budgeting

Smart budgeting tips for small businesses to start the New Year right

New year, new beginning.

Never has that maxim been more appropriate than right now, as we look forward to a better year on all fronts in 2021. So, it’s time to take care of your business and pave the way to a brighter future.

There’s no better way to take care of your business than by smart and accurate planning and budgeting. Here are a few practical strategies you can use to improve your financial security in 2021.

Define and understand your risks

Everyone is a little wiser now about the way in which a global event can impact even a small, local business. Prepare your business with a thorough risk analysis by assessing the likelihood, and the effect on your costs and revenue, of the following situations:

  • Pandemic. A second or third wave of coronavirus, or a new form of flu
  • Natural disasters. Storms, floods, drought, bush fires
  • Workplace accidents. Machinery mishaps, road accidents, chemical spills
  • Service interruptions. Power, water, telecommunications, transport
  • Technology failures. Outdated equipment, network failures, skill shortfall
  • Security. Theft, vandalism, fraud, cyber attack
  • New government regulations. Restrictions, taxes or levies around water usage, carbon emissions, quarantine
  • Legal liabilities. Disputes with customers or employees, problems with contracts, insurance or regulations
  • Financial developments. Interest rate increase, supplier price increases, slow-paying customers
  • Market changes. Increased competition, reduced demand

Ideally, set up a risk management plan, and insure against the most likely risks where possible.

Set your budget and regularly revisit it

Your business will benefit from a formal budget, rather than a vague list of likely sales and expenses. In its simplest form a budget includes projections of sales and other revenue, by year, quarter or month, as well as costs under the same detailed headings used in your profit and loss statement.

Having a budget will help you set goals and make better business decisions, and is a standard requirement when you apply for finance. There’s a useful government website offering guidance on budget preparation.

But budgets should never be set in concrete. Half-way through the financial year, your figures may already be out-of-date. You may need to revise your budget, or get a better idea of where your business is going via a flexible monthly forecasting system, including cash flow projections.

Overestimate your expenses

Now that you fully understand your risks, one of the worst things you can do is underestimate your business expenses (and its converse, overestimate your revenue). It’s much better to manage your expectations and avoid disappointment by being ruthlessly realistic about what your costs could be. Add some contingent wriggle room by adding 10-20% to your best estimates under each expense heading.

As long as your budget says you’re still breaking even, and you continue to rigorously monitor your actual expenses when they occur, you may be able to look forward to a pleasant surprise instead of a nasty shock.

Don’t underpay yourself

The fortunes of your business depend heavily on you. So, while paying yourself first, and paying yourself well, may sometimes seem like an unattainable goal, plan to put your own financial welfare at the top of the list.

Work out a reasonable salary, as paid by companies of similar size in your locality. Then, aim to pay yourself regularly and formally, preferably using accounting or payroll software. An owner who takes a reasonable salary can be another plus point when applying for business finance.

New year, new finance needs?

Contact your Pacific Finance broker to find out how we can help you with finance for your 2021 business goals.

WA Economy Stronger Than Expected

Economy

The state’s response to COVID-19 has positioned the WA economy to rebound faster and stronger than anticipated. The Government’s WA Recovery Plan of more than $5.5 billion has played a major role in assisting businesses during the pandemic.

WA was the only state to experience growth during the last year (increase of 1.1 per cent). The 2021 State Budget reveals that the WA economy is expected to grow by a further 1.25 per cent in 2021.

Employment

Even though the Government made the tough decision to shut down the WA border when the pandemic hit, employment is now tracking strongly. WA had recorded its largest ever monthly fall in unemployment rates in August 2020. By October 2020, more than 87 per cent of jobs that had been lost between February 2020 and May 2020 had been recovered. Close to 90 per cent of the fall in hours worked had also been salvaged. Employment rates are set to grow in the months to come.

Industry

The mining industry was largely able to contribute to the increased production during the pandemic. Industries with the main detractor from WA’s economic growth include – accommodation, and the food and beverage sector. The border closures had resulted in serious disturbance for businesses reliant on moving people around the country. Some of the biggest challenges our clients are encountering is finding staff.

Real Estate

According to REIWA, property sales in WA increased by 42.5 per cent from December 2019 to December 2020. The RBA has made it clear that it intends to keep the cash rate unchanged for at least the next three years. With this in mind, the WA property market, both rental and sales, is expected to encounter steady growth this year.

 

Resources

WA State Budget 

Government of Western Australia 

REIWA 

 

IAWO

How your business should be using the IAWO

The latest extension to the instant asset write-off (IAWO) tax concession continues the good news for SMEs.

Details of the IAWO concession

In effect, there are now two overlapping asset write-off schemes in place – IAWO scheme and ‘temporary full expensing’ scheme. Small and medium businesses qualify for both. The total cost of new assets can be written off as a tax deduction in the FY in which they were first purchased and/or installed ready for use.

The details for the 2020-21 and 2021-22 tax years are:

IAWO
New assets costing up to $150,000 each, purchased between 1 July 2020 and 31 December 2020, can be fully written off in the current tax year. The assets must be first used (or installed and ready to use) before 30 June 2021.

Temporary full expensing
New assets purchased from 7 October 2020 can be fully written off in the FY they were installed and ready to use. There is no upper limit on cost, and the concession applies until 30 June 2022.

The cost of improvements to existing assets can also be fully expensed. Second-hand assets are also deductible if your annual turnover is under $50 million.

In simplified terms, SMEs can rely on IAWO for assets purchased between 1 June and 6 October 2020. For temporary full expensing, assets purchased between 7 October 2020 and 30 June 2022 are eligible.

How to benefit from purchasing equipment under the IAWO Scheme

If you’re a farmer, you could, for example, bring forward the planned purchase of new machinery such as tractors, harvesters and loaders. This would allow you to take advantage of a full tax deduction in both the current tax year and the next one.

If the result for your business is a loss for tax purposes, you could even qualify for a refund of tax paid in a previous year. This comes as a result of the new ‘loss carry back’ provisions also announced in the federal budget.

How to benefit from purchasing vehicles under the IAWO Scheme

Your business can also write off the full purchase cost of new and second hand vehicles. However, there are some limits for passenger vehicles you need to be aware of.

For passenger vehicles designed to carry a load of less than one tonne and fewer than nine passengers, the maximum write-off amount is $59,136 in FY 2020/21.

However, trucks, delivery vans, utes with a payload of one tonne or more, and vehicles with a passenger capacity of more than nine, can all be fully written off. But remember the $150,000 cost limit if they were purchased before 7 October 2020.

Base your purchase decisions on business needs

Major asset purchases need careful consideration, rather than being done in a rush to lock in tax benefits. We suggest that you discuss your plans with your Accountant or Business Advisor to find out exactly what you can claim and how it will affect your profitability and cash flow.

But if and when you’re ready to go ahead, your Finance Broker can advise you on the most suitable finance options for your business.

SMEs

The Federal Budget: What it means for SMEs

The federal budget delivered on 6 October 2020 will help put SMEs back where they belong. This is at the forefront of economic recovery as we continue to stand firm in the face of the COVID-19 pandemic. Here are the details:

Instant asset write-off (IAWO) extended

The existing concession, to write off 100% of new asset purchases as an expense in the current tax year, has been extended. It has been partly replaced by ‘temporary full expensing’ to 30 June 2022.

Assets purchased prior to 6 October and must be installed and ready for use by 30 June 2021 to be eligible for a full write-off in the FY 2021. Each individual asset must not exceed $150,000 in price.

New assets purchased after the budget announcement, with no upper limit on cost, can be fully written off for tax purchases in the year they were installed and ready for use, until 30th June 2022. This includes the cost of any improvements to existing assets.

Second-hand assets can be fully written off until June 2022 if your annual turnover is under $50 million. For a full list of the changes made to the IAWO, click here. 

Fringe benefits tax (FBT) concessions

Employer-provided retraining (as opposed to further training for a current role), previously subject to fringe benefits tax, will be exempt from the tax from 2 October 2020. This will help SMEs retain and/or retrain employees whose roles have become redundant as a result of COVID-19.

From 1 April 2021, on-site employee parking spaces previously subject to FBT, plus electronic devices provided to employees (e.g. phones and laptops), will be exempt from the tax for all businesses with an annual turnover below $50 million.

Trainee and apprentice wage subsides

SMEs will fewer than 200 employees hiring a new or re-engages apprentice or trainee between 1 July 2020 and 31 March 2021 will qualify for a 50% wage subsidy. The subsidy is worth up to $7,000 per quarter per employee.

If you engage a new employee starting on or after 5 October 2020, the subsidy continues to 30 September 2021, and capped at $27,000.

This is an extension of the previous 50% subsidy scheme applicable only to businesses with fewer than 20 employees, in place from 1 January 2020 to 30 September 2020.

JobMaker

The Government is focused on getting young Australians into work. Employers will be given credit for each new job they create for 16 to 35 year-olds. The details are:

  • $200 per week credit for 16-to-29-year-olds
  • $100 per week credit for 30-to-35-year-olds

Employee eligibility is limited to working a minimum of 20 hours per week. These employees must have been receiving either of the below for at least one month in the three months before they were hired.

  • JobSeeker,
  • Youth Allowance, or
  • Parenting Payment

It’s all good news, but a bit complicated

Contact your Finance Broker if you’re struggling to get your head around the budget details. We’re here to help you take advantage of concessions and rebates on asset purchases and new employees. Give us a call today on (08) 9321 2120 or send us an email via info@pacificfinance.com.au

economy

What do the RBA’s rate cuts mean for the economy?

economy

Monetary Policy 

Following its November meeting, the RBA announced further rate cut support for the economy. In particular:

  • The cash rate was cut from 0.25% to 0.1%
  • The 3-year Australian Government bond target was also reduced to 0.1%, as was the lending rate charged to banks (the so-called Term Funding Facility)

These changes were widely anticipated. Much of the financial market focus was on whether a Quantitative Easing (QE) policy would also be implemented (where the RBA buys bonds in the financial markets with an aim to reduce longer-term interest rates). It was. There will be a $100b program to buy Federal and state Government bonds with maturity of between 5 and 10 years.

As the pace of spending was quicker than had been anticipated, longer-term interest rates fell following the announcement. There was only a small downward movement in the $A (and that was more than fully reversed in the subsequent hours). That would have been something of a disappointment to the RBA given that a lower $A was an explicit outcome they hope to achieve from the monetary easing. But of course they have yet to begin their buying program.

The RBA is targeting two key economic outcomes: inflation returning sustainably above 2% and an unemployment rate dropping back towards ‘normal’ (under 6%). The RBA has revised down its view on the unemployment rate, now expecting a peak of 8% around the end of this year then falling to 6% by end 2022 (the unemployment rate is currently about 7%).

September quarter economic performance

One of the reasons that the RBA revised down its unemployment rate forecast was that the economy has done better than it was expecting. The maths said the economy had to have had a decent Q3. Three-quarters of the Australian economy were able to go out and buy a coffee again. I look for September quarter GDP growth to grow stronger than the current consensus (2-3%).

Such a bounce in growth was consistent with the feedback from firms. Companies said that conditions in the September quarter improved although remained some distance from ‘normal’. Order books were getting fuller but were still relatively light. The export outlook was better albeit tough. Firms are giving thought about adding a few more staff, although they are some distance from going on a hiring binge. Margins remain tight.

October and the outlook

So growth bounced back in the September quarter. And it looks like things improved further in October. The Budget announcement would have helped. Construction has benefited from a souped-up HomeBuilder program. The JobKeeper and JobSeeker income support programs are still around (albeit less generous). The RBA gave clear signals in October that interest rates would be cut further.

All up, the signs are that the economy improved in the September quarter. And the Budget and talk of lower interest rates looks to have helped things in October. The opening up of the Victorian economy should see the economy get a further boost through November and December.

But it is far from clear that underlying economic momentum is enough to create the number of full-time jobs necessary to take a big chunk out of the under-utilisation rate. Or to get the inflation rate back above 2%. The RBA and the Government have done a lot. They still may have to do more. The good news is that judging by their actions in the year to date, they will.

 

Regain confidence in your business’ cashflow

Managing Your Cashflow

Every business owner understands that cashflow is the lifeblood of their business. It is the thing that keeps business owners up at night. Being able to juggle the cost of paying employees, rent and suppliers can be challenging. Not having enough money in the business account each day to cover all these commitments can put you in a stressful scenario, yet it is one that most business owners face at some point in time.

There are some changes you can make to your business processes, to ease the burden on your cashflow and on yourself. With our business finance solutions, you can regain the confidence you have in your business’ cashflow and focus on other important aspects of your business.

Our Business Cashflow Solutions

Invoice Finance (also known as Debtor Finance)

We have access to a panel of financiers that specialise in invoice financing.

It ensures that every time you raise an invoice, you receive up to 80% of that invoice the very next day, without having to wait for the client to pay. When your customer pays the invoice, the funds will go to the financier and you will receive the remaining 20%, less interest and fees.

Product information:

  • Inject cash into your business within 24 hours of the invoice being raised
  • No property security required as the unpaid invoices are used as security
  • Loans available from $5,000 to $2 million
  • Flexible payback periods of 30 to 90 days

Trade Finance (both local and international)

This facility will provide funds to pay your suppliers (both local and international) and give you 30, 60 or 90 days to pay it back. During this period no repayments are to be made, but the facility must be paid out in full at the end in one lump sum.

The facility can be used by importers who are purchasing goods from overseas for re-sale, or by businesses purchasing stock or goods from local suppliers for re-sale trade finance. Effectively gives you 30, 60 or 90 days to make your sale and collect the money before you need to pay for the goods or stock.

Product information:

  • Inject cash into your business within 1 to 2 weeks
  • No security required
  • Loans available from $150,000 to $2 million
  • Flexible payback periods of 30,60 or 90 days

Short Term Business Loans

This finance solution can help you meet your business’ immediate cashflow needs. The cashflow injection could help your business meet the demands of a growing market and in turn, can assist in the overall expansion of your business. This is a time effective finance solution that requires little paperwork. The lender analyses your bank statements and determines how much your business can afford to borrow.

Product information:

  • Inject cash into your business within 2-3 business days
  • No property or business assets to be provided as security
  • Loans available from $5,000 to $250,000
  • Flexible payback periods of 3 to 9 months

You can download our Cashflow eBook for business owners by clicking on the link below

A call to the right person can get the job done

Pacific Finance takes the hard work out of securing finance. Our Brokers pride themselves on their relationship with existing clients and referral sources. We believe that a single phone call should set the finance process in motion. That is the kind of relationship our clients can expect from Pacific Finance.

For more information please call your Pacific Finance Broker on (08) 9321 2120 or send us an email via info@pacificfinance.com.au

Financing Your Equipment With Pacific Finance

Performance Mining – Client Story

Performance Mining was originally introduced to Pacific Finance Australia by an existing client and a mutual Accountant back in 2017. Tim Edwards, Director of Pacific Finance, has helped Performance Mining secure finance for around 20 pieces of equipment including light vehicles, service trucks and water trucks. Performance Mining (PM) was founded in 2016 by Director – Ray Bushnell and Jarrod Seymour.

Performance Mining is a privately-owned boutique solution provider to the mining, oil and gas, and civil industry sectors in the Australian market. The Directors have more than 50 years combined business knowledge having worked in both the public and private sectors. The team offers innovative turnkey solutions to its clients, by providing the full suite of services in-house.

About the Directors 

Ray Bushnell is a business management professional with more than 30 years’ experience in the mining industry and more than 25 years in senior management roles across civil construction, plant maintenance and mining. He has experience in rebuilding, developing, and restructuring businesses which are underperforming in the contract mining, quarrying and civil construction sectors.

Jarrod Seymour is mining and civil executive with more than 24 years’ experience in the domestic and international resources sectors with his most recent appointment being at the “C” level with an ASX100 company. His commodity experience steams across Iron Ore, Gold, Nickel, Coal, Lithium and Manganese.


If you and your business could benefit from our Equipment Finance solutions, please contact our Pacific Finance brokers on (08) 9321 2120 or send us an email via info@pacificfinance.com.au 

IAWO Scheme

The New IAWO Scheme – October 2020

On Tuesday, 6 October 2020 further changes were made to the Instant Asset Write Off (IAWO) Scheme. These changes make it easier for Australian businesses to write-off the full value of assets purchased without any limitations on the value of the asset.

What you need to know about the new IAWO Scheme

  • The original $150,000 cap for each asset has been removed. So, there is currently no limitation on the value of newly purchased assets.
  • Previously only businesses with an aggregated turnover of less than $500 million were eligible. Now businesses with an aggregated turnover of up to $5 billion can apply under the new scheme.
  • Depreciable assets that are acquired after 7:30 pm (AWST) 6 October 2020 are eligible as long as the assets are first installed or in use by 30 June 2022.
  • The new scheme will be in effect until 30 June 2022. This gives businesses more time to upgrade their equipment and claim the relevant deductions.
  • Businesses that are purchasing second-hand equipment must have an aggregated turnover under $50 million. *

*Aggregated turnover

Your business’ annual turnover plus the annual turnover of any businesses or entities that are connected or affiliated with your business, whether they are based in Australia or overseas.

Purchasing used/second-hand assets via the IAWO Scheme 

  • Businesses with an aggregated turnover under $50 million can claim a full deduction for second-hand assets, with no limitation on the value of the asset.
  • Businesses with aggregated turnovers between $50 million to $500 million can claim a full deduction for second-hand assets up to the value of $150,000 per asset. However, it should be noted that the purchase of said asset must occur prior to 31 December 2020.
  • Businesses with an aggregated turnover above $500 million cannot claim any deductions for second-hand assets.

If  you require further information on the changes to the Instant Asset Write Off (IAWO) Scheme, please contact your Pacific Finance Broker on (08) 9321 2120 or send us an email via info@pacificfinance.com.au

IAWO Extended

90 Days Until The IAWO Ends

What is the Instant Asset Write Off (IAWO)?

  • The IAWO is a once-off tax deduction that businesses can claim for the purchase of business-related assets
  • Businesses can claim a 100% deduction for eligible assets. The asset is eligible even when it has been acquired under finance
  • The current threshold is $150,000 for each asset. This means that businesses can immediately write off multiple assets

Does your business qualify?

Your business’ aggregated turnover must be under $500 million.

Aggregated turnover – Your business’ annual turnover plus the annual turnover of any businesses or entities that are connected or affiliated with your business, whether they are based on Australia or overseas.

What assets are eligible under the IAWO?

  • The assets must be used for business purposes
  • Both new and used assets are eligible. However, the assets must be installed/in use by 31 December 2020
  • As long as the cost of each asset does not exceed $150,000 in value, the deductions can be claimed on multiple assets

For a list of excluded assets, please refer to the Australian Taxation Office websiteexcluded assets.

What if the equipment costs more than $150,000?

If the equipment is valued at more than $150,000, you speak to your Accountant or Tax Advisor. There may an option to use the new 15 months investment incentive which provides you with a 50% deduction of the cost of the new assets. For more information on the depreciation rules and capital allowances, please refer to the ATO website.

Your business has 90 days to take advantage of the IAWO

Starting 1 January 2021, the threshold for assets will revert to $1,000 for small businesses that have an annual turnover of less than $10 million. Do not miss out on this great tax deduction opportunity. Speak to your Pacific Finance Broker today for more information by giving us a call on (08) 9321 2120 or by sending us an email at info@pacificfinance.com.au 

 

financial stability

Achieving Financial Sustainability During Ongoing Uncertainty

Recent developments in Australia – and even New Zealand – have demonstrated that COVID-19 is going to be with us for quite a while yet. The businesses who survive, and come out the other end ready to accelerate, will do so because they were financially sustainable. But just how do you achieve financial sustainability?

Let’s take a look.

Cut unnecessary costs

When revenue is flourishing, it’s easy to overlook expenses that don’t earn their keep. But when conditions become more challenging, sustainable businesses remove unnecessary liabilities.

Here are some cost-saving steps you can take:

  • Challenge suppliers’ proposed price increases.
  • Research other suppliers to get more competitive pricing.
  • Minimise freight costs by placing single monthly orders.
  • Switch to lower-cost ‘own brand’ products.
  • Transfer printed mail-outs to email.
  • Switch to digital record storage and eliminate printed paper storage costs.
  • Put entertainment costs on hold.
  • Plan travel well ahead for lower fares and accommodation prices.

Use hard-headed cash flow management

Although we’re many months into the crisis, we still don’t know when it will end, nor what the full impact will be on our overall health and the economy. Planning for the future is more difficult than it has ever been, so the only way forward is to prepare your cash flow for multiple outcomes. To make your cash flow as close to bulletproof as it’s currently possible to be, you should aim to:

  • Mitigate possible supply chain disruption, especially across state and national borders.
  • Request extended payment terms with suppliers and the ATO
  • Speed up the process of turning receivables into cash, by offering discounts for early payment or by factoring.
  • Trim inventory to free up working capital.
  • Sell unwanted assets, and finance any new assets.
  • Investigate alternative sales markets and low-cost marketing methods (such as social media).
  • Increase your selling prices where customers will comply.
  • Apply for government grants.

Assess your debt and loan situation

Maintain detailed records of amounts owed to suppliers, payroll costs, taxes payable, and any other short-term debt due for payment within the next 12 months.

You may be able to ease your short-term debt situation with a new business loan, by financing new assets instead of purchasing them outright, or by leasing back assets you already own.


Talk to your Pacific Finance broker today about achieving financial stability. We’re ready to listen and give you the advice you need. Give us a call on (08) 9321 2120 or send us an email via info@pacificfinance.com.au