Category Archives: Financial Management

Financial management is an organization’s way of calculating, monitoring, systematizing, and regulating its monetary resources in order to achieve its financial goals. Common key objectives for financial management would include creating wealth for the business, creating cash flows, and providing an adequate return on investment.

With the current business environment, managing resources has never been so important. Organizations are all striving to become leaner, more productive, and more cost-efficient. In doing so, more attention is focused on the allocation of their financial resources to ensure faster returns of investment and higher profits. Moreover, based on a current survey by a leading financial magazine, it’s the financial executives in charge of ensuring company funds are effectively utilized who are garnering six-digit paychecks. This just goes to show how financial management plays a significant, and critical role in today’s business environment.


Tax Tips for SMBs

While hiring a financial expert can make filing your taxes convenient, there are still other tips that can put to practice to make your business smoothly glide when the tax deadline comes near. These tips will provide you with ways on how you can lessen the trouble that you usually encounter when you file your taxes. Even if you choose not to do it yourself, you will still have to do certain things for to accomplish the task. And keep in mind that in the end, you will be responsible for your business.

Employing a Strategy

One of the bigger steps that a business takes towards organizing the finances is to start bookkeeping. Bookkeeping is a simple task for people who have a background. It does not require specialized skills but you must be familiar with the terms. Accuracy is the most important feature of accounting since the details in the books will be the bases for the health of the business. Make sure that the bookkeeper is honest and objective. Accounting for small businesses is usually performed by the owner but as a firm expands, it becomes more effective to hire someone else. When this time comes, listen to what your accountant has to say. He or she knows more when it comes to your finances so make sure that you hear him or her out especially when making business decisions.

Getting used to it

Tax payments are perennial payments. Learning to accept that and getting used to it is a giant leap towards easy management. It will also save you resources when you realize that it is a normal part of your business and that you have to incorporate it in all aspects of the business the whole year round and not just when the deadline comes near. Here are other advantages when you distribute your tax-related tasks to your everyday activities:

  • You will have enough time to finish the documents.
  • You get to set aside cash for the payments. This will make the expense easier since you do not have to shell out in bulk.
  • You will also make the most of you accountant’s skills.

Make the Most of Technology

If you are ever caught in a pile receipts, then you must make use of this impressive soft wares. Not only will you have less clutter but you can fill out your Business Activity Statement (BAS) and Annual Tax Assessment easily. If you have an Apple iPhone, you can use Genius Scan+ for easier documentation. You can take a photo of the receipts and have them kept in online storage sites that you can access anytime. There are also similar applications for other phones. These soft wares will spare you the time of looking for old receipts and give you an easy time as the deadline draws near. And since you are required to keep the receipts for seven years, you will be able to save space and ensure that the ink has not been erased by water and other materials.


Deductions Maximisation

You may not be aware of it but some of the payments you make can actually reduce your taxable income. And these acts are purely legal. You need not skip certain earnings that can actually bring you to jail. Take your cue from these actual cases when you would never think these people can actually get more for what they did.

Mark Morris, a senior tax counsel in Australia talks of a police officer who can claim the payments he makes to informants through his tax payments. With adequate documentation and authorization from his service, he can actually get his money back. It works like any expense made by an employee that the business must reimburse. Especially since the police officer works for the state, it is also the state that will pay him back through the cut in his taxable income.

Another interesting way that you can actually cut on your taxable income is through the clothes you wear to work. It may seem kind of odd but if a change in wardrobe is required for you to perform your job, then you can you can actually save some money come tax payment time. Flight attendants are awarded allowable cuts when they have to buy shoes or clothes in place of the ones that they have but would affect their jobs. Electricians who work outdoors can seek cuts for the payments made in buying protective gears and clothing.

You may find these instances odd but you will be surprised to find out about the mundane things you do every day that actually allow significant deductions to your taxable incomes .

  • You can actually avail of laundry deductions when you have to pay more to clean protective clothing and other work-related apparel. This is applicable to employees of chemical companies and similar industries where the clothes they wear are different from the normal clothes a person wears. Since they are made of different materials of have delicate structures, you can be spared of the costs of cleaning them.
  • Home office costs are allowable deductions for people who work in their homes. At a normal rate of $0.26 per hour, the worker can save the costs he or she incurs for electricity and other costs for the work.
  • Self-education costs can also be claimed if you are taking up higher studies aimed at your current career alone.
  • Motor Vehicle costs can also be allowed if your company does not reimburse your vehicle costs like petrol consumption for work-related trips.

In general, allowable cuts work as reimbursements wherein the paybacks are made through the cuts in the taxable income. Allowable deductions are usually awarded to builders, cleaners, healthcare workers, electricians, engineers, hairdressers, lawyers, miners, security guards and travel agents. It you have inquiries and questions on how you can avail of allowable deductions, visit Just keep in mind that for transactions to be valid and authorised, proper documentation is necessary. You can also seek help and assistance from your financial advisers.


Improving Cash Flow with Payment Options

The success of a business lies in many factors – one of these is your payment options. Your systems of payment can make or break your transactions with your customer. There are a lot of times where customers would opt not to engage their selves in a business transaction upon discovering a company’s payment option. This is something you should avoid in order to cater to as many customers as possible. And as we all know, more customers means more cash.

There are innumerable points to ponder on in choosing your company’s payment option. Here is a list of some considerations to make sure that you will not only make the right decision, but the best one.

  • Identify how your system should work depending on your enterprise. First and foremost, consider what you do. Do you provide goods? Or services? Do you provide these to consumers? Do you provide these to sellers in the form of retails? Do you provide these to other businesses? Or do you provide these to a company?
  • Consider what you need and where you can acquire these needs. To successfully manage the whole system, identify what resources you should have and you should access. Should you need to visit the bank? Where would the nearest bank be? Does your client have access to the bank? Does your customer know how to make transactions in the bank? Should you opt for cheques? Would this make it easier for your customers? Would this make it easier for you?
  • Take note of the time that you and your customers need in order to fully carry out your transaction. Never forget that time is of the essence. No customer, nor business, is willing to allot a very long time in carrying out transactions. There are some credit card offers that automatically download statements into software accounting packages. This way, your customers can ensure that no matter how they pay, their bank statements and their accounting records are coordinated.
  • Make use of various technologies. How should your system work? BPAY enables businesses to transact payments through a banking facility of a financial institution. It can be conducted online or through telephone lines. This system, however, is only available to companies who are registered BPAY billers. For years, this system has worked with a number of institutions in order to provide an easier and simpler sign-up process, especially for small enterprises. Small businesses believe that this system adds credibility to their enterprise.
  • On the other hand, an Electronic Funds Transfer or EFT is a system of direct transferring of funds from one account to another. It can also be carried out through telephone lines or computers. This system allows an instantaneous movement of money among the involved parties. Before implementing your payment option, be sure that you know how it works.
  • Last, but certainly not the least, aim for credibility and customer satisfaction. The efficiency of your business and the welfare of your customers should always be on the top of the list.

Tax Deductions – Making The Most Of Them

Taxation is a complicated and even boring topic for most people. However, knowing how taxation works can actually help you save you money at the end of the year. And you can do so in a perfectly legal manner through the aid of tax deductions.

Tax deduction is a sum of money allowed to be deducted from your taxable income at the end of the year. These deductions are allowed depending on the products and services availed by the person. Usually, allowable deductions are awarded to workers who incur additional costs to perform their jobs more effectively. These include clothing expenses, travel expenses and other lifestyle expenses. Donations and gifts are also deducted from the taxable incomes.

To further explain how allowable deductions work, consider a regular labourer. In the previous year, he was able to earn $10,000 dollars. However, he was forced to spend a fraction of his income for some work requirements. He had to spend $500 dollars to buy protective clothing. He is allowed to deduct this amount from his taxable income. Hence, only $9,500 will be considered when computing for the amount he needs to pay. If for example, the tax he has to pay is 10% of his taxable income, he will only have to pay $950 instead of the $1000 without deductions. He will be able to save a total $50 due to the deductions.

Moreover, here are some tips on how you can familiarize yourself with tax deductions and make the most of them. You will be surprised by how much you can save at the end of the year.

Keep Your Receipts

If you are like most people who throw away the receipts or slips of transactions, you may have to think again next time. In order to avail of allowable transactions, you will have to present proofs of transactions and purchases. However, if you have already lost your receipts, you can still avail of fixed rates for work-related costs. On the average, $300 of work-related expenses can be compensated alongside $150 worth of laundry services. Others may require detailed summaries of transactions so it is best to check the requirements imposed by the ATO. Workers are also encouraged to keep their notice of assessments for future reference.

Have a Tax Agent

Aside from using the spread sheet programs to keep track of your finances, you can also use the E-tax program. Through the internet, you will be able to keep track of your expenses and easily identify which if your expenses you can get deductions from. The program also features quick links to the ATO site for quick reference.

However, hiring a tax agent is still the prescribed move by financial advisers and analysts. It is true that it will you to have them manage your taxes but most people find them worth it. Unlike computer programs, these trained professionals can dig deeper into your expenditures and further analyse your possible claims.

To learn more about allowable deductions, visit the ATO site at


Tax for Small Businesses

Taxes can be such a hassle. Filling out forms is tedious enough. Compiling the paperwork and doing the computations is also very exhausting.  But paying taxes is your way of giving back to the economy. And it is also another way of making sure that you get back what you deserve. That’s right. Filing you taxes accurately and religiously is the most effective way of getting a guaranteed refund.

There are a number of ways on how to get through you taxes. There are also important things to keep in mind. The most important consideration is the accuracy of details you submit. The information must true and accurate. It is an advantage if you are well-versed about taxation so that you do not understate or overstate your figures.

The main decision that you have to make is if you will be the one to file your taxes or if you will hire a tax agent. Both options have its ups and downs so it is best if you weigh your needs and current situations.

Doing it Yourself

If you are saving money and would prefer to learn about the processes yourself, just visit the website or personally go to the Australian Taxation Office. They provide comprehensive guides and how-tos for your easy facilitation. It is recommended that you check the rules and provisions every year since they are bound to change regularly.

Filing of taxes for full-time employees who receive a payment summary is bound to be easier. Being employed gives you access to paper works prepared by your employer. However, you may still need professional advice when preparing the list of your benefits and deductions. Some terms are too complicated and may cause wrong computations and statements. However, if you are confident about your abilities and judgement, then you can save money by filing your taxes yourself.

Getting an Agent

The main concern you will have when hiring an agent is the additional cost entailed. The cost would usually depend on the services the tax agent performs and how long it takes for him or her to accomplish it. One way to lessen the time (and hence, the total bill) is to compile your receipts and papers as soon as you get them. This will give the tax agent an easier time when she reviews your documents.

However, it may come as a relief that the payments made to tax agents are normally deductible from the taxable income. Other advantages of getting a tax agent include the high degree of accuracy above all. Second, you will be able to get the maximum allowable refund for your income and expenses. The services of tax agents also do not stop at the filing of the papers. They can (and should) also give insights and recommendations on how you can handle your finances better.

If you decide to get a tax agent, finding one should not be a hard task. You can visit to find a list of credible and registered certified public accountants that you can hire to file your taxes.


Business Valuation

How much is your business worth?

Business valuation is a process used by accountants or by specialist company valuers to determine the worth of the business. This tools are employed by companies who are about to sell their enterprise or those who are about to buy another business. These tools can be used for various business and legal purposes – whether you want to determine the value of your enterprise or another company’s enterprise. Let us assume that you would want to sell your business. Primarily, there are four ways to determine its worth – something you should consider before you finalize your transactions.

Looking ahead

When you are trying to sell your enterprise, it means that you are also selling the rights to any profits that the business may accumulate in the future. The capitalized future earnings method makes use of the values of the Net Profits and Return On Investment or ROI as its basis.

Essentially, this method determines the value of a business by dividing the Net Profits by the ROI. The value of the Net Profits can be derived from the profit-and-loss statements of your business from the past three years. The ROI, on the other hand, is the rate of return that your buyer may expect upon purchasing your business.

Looking at the present

Asset valuation is considered as the simplest way to determine how much a business is worth. It uses the values of your assets and your liabilities. Add all of your business assets such as cash, stock, plant and equipment, and receivables. Then add all your business liabilities such as bank debts or loan repayments, or simply any amount of money your business owes. Then, subtract the total value of the liabilities to the total value of the assets.

However, this method does not make use of the goodwill of a business. This goodwill is usually used for retail or those businesses that offer services. It is the difference between the true value of a business and the value of its net assets.

Look at your neighbours

The earnings multiple method is considered an easy method that depends on the values of other businesses that are similar to yours. By simply multiplying the earnings before interest and tax (EBIT) value by a selected number you may find the worth of your business. The selected number is called a multiple. This multiple depends and varies on the industry and growth potential of your business.

On the other hand, the method of comparable sales also relies on other similar businesses. By considering the prices of the sales of the businesses similar to yours, you can compare the value of your own business.

Almost all of these methods are used to validate the value of businesses. However, you should always remember that whatever method you may opt to choose, you should consult with experts such as business brokers, accountants, and business valuers. This way, you can fully understand the process of determining the value of your business and what it really means.


Self Managed Super Funds

Retirement plans provide benefits for companies or government institutions concerned with the longevity of investments for their future. Having one for the long run must ensure security on your funds. The Self-Managed Superannuation Fund is a type of pension plan that features a full control as to how your funds and assets will be invested or will operate. In setting up a SMSF, you must know your skills relevant to your needs and you must have reliable providers.

To start running a SMSF, you will have to decide first if: you’ll take charge yourself to the submission of pertinent documents, plan management, record-keeping and taxation registration; or outsource all or some of these to legal individuals or service providers. The next step here is to look for the appropriate SMSF provider. Indexes of providers can be found over the internet. Choose the one that suits you the most. But to find out if you have chosen the right provider, check out first how long they have been in the business. As an advice, you must be cautious on selecting the providers who’ve just been in existence for barely two years. You may want to check some background information of the operators if they are capable enough to handle you as a client and your superannuation fund.

Many of the online service providers give fund establishment services, ongoing administration and one-off transactions. Aside from these, some are even linked to various financial and adviser groups. In fact, you can even benefit from their financial products.

A complete package of services is also offered by some providers. This includes investment accounts, direct services for the requirements and lawful individuals like an auditor, a tax agent, a financial adviser and a relationship manager. However, this can be costly so you must be watchful on the signing of documents and other related business transactions. Usually, a flat fee or an hourly fee for administration services could be charged on your bank accounts or even on your assets.

The business expenditure for a SMSF with the aid of online providers is relatively cheap, though. If you are concerned whether to have online or face-to-face service providers, consider first your needs and the difficulty of your fund. But at many times, face-to-face consultations with extra credits are also made available by the online providers. You may also opt to hire an accountant provided that he/she is a SMSF expert.

The last thing that you have to consider on selecting the provider is the scope of their SMSF service. If you opt to have a complete package agreement, it may depend on the benefits that the operators will give you. Evaluate then which online provider offers better services in terms of business and running payments, additional fees and other expenses that may come up which is not included in the package deal. Now if you want to be guaranteed, you can ask your financial adviser to separate the SMSF running costs and recommendations regarding non-super assets, if there are any.



Funding Your Cash Flow With Loans

Credit and Financing

Capital is the monetary requirements of a business firm to operate. So whether you are just setting up or already running your business, the source of capital is an important consideration.

Credit and owner’s equity are the conventional sources of financing among businesses. Since every firm starts out small, seldom do investors inject money to the enterprise. Additional and amenable options, however, become available as the business grows. It is important for a business to have a steady cash flow. Aside from the recurring operating expenses, other payments such as tax and other duties arise. Most of the time, the owner’s equity becomes inadequate to support the growing needs of the business. It is therefore important for the owner to be familiar with the terms, benefits and risks of credit.

Your Personal Credit Line

Using your personal line of credit is a convenient way of financing the business. You can use your credit card or borrow cash from your family and friends to suffice the expenses. However, with a growing business, these methods have immediate limitations. These methods are optimized for personal use and emergencies so in time, it becomes inadequate to support the growing needs of the enterprise.

It is important to consider certain points when using personally borrowed money or your credit card. Below are some questions you may ask to gauge the extent of your personal credit:

  • Until when can the cash support the enterprise? How much and how fast are you spending the money?
  • Will more cash be available?
  • What are the terms of repayment?
  • When are your friends and family expecting their money back? Do they have plans for this money?
  • What will happen if the debt is not repaid? What will you lose?

Business Loans

A business loan is an amenable option when starting your enterprise. You can also avail of business loans to expand the business. There are many institutions that offer loans depending on your business scale. It is important to familiarize with their terms so you can make the most of their offers. It is best to visit the banks and offices so you can discuss the options for your business.

It is also important to discuss these options with your financial advisers. Seek the opinions of your accountant and auditor when getting a loan. They know best if your business can repay the loan in time. Moreover, talk to your lawyer to verify the legal implications of getting a loan.

Imposing an Overdraft

Overdrafts are a form of financing that allows business to make purchases using their accounts even if the available balance is not enough. Overdrafts are a form of short-term funding that businesses can take advantage of. However, it is important to always review the terms and status to avoid incurring unnecessary expenses.

When deciding on external financing, it is important to have a long-term plan. This will give you an idea of how you can repay the loans you will avail. It will also ensure you that the loan will go to the business and not your personal needs. .


Funding your Business without a Loan from a Bank

Most of the time, applying for a small business from banks require a collateral; and this has been proven quite a challenge to small business owners. Due to a lot of requirements, most small business owners have already factored out getting loans from banks. Nevertheless, this doesn’t mean that you cannot find other creative ways in funding your business. Here are some things to try, and their pros and cons, in order to get that additional funding for your business.

The Factoring Method

The factoring method allows you to sell your business’ accounts receivable to a third party entity in exchange for immediate cash. Factoring can be quite expensive though. With mark-ups of up to fifteen percent, factoring might work for expansion; but this method might not be best for a company that’s downsizing or losing money.

Use your IRA or 401(k)

You can also consider borrowing money from your retirement funds. First thing you might want to consider in doing this is taking a sixty-day interest-free loan from your 401(k); there are also no fees involved if the loan was paid back on the time specified. One important thing to take note of though is that these funds are for your retirement. It is usually risky and might even be devastating to lose this money in business.

Try to Secure a Government Grant

Government grants require extensive research at the local, state, and federal government levels. One important consideration though is that these grants are very technical in nature. Moreover, they usually require some very strict reporting in the progress of the research being conducted.

Get a P2P (Peer-to-Peer) Loan

You can find some online organizations that offer peer-to-peer loans. These peer-to-peer loan companies have people who you don’t know offer you to loan money from them. Your possible loan amount depends on your credit score, the economy, the period of the loan, and your business’ story. On the other hand, peer-to-peer loans are hard to acquire and the interest is quite high.

Use Global Crowd Funding

Very much like P2P funding, crowdfunding allows you to get people to invest in your particular organization. But unlike, P2P, crowdfunding donors do not expect to receive money back. You can, in turn, provide them with rewards of receiving your products first, or having products named after them.

Engage in Microfinancing

Microfinancing is relatively new. Microfinancing organizations provide small loans that are based on your business’ experience, marketability, and sales.

Get Financing Options from Wholesalers or Suppliers

Doing this method helps you work more closely with your supply chain to get the financing that you need to further fund your business. This method works best with a local supplier who has really shown great interest in your products or services and is willing to work with you. As a side note, always remember not to personally guarantee these types of loans.

Join Business Plan Contests

Another creative way to get your business funded is to win the money through competitions. There are numerous business plan writing competitions that are awarding a good amount of money, or funding, to the winners. Just make sure that your business writing and presentation skills are tip-top because you will be competing with the best in the country.

Find Organizations that are ‘Business Incubators’

New businesses can get money, mentorship, and other similar support from organizations that are business incubators. Business incubators usually have great track records of success on the businesses that they’re nurturing. Just be mindful that there is a lot of competition for small businesses that want to be part of these organizations.

Barter Goods or Services

You can also look at exchanging products or services instead of money. Moreover, bartering can save you money and move some unused resources. This can be done directly with another business or through barter exchange organizations. Do take note though that you only need to barter a few select products and services; bartering without cash cannot pay employees or rent.


How Dollar Depreciation Affects Business Owners

The decline of the purchasing power of the dollar generally had an adverse effect; in the immediate sense, for dollar purchasing countries and for businesses that uses dollar a currency in transactions. Compared to other foreign currencies, the dollar has been declining at a relatively steady rate. The purchasing power based on the Consumer Price Index (CPI) and the exchange rate relative to other foreign currencies such as Yen and Euro had shown that there is a decline since August of 2000.

The effect of this on businesses that buy goods and source services to other countries with a relatively more stable currency is that the prices for a fixed amount of goods and services are rising. Compared to the prices back in 2000, the goods now may cost five to ten percent higher in terms of the local currency. This added cost directly translates to a five to ten percent decrease in profit.

The problem is further aggravated by the quasi-recession of the American economy. This results to companies increasing the prices to make up for losses because consumers now have less purchasing power compared to a decade ago.

The same is true for companies that sell their goods on foreign countries using dollar as currency for the prices of their goods. For every deal with a foreign buyer with a relatively stable currency, you are giving a five to ten percent discount per deal in dollar. This now poses the question of will it be safer to adopt a new currency that is more stable than the dollar.

This pricing strategy can be effectively employed; given that you have already established a  price-listing catalogue in different foreign currencies. The task does not stop there, of course. You also need to have an up-to-date price listing so that the rate of fluctuation loss for each of the currency can be minimized. Furthermore, you must maintain a balance of value so that you could see if the effort of pricing in foreign currency benefits your business at all.

You must be ready to train your staff on the changes in the management of money in your accounts. Be ready for complaints and necessary adjustments if foreign buyers do not see your prices to be realistic. Also, you need to set up the payment methods and even the Local Fund Transfer system of each of the currencies that you will use. Using multi-currency software on online marketing is easy; but the LFT for each country will be tricky at first.

On the bright side,  the declining purchasing power of the dollar can boost purchases from abroad. So what you lack in percentage of cost per unit is compensated by the volume of units that you will be selling to foreigners with a more stable foreign currency. This, in turn, can very well replace the loss margin by making up for profit with the increased volume. Just make sure that in the process, a five to ten percent decline would not substantiate the profit per unit. If this is the case, there will be a general capital loss for every unit sold; and that will be bad for your business.