January is here, beginning with the “race that stops a nation”, but not the Reserve Bank which meets on the same day. Howeve
In Australia, inflation rose 0.5 per cent in the September quarter lifting the annual rate from 1.6 per cent to 1.7 per cent. This is still short of the Reserve Bank’s target but may allow it to delay further rate cuts. Consumers remain cautious – the Westpac-Melbourne Institute consumer sentiment index fell to a 4-year low in October. Business confidence is also weak – the NAB business confidence index fell to a 6-year low of 0.3 points September. The Australian dollar firmed in October to US69c.
Mastering the art of negotiation
Luckily, like most things, you get better with practice. And it helps to know there are some common approaches to successful deal making.
Know what you wantA common problem when negotiating is not knowing what you want. It’s no use having a vague idea of what a successful outcome looks like. Before you go in, think about your objectives and make them measurable, decide on your ideal result and consider your non-negotiables as well as what compromises you’re prepared to make.
It’s also wise to spend some time assessing exactly what the other party might want, so you are not only prepared but can develop solutions that are mutually beneficial.
Go for the win-winA common mistake of negotiation is viewing it as a competition where there is a winner and a loser, when ideally you want to pursue an outcome where everyone’s happy.
Psychologists call this tactic integrative bargaining, looking to treat negotiation holistically and in pursuit of both parties’ interests. The opposite is distributive bargaining, where someone has to walk away feeling at a loss.
It helps here to consider what the other party really needs. Think outside the box. There may be something you can offer them that you never initially thought of as a sweetener.
Just askIt sounds so simple. But people are scared to just ask for what they want. Instead, they beat around the bush, or settle for second best.
Questions also allow you to arm yourself with knowledge. Until you’re in the meeting, you’re never going to have all the answers. But you should know exactly what you’re going to ask. Robust questioning has the added benefit of easing social tensions and making both parties feel like it’s a collaborative space.
Managing your emotionsEmotionality can both help and hinder negotiation processes. It’s useful then to understand which emotions can get in the way and which can actually get you closer to your goal.
Anxiety can be particularly unhelpful. Though a healthy dose of nerves will make sure we do the adequate research prior to a negotiation, actually appearing anxious in the meeting rarely does anyone any favours. Similarly, conversations led with anger can either put people off side or bully them into submission which rarely leads to good long-term outcomes.
Instead try to frame your emotions around your passion for the deal. Excitement can elicit a strong response, so too can remaining calm and respectful.
Getting a third partyCertain negotiations such as purchasing or selling a business or working through a divorce, are so high stakes or emotionally fraught that it can be best to engage a third party. Engaging a professional to assist can bring expertise, insights from their experience and also ideas for compromise that may have alluded you. Whether you employ a professional or a trusted ally, a third party can provide perspective, remove some of the emotion from discussions and also allow you some breathing room.
Be prepared to walk awayIf you’re not entirely comfortable with the outcome, give yourself time to sleep on it. Don’t allow yourself to be pressured to agree to something on the spot.
And remember, not every deal is meant to be. Sometimes by walking away from something you can actually preserve the long term relationship, rather than settling on a contract that would have left both parties resentful. Understand your bottom line and know there is power in saying no.
Certain negotiations are always going to be difficult, but it helps to know there are tried and tested approaches that work. By taking the time, practicing and mastering the art of negotiation you could reap the benefits in your business or personal life.
Is your business financially fit?
Of course, the best policy is to continually monitor how your business is faring throughout the year. But if you’ve been caught up in the day-to-day management then now is a good time to get back on track because you will be looking at your figures for tax time anyway.
How do you compare?There are a number of ways to work out just how well your business is faring but an easy first step is to use the Australian Tax Office’s small business benchmarks.
This tool lets you compare your business with others in your industry using appropriate benchmarks such as turnover range and expenses.
If you are outside the benchmarks, whether above or below, then it may be worthwhile looking at such things as the rate you pay for inputs, the price you sell, the level of inventory you carry or whether you are reporting your expenses accurately.
Check your ratiosFinancial ratios are another useful method to determine fitness. You can check your business’ liquidity, solvency, profitability, management and balance sheet through ratios.
For example, working out your solvency ratios shows how easily you can meet your debt obligations from sources other than cash flow. Management ratios can identify how quickly you can replace stock, how often you collect debts and how frequently you pay your suppliers.
It might be good to talk with us about how to calculate and interpret these ratios for your future planning.
Key warning signsGenerally, there are five key warning signs that your business is not performing well and could be heading for trouble. These are an inability to pay debts, poor profitability, no access to finance, high staff turnover and inadequate financial records.
If any of these are occurring in your company, then we can help you make changes to rectify the situation.
For instance, if you are facing difficulty paying your bills, it may be time to improve your cash flow either by selling old stock at a discount, chasing outstanding debts or talking to your bank to alleviate your situation. Looking forward, you could prepare weekly cash flow forecasts so you control your outgoings and income.
If your profitability appears to be failing, take a look at what may have triggered this state of affairs. Perhaps you are failing to pass on cost increases sufficiently to your customers or maybe you are carrying more staff than your turnover can support.
If your issue is high staff turnover, then focus on the attributes you want in new employees and develop a recruitment plan. You might also consider ways to improve employee engagement, such as encouraging and rewarding them to put forward ideas to improve the business.
Managing riskIn a challenging business environment, all businesses can be at risk of failure. The key is to manage your risk.
Risks can come in many forms – strategic, compliance, financial, operational, environmental and reputational. Today’s businesses are also facing new challenges, from structural changes in their industry to cybercrime and the potential for disgruntled customers to damage your reputation in online forums.
By recognising the risks your business is exposed to and having a strategy, you can head off problems before they become critical. What’s more, you may be able to use your relative strength to take advantage of opportunities in the marketplace.
Even if you are confident your business is fundamentally sound, constant financial monitoring will ensure it stays that way.
If you would like assistance in determining how your business is shaping up, give us a call.
Your life in numbers
The best apps to measure successIt should come as no surprise that we love numbers… and number crunching. Luckily for us, these days you can quantify just about anything by simply reaching for your phone and opening an app.
App culture has made it easier than ever to access and meaningfully collate and interpret data. It seems like there’s an app for everything these days, and we’re going to take you through some favourites. But first, a few fascinating figures.
Apps by the numbers2008 was the year Apple released the app store. A date some analysts think is more important than the release of the first smart phone.i Since then, the world of apps has exploded. Statista puts the quantity of apps in the app store at 1.8 million. Google Play has even more at 2.1 million, and it is estimated that the global app economy will be worth $6.3 trillion by 2021.ii
Yet, with so many options comes a tyranny of choice. To help you out, we’ve put together a list of consumer favourites across three topics: health, organisational and of course, financial.
HealthThere are a bunch of health apps out there, but we like those that give you the numbers. One that is consistently highly rated is Strava. Billing itself as a social network for athletes, it’s a useful tool for both runners and cyclists, allowing them to not only find popular local routes, but also to track various metrics such as heartrate and speed, and compare results with their community.
If you’re wanting to extend the same numeric approach to your diet then look no further than MyFitnessPal. It makes it easy to track the calories of everything you’ve eaten during the day using its huge database of over 5 million foods. It even has a barcode scan feature that allows you to quickly enter the calories from various packaged treats. Each day is presented as a pie chart giving you an easy quick view of your macros (fat, protein and carbs). It tracks progress towards your goals and, like Strava, has an engaged user base you can look to for support.
OrganisationalThe same principals of high-powered data collation can also help you live a more organised life.
If, like many of us, you feel like you’re always racing the clock, you might want to look into one of the myriad time management apps on the market. A popular option is Rescuetime. Designed for the procrastinator in all of us, it syncs up with your various devices (computer, tablet, mobile) and accurately measures how much time you are spending on different screen-based tasks. This is huge considering the average Australian adult spends more than a third of their day in front of a screen (9.4 hours to be precise). The app even allows you to elect to have it block certain apps after you’ve spent too much time on them. No more hour-long scroll sessions.
FinancialWe couldn’t have a conversation about apps without mentioning the ones that take the hassle out of your finances.
If you’re currently wading through a sea of receipts, why not try one of the many apps that make keeping track of your expenses easy, such as Expensifyor Zoho Expense. Both can scan and read data from receipts and pull through data from credit cards to make a set of comprehensive reports on your annual spending, making tax time a lot easier.
Finally, if you’re interested in automated investing, then you might consider an app like Acorns, which hit 3.5 million users in 2018.iii Though by no means a consolidated investment strategy, this powerful app works on the premise that every little bit adds up, especially when compound interest is involved. The app syncs with your credit or debit cards, and invests your digital spare change by rounding up all your purchases to the nearest dollar. Their portfolios focus on low-cost exchange-traded funds with a diverse set of investments.
Once upon a time we were limited to the humble spreadsheet. But these days with the advent of big data, advanced automation, and app culture it is easier than ever to report on many aspects of your life in an easy and meaningful way. So, what are you waiting for? The numbers speak for themselves!
Tips for running a General Practice
The idea of generating profits from patients doesn’t sit well with the ethical soul of general practice.
But, then again, money does make the world go around…
In this bonus episode, we catch up with GP business expert David Dahm to find out his best tips on turning a healthy profit.
Click here for the Medical Republic article
Click here to listen to the podcast.
How to avoid unwanted ATO attention
Whether it’s not declaring foreign or business income, claiming too much for work-related deductions, or not paying your employees’ superannuation, some activities are likely to attract the tax man’s interest.
Here are some simple steps you can take to reduce the likelihood of the ATO taking a closer look at your personal or small business return.
Declare all your incomeFor individuals, it’s important that you include all your taxable income in your return. Ultimately, the responsibility for including all your income rests with you, so ensure you report everything as the Tax Office will use a wide variety of information sources to cross check.
Common mistakes are not including capital gains you received when selling shares or property or forgetting income from overseas sources such as a business, rental property or shares.
When it comes to tax deductions, the ATO is particularly interested in your workrelated expenses. If your deduction claims are unusually high compared to other people in similar industries, the ATO will want to know more. A good tip is to check out the ATO’s guides to deductions for specific industries.i
Take care with property investmentsTax deductions claimed on your rental property are another red flag for the ATO, so it’s important to follow the rules.
Ensure you understand the difference between claims for depreciation and capital works, and only claim expenses for periods when the property is rented, or genuinely available to tenants. And don’t forget you can no longer claim travel expenses for inspecting your property or undertaking maintenance.
The ATO is also interested in any noncommercial rental income received from a holiday home, so if you let your property at a discounted rate to relatives or friends, you need to limit the amount of deductions you claim to avoid problems.ii
If you have a loan for an investment property and are claiming for the cost of interest on the loan, you need to split your deduction into private and business purposes.
Watch your business reportingWhen it comes to small business, the ATO looks for enterprises that incorrectly or under report their sales (both cash and electronic payments) or fail to register, so ensure you keep good business records and lodge accurate business activity statements.
Another warning signal for the ATO is businesses that report outside the normal small business benchmarks for their industry.iii These benchmarks are helpful for comparing your business’s financial performance against similar businesses, but they also provide the ATO with a useful tool for comparing tax payments and deductions claimed by businesses across the industry.
As more customers pay electronically, the ATO is also increasingly interested in cash-only businesses which it views as more likely to be avoiding tax. If your business operates and advertises as being ‘cash-only’, or does not accept electronic payments, you will need to keep detailed records of your takings and payments, as the ATO will be extremely interested in your tax returns.
Pay your staff correctlyIf your business employs staff, ensure you are deducting Pay As You Go (PAYG) withholding from their wages and regularly forwarding it to the ATO. Making regular Superannuation Guarantee (SG) contributions to your employees’ super funds is also important if you want to avoid ATO scrutiny.
Not paying the correct amount of Fringe Benefits Tax or incorrectly accessing FBT concessions are also red flags, so ensure you are complying with the rules.iv
If you are registered for Goods and Services Tax (GST), ensure you are actively carrying on a business or you may find yourself talking to an ATO auditor.v
The key to ensuring your tax return is correct is to get professional help. We can help you to maximise your tax return, while ensuring that it is correct and compliant.