies of Scale. You’re buying a business so you’re adding revenue but you’re not just adding revenue. You have the opportunity for increasing profit in both the acquired entity and your entity. Not just through economies of scale, which is what I’m talking about here. I.e. you’re bigger so you can negotiate better buying, supply costs, but actually what number 2 should really say is that it’s about increasing profit because you can pull out expenses for duplicate items. Duplicated admin, duplicated marketing, etc.. There’s just so much more that you can do when you’re putting these parts together than what you can do with the one entity.
I know this might sound really bad mathematically, but in a way, 1 + 1 = 4, not 2.
Add more services and products to sell to existing clients. Now, I guess the first starting point is that you have the opportunity to use acquisition to provide a more complete service or solution to your clients. That’s the first thing, but then think about it. If you’ve got two separate client bases that have something that they’re crossing over in, you have the opportunity to cross-sell and upsell to each other. Not only are you getting the benefit of the profits in the business that you’re acquiring and the uplift because now you’ve got a higher value and so therefore a higher multiple and then rip out the profits, the expenses, so you’ve got a higher profit in both, you also now have this ability to cross-sell products and services to each of the other client bases if what you’re acquiring is an extension to your current products and services.
Watch the full webinar at https://insp.red/acquireabusinessweb
What You Need To Know About Car Allowances
I was hosting a webinar recently, and one of our attendees asked: “Do you have any advice on car allowances from the individual/company audit?” Here’s our response:When it comes to car allowances, usually what typically happens when there’s a company that you work for, If you use your car for work purposes instead of the business supplying a car, or you use your own car, the business then pays an allowance to you to reimburse for any costs for using your car. That reimbursement is usually included as taxable income, and you then claim the deduction on your car so it offsets each other. So if you use all your allowance for your car expenses there should be no tax payable.
Now, if you own your own business, typically speaking, we would first of all go a step backward and ensure that any cars that you buy is bought in the business in the first place, so that you don’t have to pay the allowance. Essentially you use the car for business purposes – let’s say 80% business purposes, and then 20% private use. We then take up that private use as a contribution that you make to the business essentially to recoup that. So it’s the other way around – you’re reimbursing the cost of the 20% to the business for using that car. You don’t necessarily need to take an allowance out for that unless you own that separately.
If you are using your personal car in the business, you can pay yourself an allowance. I would then pay the exact amount to the amount of expenses that you’ve used for the business. So you want to do a summary of what your expenses are, reimburse that from the business, that you essentially the deduction is in the business, not you personally.
That’s generally how it works but, again, the level up before of having the car in the business has other benefits as well. One of the big ones is depreciation – owning the car in the business means that you can claim the depreciation upfront.
Learn the 12 things you can do to legally reduce your business tax bill in 2021- FREE on my e-learning page at https://learning.benwalker.com/courses/TaxPlanning2021
What Are The New Criteria For Loss Carryback?
I’d just like to touch on some changes from last year’s budget. There’s a new strategy that we’re putting into play before the 30th of June called “The Loss Carry Back”.The criteria is if you’re running a company and you’re a small business, if you make a loss in 2021 financial year, after this 30 June, you can apply those losses against prior year profits that you have made to get a tax credit back. I repeat, if you’re a company who made a loss this year you can apply that to your prior profits to get a tax credit back.
Now, it doesn’t mean you have manual returns, or anything like that, it’s just that we use those losses backwards.
It’s quite magical, because you’re basically recouping prior tax money that you paid. Now, that’s a massive incentive by the government to essentially help out businesses that got hit really hard during the tough Covid period. And not only they don’t pay taxes here, they get a little bit of the tax back from the last few years as well. Company losses, prior year profit and you get tax back.
Learn the 12 things you can do to legally reduce your business tax bill in 2021- FREE on my e-learning page at https://learning.benwalker.com/courses/TaxPlanning2021
Get Cashed Up
