Doesn’t it feel good when you touch the accelerator and you get an immediate response from your car’s engine accelerating you out of danger or quickly past the car in front?  In the same way a finely tuned business is better able to avoid danger and much better able to take advantage of opportunities.  A finely tuned business has an excellent dashboard of instruments telling you quickly what is happening in your business engine. With advances in computing this type of system is now in the reach of most small to medium businesses.

Cloud technology has now brought the price of larger software systems down to an affordable level.  It has done this in two ways.  One, you do not need to purchase expensive servers to run the software as you use the software over the internet.    Secondly, you do not have to buy the software outright as you pay a monthly fee per user.  This approach enables you to afford more powerful software that gives you the information you need to run your business better.

Most businesses rely upon spread sheets and their accounting software to provide them information about where their business is at.  Some have specialist front end software for invoicing and perhaps job costing and stock management.  The problem with this approach is that because the different sources of information are not integrated or poorly integrated you have to input similar information in different software applications.  Also you do not know what the information is telling you until you get time to input it all.  Back to our car analogy this is like needing to pull over while you check the oil and the radiator.

An Enterprise Resource Planning (ERP) is a software package that has all the applications you need in the one program which means you only input data once.  An ERP will include sales, quoting, customer relation management (CRM), project management, job costing, time recording, manufacturing, inventory management, HR & payroll and accounting.  You are able to tailor an ERP to only include the parts you need.

Better still an ERP captures information at the time you are doing the business activity.  That may be quoting, invoicing, doing work on a job etc. The other big benefit is that it updates all the different aspects of your business in real time so you know exactly where you business is at now.

An ERP should have excellent reporting so that it tells you what is important to you in managing the business.  A good system will give you a dashboard that comes up on your main screen with the most important things you need to know about your business for it to be running well.
 
With a good ERP you are able to better manage the business, because you are better measuring it.  You are able to make those small percentage improvements that all add up and are very important in today’s economic and competitive climate. 

Peter Ambrosiussen is the principal of Ambrosiussen Accountants & Advisors and accredited Gazelles International Coach www.ambrosiussen.com.au 

View LinkedIn Profile – http://www.linkedin.com/pub/peter-ambrosiussen/29/171/a24

Published by Toowoomba Chronicle www.thechronicle.com.au on Saturday 11 February 2012

Take the Rockefeller Challenge to improve and grow your business.

Developed by Verne Harnish, the Rockefeller Habits offer a disciplined and proven approach to business growth.  From doubling your cash flow, to determining your competitive advantage and energising your employees, the world-renowned Rockefeller Habits offers an easy to use program for making strategically smart business decisions.

Our Rockefeller Challenge introduces you to the Rockefeller Habits Checklist, a process that covers 10 essential business habits and will allow you to determine areas for improvement relating to People, Strategy, Execution and Cash.

To take the Challenge is easy and free!

Simply spend 10 minutes working through the checklist, score your results and email or fax your checklist to us for an obligation free analysis of your results.

Participants who complete the checklist will receive a free copy of Verne Harnish’s book, Mastering the Rockefeller Habits.

Email us today for your checklist or speak with either Peter or Julie on 07 4639 1957.

Having lost a full frontal battle to totally demolish trusts just over ten years ago by trying to tax trusts as companies, the ATO has resumed the battle in recent years in a sniper approach.  The latest sniper attack comes in the form of a consultation paper released late last year that puts forward options that will further limit the tax effectiveness of trusts.

Last year saw trusts tax effectiveness hit by reducing the tax free distributions to minors from $3,300 to $416; reduced flexibility of trust distributions if tax returns need to be amended; and higher taxes if trust distributions to companies are not cash flowed. 

This consultation paper headed “Modernising the taxation of trust income” sets out a number of options.  One of these options, which seems more favoured by the ATO is one used in New Zealand, Canada & the USA, called the “Trustee assessment and Deduction model” – TAD for short.  Under this model whatever taxable income is not physically distributed to the beneficiaries of the trust in cash or property is taxed against the trustee.  Under current law the tax rate for taxable income to the trustee is 46.5%.

The problems with this approach are:

• The higher rate of tax.  This is due to both the penalty rate of 46.5% and that if the distributions cannot be cash flowed through to lower income individuals and not for profit organisations in the required time frame the tax free or lower tax rate opportunity is lost.
• Difficult to retain cash in a trust:   A business needs to retain cash for working capital, debt reduction and purchase of assets.

This approach is pushing businesses to look more closely at operating through company structures. However company structures do not have the range of capital gains benefits that trusts do. If you are over 55 when you sell your business then the company structure will give most business owners the opportunity to receive the capital gains tax free.  Alternatively if you sell your business before you are 55 you have the opportunity to roll over the capital gain into another business asset and thus defer the capital gain until you are over 55.

Not all business owners want to wait until they are 55 before they realise the proceeds from the sale of their business.  For this reason the more appropriate structure moving forward is more likely to be a combination of a trust and a company working in tandem.  The trust structure gives you the capital gains tax benefits and the company enables you to retain profits and keep your tax rate at a maximum of 30%.

While submissions on the draft paper close in two weeks it will be another six months before we see the draft legislation.

If you are setting up a new business or restructuring your existing business it will be important to keep these possible changes in mind.  It is also important to keep in mind that the ATO is continually finding ways to minimise the effectiveness of trusts, especially as a business entity.

Peter Ambrosiussen is the principal of Ambrosiussen Accountants & Advisors and accredited Gazelles International Coach www.ambrosiussen.com.au

Published by Toowoomba Chronicle www.thechronicle.com.au on Saturday 28 January 2012.

“There is no such thing as goodwill” this experienced businessman was often heard to say, except that is when he came to sell his own business. For a healthy business goodwill is the major part of the overall value of a business. Many of the younger entrepreneurs today are very much focused on the value of their business and increasing that value. They see their business as an investment, in the same way as they would an investment property.

These younger entrepreneurs are working on getting their business “sale ready” even though they do not have immediate plans to sell. They recognise that it takes a few years to get your business to the place where you can maximise the sale price. They are also ready to sell it if the price is right, or another Alan Bond should come along.

You can increase the value of your business by having consistent or growing profits. Strong systems also increase the value as they minimise the risk on takeover. The less the business is reliant on the business owner the greater the value of the business. Likewise a quality, stable workforce that is adequately paid gives the buyer confidence. A strong brand, image and reputation also increase the value. Working on these areas as well as growing profits will make your business an attractive proposition and will help you get closer to the price you would like.

Tax on the sale of your business can significantly reduce the end price you may be expecting. By looking at the sale of your business well in advance you have the opportunity to reduce the tax impact. By handling the tax smartly it is possible to receive the bulk of your sale proceeds tax free.

A business is generally valued by capitalising its future maintainable earnings. This is the same way a commercial property is valued. The only difference is the larger range of capitalisation rates for businesses. The more sought after a business the better the capitalisation rate. The higher the profits and the less the owner works in the business the better the capitalisation rate.

If the profits of the business are say $500,000, and you believe this can be maintained, and the capitalisation rate is say 30% the business would be worth $1.5mill. The difference between the $1.5mill and plant and equipment and stock is the goodwill of the business. The greater the goodwill the greater capital value you have created.

By working on increasing the value of the business you are working on the second form of return from your business, the capital growth. The good thing – as your capital value grows so too will your profits.

Peter Ambrosiussen is the principal of Ambrosiussen Accountants & Advisors and Certified Gazelles International Coach. www.ambrosiussen.com.au

Welcome to the launch of Ambrosiussen TV!  This page will showcase videos that are relevant to your business, including popular Gazelles and strategic planning topics.

• We launch with a video of Peter Ambrosiussen being interviewed by CPA Australia.  Peter was selected as part of Showcasing Best Practice in Public Practice .    We have included an extract on how our organisation’s culture impacts on our client relationships:

Impact of Our Culture on Our Client Relationships from Ambrosiussen Accountants on Vimeo. For further information and to view the full video, please contact our office on (07) 4639 1957.   CPA Australia can also be contacted by initially going to their website: CPA Australia Online Learning . 

• Gazelles:  Gazelles TV provides online education, resources and tools to keep you great.   Peter attended the Fortune Growth Summit which is featured in some of the videos.

• Be inspired by Naomi Simson, CEO of Red Balloon as she discusses her business’ Core Values:
  
  and Red Balloon’s Big Hairy Audacious Goal:
  

No matter what stage a business is in, at some point the business owner or management team will face the need for growth or systematic improvement to your operations.  

Common questions asked in any business:  What happens to your cash flow if your sales increase?  What will interest rate changes do to the bottom line?  

As part of our structured Business Edge service, we have the resources and the knowledge to be able to provide answers to complex questions such as these  and show you the impact of these business decisions.   We can quickly identify problem areas and ways to address these issues, analyse performance of the business and monitor KPIs.

For a free consultation with regards to this service, please contact our office at admin@ambrosiussen.com.au or call on 4639 1957 and speak with Peter. 

If you have clients that you feel will benefit from this, forward this email to them so that they can take advantage of this opportunity.

For further information on our Business Edge Service, please click here.

We hear daily of the financial troubles of governments in Europe with their huge debts.  The mineral resources rent tax, if used properly, can put Australia in a place that will ensure our financial future and that of future generations.  What is happening in Europe starts with finances, but that effects people’s day-to-day living, whether they have a job and a whole range of family and social stresses. Not that we are anywhere near that, but I’m sure the people of Greece did not think about these issues five years ago either. 

The mineral resources rent tax is now almost certain to become law that will come into effect from 1 July 2013. It is expected to raise $10 billion by 2014.  Most of this will go towards funding marginally lower company tax rates.  It will also fund the cost to government of increasing the super guarantee rate from 9% to 12%. 

The amount of revenue will go up and down, but as mining operations become established their profits will increase over time and so too will the amount of tax collected.

The risk though is that this fund of additional taxes – that has rightly been seen as ours and especially future generations’ inheritance – will be used for short term benefit in order to win elections. Also, as the resources industry is very volatile, a government funding recurring programs with this uncertain revenue will be forced to cut spending or raise taxes to make up any shortfall when the tax drops.

During this last week the World Economic Forum issued a scorecard on the competitiveness of 137 countries.  In this report card Australia dropped from 16^th place to 20^th place in the world in terms of competitiveness and productivity. One of the primary reasons we dropped was our lack of investment in infrastructure.

This tax presents Australia with a unique opportunity to bring ourselves to a place where we have no net debt.  Putting the proceeds into a separate fund that can only be used for public infrastructure will ensure the once off minerals we have in the ground are turned into something that provides a lasting benefit above the ground.  At the same time such an investment will help increase our productivity and competiveness. 

There should be strict criteria on projects being able to access these funds, based on the return they are expected to make to productivity.

A similar approach could be adopted to what we use on a micro level with some of our clients when they have had a windfall gain.  We lock those funds away and use them for strategic business opportunities that have a high rate of return.  The new project must first repay the funds before any profits can go into the general revenue.  This way the fund keeps its capital in place for future opportunities.

The mineral resources rent tax gives us a unique opportunity to put our public finances into a very strong position, make our private sector more productive and leave a lasting legacy. Will we have the courage to do it or squander the opportunity?

Peter Ambrosiussen is the principal of Ambrosiussen Accountants & Advisors www.ambrosiussen.com.au

Published by Toowoomba Chronicle www.thechronicle.com.au on Saturday 17 December 2011.

The “World’s best treasurer”, Wayne Swan introduced a mini budget this week to keep the possibility of budget surplus alive.  Events in Europe and the USA have undermined confidence here and reduced business profits and tax revenues. 

 There are a few changes in the Mini Budget that will cause concern, but they will only have a narrow impact.  The Mini Budget does help convince the investing world that the Government is serious about keeping a lid on our debt.

Australia’s local and foreign currency was also rated AAA by Fitches rating agency this week.  In doing this they referred to our relatively low foreign debt and the commitment of the Government to get the budget in surplus.  Being AAA rated means the cost of funds is cheaper and interest rates will be more likely to come down.  AAA rated also will attract overseas investors which brings more opportunities for business and jobs.

The assumptions in this mini budget are optimistic.  However, the fact that the Government is implementing a mini budget that seeks to maintain the surplus and reduce debt will reinforce the AAA rating.

Some of the negatives are:

• An increase of the tax on aviation and vehicle fuels which will raise transport costs.  This will be on top of the impact of the Carbon Tax next year.  Transport costs are going to be an increasing cost to manage in your business.  Transport operators are going to need to increasingly manage their fuel costs to remain competitive.
• Living Away From Home Allowance for foreign workers is being changed to only allow this if you have a home you are maintaining elsewhere in Australia.  This will make it even more difficult and more expensive for attracting migrants on 457 visas.  Also, the amount that can be claimed is being reduced, unless you can substantiate your expenses.  This will particularly affect those businesses with people working out west.
• The Government is going to make a fresh push to get the means testing of the health funds rebate through.  Heath fund premiums are already very expensive.  If an extra 30% on top has to be paid it will make it prohibitive for most people.  The means test is $80,000 for singles and $160,000 for couples or families.
•  Some tax cuts will be delayed.  However, these are only minor and include the introduction of a standard deduction of $500 and then $1,000.  Also, the 50% tax free part of interest has been delayed.

As you can see the changes to reduce expenditure are going to have a narrow impact and could have been much more severe. If these changes do impact your business then look at when they come in and estimate their impact. What you can measure you should be able to manage.

The real aim and benefit of this budget is to keep a positive view of the Governments economic management and continue to attract investment into the country.

Peter Ambrosiussen is the principal of Ambrosiussen Accountants & Advisors www.ambrosiussen.com.au

 Published by Toowoomba Chronicle www.thechronicle.com.au on Saturday 3 December 2011.

With the passing of the carbon tax legislation during the week this tax is now a reality that we must face.  The new tax will take effect from 1 July next year.  It presents both a cost to be managed and an opportunity in opening up new areas of business.

The celebrations last Tuesday, by some, resembled the winning of a football grand final.  However the whole science behind whether carbon dioxide is creating the problems of global warming is still very doubtful.  However, despite what we may or may not think about the science the reality is that the tax is with us and we must deal with it.

The tax initially is going to be levied on the top 500 polluters.  This is primarily going to impact electricity generation, mining, petroleum, manufacturing, aviation, construction and transport. However the flow on effects will be to all businesses. It is going to affect your electricity prices, transport prices, and lead to price increases to most of your supplies.

The timing of this for business could not be worse.  Many businesses are facing reduced demand for their products and services and cutting costs to remain profitable. Now business must add increased costs come 1 July to their challenges.  You have two options.  The first is to pass on what you can.  Look at lifting your prices.  Consumers are being compensated for the rising costs and so will have some capacity to pay more. However consumers are also pulling back on spending and so you may not be able to pass on all the cost increases in higher prices.

The second option is to cut costs further. However care needs to be taken in cutting costs.  Many of your overheads provide vital resources to the generation of income for your business.  The best way to determine which costs to cut is to list each of your overheads and ask these questions.
• Does this expense generate additional revenue?  For example advertising should, but does it?  Look at each area you spend your advertising dollars to see that you are getting a return for the expenditure.
• Will the expenditure lead to the retention of customers?  Cutting back staff may lead to poorer customer service.
• Will this overhead lead to cost savings elsewhere? Equipment that you have can lead to wage savings.
• Will the expenditure lead to better cash flow?  For example having a person employed to manage your debtors.
• Will the overhead provide productive capacity?

The new tax also provides positive opportunities for business. Are there ways your business can use your current services to reduce the carbon usage of other businesses?  Are there ways you can adapt your current product or services to tap into the carbon reduction market?  There will be many new businesses that will open up providing clean energy.  Look at ways you may be able to supply to them. Keep yourself educated on the changes that are coming in clean energy and the carbon reduction industry to be aware of these opportunities.

Peter Ambrosiussen is the principal of Ambrosiussen Accountants & Advisors www.ambrosiussen.com.au

Published by Toowoomba Chronicle www.thechronicle.com.au on Saturday 12 November 2011.

I am often asked “what is the best way to motivate my employees”.  The people asking this question are often thinking of the reward in monetary terms.  This is an intuitive answer.    However studies have shown that money is not a good motivator.  In fact money as a reward often leads to poorer performance.  This was a fact I was aware of, but what is the alternative?  Daniel Pink, the author of “Drive” explained to us at the Gazelles Fortune Summit in Phoenix today simple but effective alternatives that work.

Daniel explained from research that has been conducted three powerful motivators:
• Autonomy
• Mastery (of their work)
• Sense of purpose

Employees that are micromanaged do not feel motivated. Staff feel motivated when they have autonomy over their:
• Tasks (have some responsibility over what they do in a day)
• Time  (when they arrive, leave and what they spend their time on)
• Team members they collaborate with
• Technique or how they actually perform their tasks

The more autonomy the staff have, the more they will be motivated. One way to increase the autonomy is to do what one Australian company, Atlassian, is doing.   Once a quarter on a Thursday afternoon, they ask their staff to drop their official work and instead spend time working on something that interests or irks them. The only obligation is that they must show what they’ve come up with to the rest of the company on Friday afternoon in a fun, free-wheeling meeting.  This has resulted in an array of ideas for new products, improvements to existing products, and refinements of company processes that had otherwise never emerged.

People feel good about their work when they make good progress in the day. Often staff are not sure whether they have made that progress. They need feedback to gain that confirmation. Often the only feedback people receive is the annual performance review.  In today’s world where we get instant response by texts, waiting a year just does not cut it. Today’s work places feel like a feedback desert to today’s younger generation.  Finding ways to give daily feedback is important providing motivation.  Daily Huddles for example provide a good forum where staff can gain the confirmation from their peers and managers.

Staff need to know they are making contribution in their work to something that is bigger than just making profits.  It helps if we talk more about why jobs are important as much as how to do the jobs. Spend time in your monthly or weekly meetings to review the businesses purpose and core values with team members.

There are real staff challenges today, from the pressure from mining companies through to getting the maximum effectiveness from your staff to keep a lid on costs.  How you motivate your staff will make a big bearing on how you meet these challenges.  Doing nothing is not an option.

Peter Ambrosiussen is the principal of Ambrosiussen Accountants & Advisors www.ambrosiussen.com.au

Published by Toowoomba Chronicle www.thechronicle.com.au on Saturday 29 October 2011.