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April, 2019 – 9pm Outlined below are the main Federal Budget initiatives targeted at SMEs, along with whether small to medium business owners really wanted the Government to prioritise that initiative. The data comes from a survey released this week of 1257 Australian SMEs, as part of Scottish Pacific’s March 2019 SME Growth Index.* Company […]
Read moreAs businesses look more to their advisors, particularly accountants and bookkeepers, its great to start to get your clients ready for any funding they may need in the near future. A common misconception amongst accountants & bookkeepers is that you need a separate financial or credit license to be able to talk to your small business […]
Read moreFor any business, having steady and predictable access to cash is vital. Every successful business has its own unique features, yet effective cash flow management is a common thread. 9 out of 10 SMEs report that problems with cash flow have prevented them from generating more revenue and top reasons include suppliers reducing payment times, […]
Read moreAlmost half the small businesses polled in the March 2021 SME Growth Index introduced new funding options in 2020 to deal with pandemic recovery and growth opportunities. This large cohort of small businesses (46%) looked beyond their traditional funding methods to keep operations on an even keel, while 54% were able to get by using […]
Read moreWhether it’s heavy industrial machinery, office computers or anything in between, having the right equipment is vital to the success and longevity of your business. Not only is it essential for completing daily tasks and increasing productivity, it’s necessary for long-term, sustained growth.
Of course buying equipment outright can be expensive and put a strain on cash flow, and simply isn’t a realistic option for all SMEs. Fortunately, equipment financing, where you receive a loan to invest in business equipment, is a viable solution and can be a huge help for growing and expanding your company.
And with the updates to the instant asset write off scheme for small and medium businesses in effect, now is the perfect time to use equipment financing to purchase new equipment.
In April 2019, the Australian government made an exciting announcement regarding the instant asset write-off. According to the Australian Taxation Office, “The threshold has increased to $30,000, and has been extended to 30 June 2020. The instant asset write-off now includes businesses with a turnover from $10 million to less than $50 million.” So if your business has a turnover of less than $50 million, you can claim a tax deduction on all new assets under $30,000. Check out this resource to learn more about the deduction thresholds and get the full details.
This makes it the perfect time to capitalise on EOFY discounts and purchase any new equipment you need, while getting the most from your tax returns. But don’t worry if you miss the EOFY sales, this scheme will still be relevant for the next financial year. Meaning spring-cleaning of your old equipment, business boom after the festive season, or the ramp up to next financial year close out are all good periods for you yo look to make the most of the updated incentive.
If you’re wondering exactly how equipment financing works, the concept is pretty straightforward. A lender gives you a loan to purchase important business equipment that would be difficult to purchase outright. Examples could include a forklift for moving materials in a warehouse, an industrial-sized oven for a restaurant and an excavator for construction projects. However, it can also include more basic purchases like computers, scanners and copiers for the office.
Equipment loans provide you with funding to cover ongoing payments and include interest and principal for the agreed terms. Under this arrangement, a lender is essentially fronting you the money to pay for the cost of equipment. In some cases, they’ll provide you with a loan to cover the entire cost of the equipment. Other times, it will be up to a certain percentage (e.g. 80%) for larger purchases.
Unlike leasing where you rent business equipment for a monthly payment but don’t actually own the equipment during the lease term, equipment financing makes it so you purchase the equipment. So once you’ve repaid the loan and satisfied the terms, the equipment is yours. This makes it an effective way to obtain new equipment to grow your business or replace existing equipment if it breaks down.
At Scottish Pacific, we understand that SMEs have a wide variety of needs when it comes to financing equipment purchases, and we offer a few areas of specialisation including the following.
We live in a globalised world where an increasing number of SMEs are importing products from around the world. In 2018 alone, Australia bought more than $330 billion AUD in imported products, which marked a 2.7% increase from 2017.
Besides simply buying inventory, many businesses are now choosing to obtain their equipment from international vendors as well. After all, it doesn’t matter where a company is located. It still needs the right equipment.
We understand this need and already import equipment with our market leading Tradeline product and trade financing options. But we’ve taken it one step further and now offer a simplified way for clients to import equipment as well. If this is something you’re interested in, Scottish Pacific can help.
Much of today’s business equipment is quite expensive. For instance, a standard capacity forklift can cost up to $36,000 AUD, while a 4,535 kilogram capacity forklift can cost up to $65,500 AUD. As a result, many business owners opt to buy 2nd hand civil equipment, which costs considerably less.
Although it’s not brand new, it still gets the job done and helps SMEs become more efficient and productive. Going the 2nd hand route is often a smart move for all types of companies, but it especially makes sense for newer businesses that are just getting off the ground. For those that are dealing with a lot of other expenses, buying used equipment can reduce initial operating costs considerably.
At Scottish Pacific, we also provide financing for 2nd hand civil equipment which many lenders often won’t, and we treat this as a new asset allowing for flexible options tailored to the needs of your business.
If you’re looking for additional money to fund your business, we can use asset finance for legitimate capital raising. Maybe you need a cash flow injection to pay employees or suppliers. Or maybe you’re looking to quickly reinvest in your business and don’t want to deal with the rigidity of a conventional bank loan.
You can use your existing equipment as collateral and borrow money against what you already own. Our asset finance solution allows you to access additional working capital secured against your property, plant and equipment.
Asset financing offers several benefits:
When you put all of this together, it’s a viable move for many SMEs who are looking to accelerate company growth.
It’s common for business owners to feel overwhelmed with the craziness that comes along with preparing tax returns and transitioning from one fiscal year to the next. With all that’s happening, buying or replacing equipment may not be at the top of your to-do list.
But with the instant asset write-off being increased and extended into June 2020, it’s definitely something that deserves some thought. As long as your business has a turnover of less than $50 million, you can claim a tax deduction on all new assets under $30,000.
And if you need equipment financing, here at Scottish Pacific we have several options available to suit your needs. It’s just a matter of determining which specific solution you’re looking for.
Call us today on 1300 505 883 to discuss further, or click here to have us get in touch.
Small business owners are passionate about what they do. They are determined to achieve their vision for their business which can mean that dealing with finances, taxes and reporting is often seen as an unpleasant afterthought or interruption to precious family time. Most small businesses recognise that accountants are trained and skilled at financial record […]
Read moreA business activity statement (BAS) is a form that certain Australian businesses must submit to the Australian Taxation Office (ATO) to report their tax obligations. Some specific obligations include goods and services tax (GST), pay as you go (PAYG) tax instalment, pay as you go (PAYG) tax withheld, fringe benefits tax (FBT) instalment, and luxury car tax (LCT).
Some businesses are required to lodge a BAS, while others are not. In this post, we’ll explain all of the important details so you’ll know whether or not this is something you’re obligated to do, and we’ll also offer helpful tips and resources.
When it comes to determining which businesses are required to lodge a BAS, the criteria is pretty straightforward. If you’re registered for GST, then you must lodge a BAS, as this allows you to report and pay your GST and other tax obligations. If you aren’t registered for GST, then you’re not required to lodge a BAS.
GST registration is required for businesses that have a turnover of $75,000 or more or offer taxi travel. For non-profits, the minimum turnover is doubled at $150,000 or more. Check out this resource from the ATO to learn more about how GST works, and find out how to register.
To simplify matters, the ATO will automatically send you a BAS form when it’s time to lodge once you have registered for an Australian business number (ABN). This way you always have a heads up and aren’t caught off guard.
The frequency in which you must lodge a BAS depends upon one single factor — GST turnover. Here’s how it breaks down:
As a result, most businesses lodge quarterly. However, it may differ depending upon your circumstances. In terms of the specific quarterly dates in which you must lodge throughout the year, they are as follows:
If monthly reporting is required, you must lodge and pay your BAS by the 21st of the month following the taxable period. So if you were lodging a BAS for March, the due date would be 21 April.
If annual reporting is required, the deadline is 31 October of each year.
You can lodge a BAS yourself or have a registered tax or BAS agent do it on your behalf. Also note that businesses with a GST turnover of $20 million or more must lodge and pay online. For more details on due dates for lodging and paying your BAS, check out this resource from the ATO.
Lodging on time is crucial to avoid penalties and is required even if you didn’t do any business and have nothing to report.
“We recognise that sometimes people don’t meet their lodgment obligations on time, even with the best of intentions,” the ATO explains. “Generally we don’t apply penalties in isolated cases of late lodgment.” However, if you do get hit with penalties, they can be costly and something to avoid at all costs.
If applied, the failure to lodge (FTL) penalty is “calculated at the rate of one penalty unit for each period of 28 days (or part thereof) that the return or statement is overdue, up to a maximum of 5 penalty units” for small entities. For medium entities, the penalty is doubled. And for large entities, the number is multiplied by 5.
So as you can see, the costs can really add up in a hurry, especially for medium and large-sized businesses. The ATO will warn you either by phone or in writing if you’ve failed to lodge. So if you receive one of these notices, you need to respond right away and lodge your BAS as soon as possible.
If you’re unsure whether you can pay on time, you should contact the ATO to check and penalties. To make the process smoother, be sure to have your tax file number (TFN) handy when calling so an agent can quickly find your tax records.
Even if you expect difficulty paying your BAS, you’ll still want to lodge on time to avoid penalties. You can learn more about debt and lodgment enquiries on this resource.
In some cases, you may be able to set up a payment plan where you can break it down into more affordable instalments. “You can use our payment plan estimator to work out a plan that meets your circumstances, taking into account the payment plan conditions and how quickly you can pay off the debt, including how much interest you’ll be charged, the ATO writes.
You can find the payment plan estimator here.
There are several things you can do to simplify BAS lodging and make it easier when deadlines come around. First, keep thorough records of your sales and purchases. Not only is this important for staying on top of your financials, it will make your life much easier once it’s time to lodge a BAS.
Here are some specific records you need to keep according to the Australian Government:
For a full list of records you should keep and how long you should keep them, consult this resource. There are also numerous software tools you can use to help, and this resource from Capterra offers some great reviews on top platforms.
Next, double check that you enter each tax invoice only once and that all of your expenses and sales are for the correct time period. Any inaccuracies there can throw your numbers off, so it’s critical that all of this information is correctly logged.
It’s also smart to create a separate bank account that’s specifically for GST. Doing so will make it much easier to report and pay once it’s time to lodge a BAS.
Finally, be sure to keep all of your tax invoices and GST records for five years. It’s important that you keep written evidence around for this length of time in case there are any issues or disputes
The bottom line is that business owners who are registered for GST must lodge a BAS. Those who aren’t registered for GST, however, aren’t required to lodge a BAS.
If you fall into the former category, it’s important that you know when lodging deadlines are and always meet them on time. Following the tips listed above should help you do this more easily and avoid any unnecessary friction along the way.
If you’re currently behind on your BAS and in the ATO arrears, there are a few alternate working capital solutions available that can help. Selective invoice financing allows you to leverage certain invoices to obtain a cash advance, which you can use to pay your BAS. There are no long-term obligations, and you can get up to 95% of the value of your invoice, less any fees with approval typically happening within 24 hours. There’s also equipment finance, where you leverage equipment, machinery and company vehicles as collateral to obtain the necessary capital to keep you afloat.
To learn more about these and other options, contact Scottish Pacific today.
What are some techniques you use to keep your tax information organised? Please share your strategies:
Read moreOn 1 July 2019, the Fair Work Commission increased the national minimum wage in Australia by 3%. While this may not sound like that big of a deal, it could have a significant impact on cash flow for many SMEs.
In this post, we’ll look at the details and explain how to ensure your business has adequate cash flow in the face of this change.
“The minimum wage from July 1 will be $19.49 an hour, or $740.80 a week for full-time workers,” explains Sydney-based business reporter, Stephanie Chalmers in ABC News. “The Fair Work decision affects around 2.2 million workers on the minimum wage or modern awards.”
This is up from $719.20 per week one year ago in 2018. And considering how minimum wage in Australia continues to steadily increase, this is likely to rise in upcoming years. This graph from Trading Economics of the Australia weekly minimum weekly wage over the years helps put things into perspective.
Designed to increase the wages of employees throughout the country and improve their living standards, it’s a welcome change for low paid workers. It will help this segment of the workforce provide a better life for their families and live more comfortably. So in that regard, it’s positive.
However, these pros aren’t without their cons for employers.
Unfortunately, the minimum wage increase can create potential hardships for many SMEs that employ these workers and put a strain on cash flow. A recent article from the Recruitment, Consulting and Staffing Association (RCSA) examines the situation and mentions the impact it can have on the labour sector.
In it, they quote Scottish Pacific’s head of debtor finance, Wayne Smith, who said, “An extra 56 cents an hour to $19.49 may not seem like much, but labour hire and recruitment businesses have dozens, sometimes hundreds, of temporary staff on their books and the minimum wage increase could impact on both their margin and their cash flow.”
Money that could go to cash flow to buy goods and equipment, cover operating expenses and expand a business must now be spent on increasing the wages for minimum wage employees. For companies where cash flow was already lean to begin with, this is a real concern.
And while the article from the RCSA applies to SMEs in the staffing/recruiting industry, the minimum wage spike impacts far more companies than that. In fact, any business that employs minimum wage workers will feel the impact.
If your company falls into this category, it’s important to look for other ways to improve your cash flow. Here are some ways to go about that.
A good place to start is to reduce the length of payment terms with your clients. While this won’t always be a realistic possibility for every business, and invoices are more likely to go past due, you’re still more likely to receive your money quicker than if you had longer payment terms.
A study by online accounting software company Xero found:
So keep this in mind when negotiating a payment structure with future clients or amending payment terms with existing ones. If you have the leverage to dictate payments, it can take a lot of stress off of you and boost cash flow.
Late payments are an ongoing problem for more than half of SMEs. In fact, research has found that between July 2017 to July 2018, 53% of smaller companies were paid later than the agreed terms by larger organisations, with the average invoice being late by 23 days.
Experts estimate that this equaled $115 billion in late payments. But if those invoices had been paid on time, small businesses would have had an additional $7 billion in working capital.
These numbers show just how big of an impact late payments can have and why it’s so crucial to stay on top of outstanding invoices. This starts by taking steps to improve debtor management so that you’re able to efficiently track what’s owed to you and when.
The RCSA recommends asking clients for down payments or partial payments on big projects where there’s a lot of money involved. This ensures you have at least a portion of payment right off the bat without having to wait for several weeks or even months for the full amount.
You should also be quick to remind clients that they owe you money once the invoice deadline has passed. The last thing you want to do is wait a week before following up. Instead, send a friendly reminder through email. And if you don’t get a response, pick up the phone and call.
It may not always be pleasant conversation to have, but it’s vital for maintaining steady cash flow and keeping your business afloat.
Traditional property secured loans from banks are becoming harder and harder to obtain. Increased lending standards due to the Royal Commission and the current property market downturn have resulted in banks being more selective about who they give money to. In turn, many business owners are exploring financing alternatives that don’t involve using property as collateral.
For instance, peer-to-peer lending, short-term loans and equipment financing are becoming popular choices that can potentially supply you with the cash flow needed as you adapt to Australia’s minimum wage increase.
Another option that’s grown by leaps and bounds is invoice finance or debtor finance where you borrow against the money owed to you from clients. With this arrangement, you submit unpaid invoices to a lender. Once approved (this typically happens within 24 hours), you will be paid up to 95% of the value, minus any fees. You then receive the remaining 5% once your client pays the invoice in full.
There are comprehensive options where the lender assumes responsibility for debt collections, freeing up your time to focus on other areas of your business. Or if you have an in-house team and don’t wish to disclose the fact that you’re seeking financing, you can still handle the collections process yourself.
Debtor finance provides an effective way to leverage outstanding invoices and put them to work in order to improve cash flow. The best part is that you’re not reliant upon funding from traditional bank loans — something that’s become more tenuous in recent years.
And with this change implemented by the Fair Work Commission, it can be a potential game changer for SMEs who are struggling. “It’s not always easy to simply pass on the minimum wage increase to their own customers, some may need to absorb an element of the additional cost themselves,” adds Wayne Smith. “Invoice finance can help them deal with this cash flow challenge.”
Australia’s minimum wage increase is certainly good news for low paid workers who are looking to make a better living. However, it does create an obstacle for many SMEs, especially those who are already facing cash flow issues.
Fortunately, there are several viable solutions available that can meet a variety of needs. To learn more about your business finance options, contact Scottish Pacific today.
How big of a strain has the minimum wage increase put on your company’s cash flow? Give us a call to discuss on 1300 505 883 or click here for us to check in
Read moreBusinesses are recommended to keep on top of a legislative change that makes it a criminal offence to intentionally underpay staff wages, superannuation and other entitlements when they are due. The change, which came into effect on 1 January 2025, allows the Fair Work Ombudsman (FWO) to investigate suspected criminal underpayment offences, otherwise known as […]
Read moreBy Zilla Effrat Survey after survey reveals that there are tough times ahead for the Australian economy, reinforcing the message that small business owners need to keep taking steps to future-proof their businesses. The September 2023 edition of Deloitte’s Access Economics’ Business Outlook report confirms both a retail recession and a per capita income recession […]
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