Monthly Archives: August 2015

Keeping your business alive.

health check for money

What’s your strategy to keep cash flowing through your business?

High sales and consistent profits are great aspects to have in your business, but without cash rolling in regularly you won’t be able to pay your suppliers, staff, even yourself! Give yourself some security by preparing a Cash Flow Forecast for your business.
What is a Cash Flow Forecast?
A cash flow forecast is a projection of all of your income and expenses for your business over the next 12 months, with an emphasis on when the cash from the income and expenses will be received and sent. This includes when your income locked up in Debtors will be received and when your Creditors will need to be paid.
Once you prepare your 12 month cash flow forecast you will be able spot weaknesses in the year and plan for it. By taking a proactive approach and planning ahead means you can start making changes now to help you through those tight periods, such as introduce tighter credit policies with your customers or acquire a line of credit to help you through the period in the future.
What’s even better is banks love them! Are you looking to lease some new equipment? If you are looking for finance it’s going to be easier for the banks to approve you if they can see you have capacity to make loan repayments.
Would you like security in your business this year? Are you interested in preparing your own forecasts for the year? If you would like to know how McMahon Osborne Group can help you to prepare a 12 month cash flow forecast for your business give Lynda a call on (03) 97447144 or email lynda@mcmahonosborne.com.au

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It’s time Generation X to future proof your retirement

time-money-spend-hourglass-coin-1160x870In this weeks Blog, McMahon Osborne Director, Tim McCarthy talks about the importance of how Generation X need to act now and become actively involved in their retirement plans, to secure long term benefits.

It seems inevitable that the Australian taxation system will undergo some form of overhaul and change in the next ten years. Quite simply, as a country we can’t continue to spend more than we bring in and maintain strength in our underlying economy. It appears less and less likely that spending will be reduced significantly – voter power and all political parties wanting to hold office fights against that proposition. Show me the major Australian political party seeking to make signification spending cuts and I’ll show you the Pot of Gold at the end of the rainbow.

So, if we can’t reduce what goes out we need to increase what comes in – pretty simple equation – and the number 1 tool that Governments have at their power is tax revenue, hence the inevitability of change. Changes could come in the form of structural change, haircuts on existing tax planning opportunities or, more likely, a combination of both. Areas that could come under scrutiny are Capital Gains Tax, a tightening of negative gearing laws, changes around foreign income, Medicare and other “levies”, GST (both what GST is payable on and the GST rate) and superannuation.

Without knowing what the change will be we can quite reasonably work on some key principles when it comes to planning for the longer term to secure a financially successful future . Let’s look specifically at super.

What to expect

  • Later access to funds – commencing from 1 July 2015 the preservation age is on the rise from 55 to 60 years of age. With the average lifespan of Australian’s increasing and the age pension access age increasing, it stands to reason that the superannuation preservation age will continue to increase
  • Limits on Lump Sum Benefits – currently a taxpayer can hit 65 years of age (or 60 if permanently retired) and take unlimited funds from their super with no tax payable. Whenever we present this to a client the first reaction is “are you sure that’s right – sounds too good to be true”. We know the old saying about if it sounds too good to be true it probably is. This surely lends itself to some tightening over the next 10 to 20 years where lump sums will have some form of limitation.
  • Taxation on Large Super Balances – the Labour Party, prior to the last Federal Election, announced that they would tax the earnings on larger superannuation balances in pension mode. Currently any super balance in pension mode does not pay tax on those earnings. It makes sense that in a progressive taxation system (as we have with personal tax rates in Australia) that a similar principle will be applied at some time to superannuation. Specifically the greatest impact under that proposal would have been on Capital Gains within superannuation funds for large member balances (two birds with one stone!)

What can we do now?
Many taxpayers fear change and in such an environment do nothing for fear that they will make a move which will backfire. However to do nothing is most likely the greatest risk of all. Here’s my general version of how to attack this issue and the methodology that Melissa (my wife) and I are currently employing for our own financial life and our three children.

  • Continue regular contributions to super over the mandated employer contributions – it stands to reason that superannuation will still be a tax preferred option in Australia. The government needs to provide incentive to put away for the future and their number one tool is tax. In short, don’t give up on super – keep contributing
  • Work a plan to build an asset portfolio (beyond the family home) outside of super – this can provide tax benefits right now if gearing is involved (remember – gearing can apply to any investments that derive income, it does not have to be limited to property as is a common misconception). More importantly this will create the opportunity for financial choice and flexibility if you are looking to retire or reduce work prior to reaching the age where funds can be accessed from superannuation.
  • Spouse Super Splitting – perhaps one of the least used forward thinking tax planning strategies. In many families there is one spouse with a higher super balance than the other for all manner of reasons. We have the opportunity for a taxpayer to reallocate a proportion of their super contributions to their spouse on an annual basis. This is a great way to future proof against large super member balances as the super balance is split more evenly across two taxpayers.
  • Create a Capital Growth Plan – regardless of any changes in tax it will be irrelevant if there is no plan to grow capital over the next 20 years. Frankly, too much money in the bank makes little sense for most, with of course exceptions for specific circumstances. A plan to make your money work for you is as important as any tax plan.
  • Understand Daily Spending – the power of compound interest can never be understated. A little bit regularly can make a huge difference. By understanding our spending we know that there is some money that can be tucked away regularly. Whatever that number is using this in creating a capital growth plan can make a huge difference for years to come.

If you would like to know more about how we can help you future proof your retirement, please contact Lynda on (03) 9744 7144 or email lynda@mcmahonosborne.com.au today.

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A well written business plan contributes to a successful business

Writing-a-Winning-Business-Plan

It may sound like a daunting assignment, but evidence suggests a well-written business plan contributes to a successful business.

Why?

Building a business from scratch can be challenging, therefore, creating a business plan compels you to systematically think through every aspect of your business and develop a solid blueprint to follow.

A business plan will help you map your business strategy for the future and motivate you to reach your goals. It will help you anticipate obstacles and work out solutions for overcoming them, thereby reducing anxiety and stress.

Additionally, the process of writing a business plan will likely reveal the level of commitment you need to devote to your business.

What a business plan should include.

Your plan should have a professional appearance and be clear and concise. Some of the essential elements to cover in a business plan are:

• Executive summary – an overview
• Description of the business
• Product/service design & development
• Industry analysis
• Market analysis
• Marketing plan
• Management team & business structure
• Operations plan
• Legal and risk management plan
• Financial projections

Writing a plan covering all these areas may take substantial time and effort, but when your plan is complete, how much will you have learned in the process? How thoroughly will you know your business? How much more confidence will you have when you actually launch your business?

For these reasons, it is best to write the business plan yourself (or at least make an attempt), rather than employ someone to write it for you. Besides, you’ll feel a sense of excitement and fulfilment when you actually put your ideas and visions down in writing. Of course, assistance in the form of books, websites and consultants is always available.

Other benefits.

A business plan is usually required by banks and lenders when considering an application for a business loan. Approaching a lender without a plan, or with one that has been thrown together in haste, will likely make a poor impression.

A business plan also serves as a reference for monitoring the progress of your business against your objectives and performance standards.

Preparing a plan may reveal that your idea is not feasible. While this may be unfortunate, it is better to fail on paper rather than to start your business and realise the same thing.

YOUR ACTION PLAN

Collate your information and have a go at writing a business plan! If you run into trouble, look online for helpful websites, ask other business owners for ideas or consult a professional.

The team at McMahon Osborne Group can assist you in writing your business plan.

Contact us today on (03) 9744 7144 for assistance with your action plan.

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