Is A Budget The Same As A Forecast?

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On a recent webinar, a client had asked, “Is a budget the same as a forecast?”

Here’s what we said – 

We prefer to use the word ‘budget’. There are many different ways that Accountants, or CFO people forecast or budget. For us, it’s using the budget feature in Xero. 

We use this in our own business and it’s working well. It gives us so much clarity. Our team gets involved in it. And there are forecasting add-ons you can get with Xero that take your budget and turn it into a cash flow forecast or a three-way forecast. It relies on your Xero chart of accounts and your budget being spot on.

 
 

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

Who Pays The Parental Leave

A commonly asked question when it comes to parental leave is, “who pays the parental leave –  Is it the employer or the federal government?” 

Who pays the Parental Leave?

The answer is: The Department of Human Services.

They manage any welfare payments such as age pension and paid parental leave. Once you have a Department of Human Services “customer reference number” (CRN,) all you have to do is give that to your employer and let them know that you are going to be receiving parental paid leave.

What happens after that is, they funnel the money through your employer and then your employer passes that money onto you. Alternatively, they can also pay directly, however that’s where it can get confusing. 

Overall, your employer doesn’t pay for parental leave, it still comes from the Federal government and The Department of Human Services is how it is managed. 

Parental Leave

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

Should I Put My Home Into A Trust?

By buying the family home in a personal name, we ensure we get the ‘Capital Gains Tax Main Residence Exemption’ when we sell that house later. 

There is a stamp duty concession once you’ve bought a home in your name. 

Those things often outweigh the benefits of putting the family home in a trust’s name. 

The other thing to consider is a setup and admin fees of a trust – it’s another “tax” from the accountant to go and manage. 

There are only limited situations where we have seen that it makes sense. 

As a general rule, we would always put the family home in the asset person’s name.

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

The Company Business Structure Explained

The company structure is one of the most common business structures.

Clients who have already done their research, or new clients who are looking at setting up a business, a company structure is  usually what they opt-in. 

Tax Rules
 

For this structure, we have two different tax rates

  • 25% – It used to be 27.5% last 2021 financial year, and it has dropped to 25% in the 2022 financial year.
  • 30% – The 30% is for big entities that are over $10 million, and entities that have passive income. 

If they’re receiving income from rental property dividends and they have millions of dollars in shares, they will be taxed at 30% for those kinds of entities. 

 

A company structure gives us some kind of flexibility when it comes to tax planning – if the structure is set up correctly

There are two key roles that we put in place in a company:

  1.  Director – A director is someone who controls and does the daily lease agreement and looks after the day-to-day activities of the company.

  2.  Shareholder – A shareholder is someone who benefits from the company’s profit. If the company’s making a profit, they can take benefits of that profit when we declare dividends. The shareholder’s job is to make sure that the shares are held correctly. We can hold the shares personally through a discretionary family trust or a self-managed super fund. There are different ways you can hold shares.
Training Your Employees
Asset Protection
 

Asset Protection

We want to make sure when you’re trading via company, we have those asset protections in place. Make sure that the director of the company doesn’t have too many assets in their name. That is just to protect their wealth aside. 

If something happens in the company, people can only go after the company’s money, nothing personally in the director’s name. We want to make sure that the director’s wealth or the assets they have bought outside the company are protected.

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

How To Add Subscription Cost To Xero

 

We want to make sure your expenses in

Xero are in detail

 

Let’s take for example, subscriptions.

At Inspire, we have about 15 to 20 accounts of subscriptions. 

And in the chart of accounts, every account needs a number associated with it in Xero. 

To avoid creating a mess of account codes, we would recommend indicating each subscription as: 

  • 485.1
  • 485.2
  • 485.3 
  • 485.4

 

It’s helpful to keep it consistent in numbering and to also separate each supplier/ subscription.

Similarly, we do this with wages to every single team member, 

Most of our account codes will be split by each supplier.

It is a lot of work to set-up initially. But, you can set up rules.

For instance, if I receive an invoice from Inspire Accountants, that will automatically get linked to Accounting-Inspire.

If we get an invoice from Xero, it goes to Subscriptions-Xero. 

The set-up is intense, but once you have the systems set-up well, it’s not a huge amount of additional work ongoing. 

 

The clarity that you get from looking at a Profit and Loss statement, you’re going to easily pick up: 

  • anomalies;
  • missing months if they’re not there;
  • double-ups; or 
  • a supplier’s charged you twice

 

This is going to be so obvious if you’re going to be this  granular in detail. 

Personally, If I was to lump subscriptions in one item line such as the Xero Templates that they give you – I would have NO clarity on every transaction and it’s not going to mean as much to me. 

Some of these suggestions might be intense, but they are amazing when it comes to running a business and getting clarity on your budget.

 

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

What To Look For When Investing

We invited Phil Grant of NAI Harcourts Pinnacle to talk about investing in commercial property.

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Here’s what he said about

what to look for when investing

  • Good Location, Quality Tenant/s, Easily Relettable, Downturn Proof

Some of the major things that really need to be taken into consideration when you’re looking at commercial investments are the fundamentals. What are the fundamentals of a good investment?-

  •  That’s got to be a good location. 
  • If it is a tenanted investment already, make sure that you’ve done some research on the tenant. 
  • Are they good-quality tenants? 
  • Are they a local mom-and-dad business? 
  • Are they a national? 
  • Are they international? 
  • Is the building you’re buying easily relettable? 
 
 

Let’s say that it’s already got the tenant and you go, “that’s a really good return.”

How about if the tenant does move out?

  • Is it something that has been specifically designed for that tenant and going to be very hard to relet? 
  • Or is it something that’s fairly generic and you can relet it really easy? 
  • Is the business that’s in that investment property downturn proof? 

I’d use that as a generalized term. But if the business world goes terribly, like we’ve had a tough run for the last couple of years, depending on which industry you’re in. Is it a business that will survive that? And if it is, that could be a consideration for you to look at. 

I briefly mentioned that you’ve got different sectors. You’ve got industrial, you’ve got commercial and retail.

 

Retail

The retail sector in the last couple of years has been absolutely smashed. 

 

Commercial

In the commercial sector, if we look at offices they have had to sort of evolving. Are they working from home? Are they working from the office? Are they working from both and switching? 

 

Industrial

In industrial property, out of the three, the one that’s actually been what I would consider downturn proof at the moment. In some instances, it is where people are now basically dealing with third parties. The product will come in, the product will go out, or services will come in and out. It’s the one that’s seen probably the most change and growth in the last couple of years than the other two. But those are some of the things you got to look at.

  • Undervalued property
  • Property that requires repositioning
  • If it’s too good to be true, it probably is!
    • Check leases very carefully, check flood maps, and Research tenants, and Leasebacks.

As accountants, we’ve helped Physio clinic owners get a handle on the key numbers in their business. But, also going back to the core of what we do which is solving all the tax problems that pop up. We make sure that your service trust is being used appropriately. 

We’ve also helped a lot of Physio clinic owners buy their physical space.  We can incorporate that in their self-managed super fund, or we could do it under a structure outside of super. There are some different ways to do that. 

We ensure you are paying the right amount of tax and not a cent more. Physio clinic owners, done well can be a highly profitable business. We guarantee that you’re not paying the extra tax that you need to.

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

Why Trusts Are Great For Tax Planning

A trust allows us to plan the tax so well so that it can be distributed to whoever it is needed for each financial year. 

Keep in mind, it needs to be, not only a distribution on paper, but the cash also needs to exchange hands. The money needs to be transferred from the trust bank account into the beneficiaries bank account.

Tax Rules

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

Modernisation of PAYG instalments

If you have a company running a business and you’re prepaying some tax for the current financial year, this is something that has been anticipated. The pay as you go (PAYG)  instalments is the way that you prepay tax for the current year and usually, it’s based on last year’s returns that were lodged. The last year of business and the current year can be vastly different for a business in terms of performance and the business is still paying tax as if it’s trading as it was last year. 

 

PAYG does not necessarily mean you are saving tax but it is a cash flow help so you don’t have to prepay as much. Businesses and companies can opt into a real-time PAYG instalments system and calculations which is based off of the accounting software you use. It will be looked into by looking at the current year and then they will calculate the tax instalment that you are supposed to be paying based on the performance of your business currently and not for the previous year. 

 

The great thing about this is, it  helps you budget your cash flow and plan your cash a lot easier. For example, some clients are paying $15,000 in instalments, but they don’t have that money and start falling behind on their payments. While there is the ability to levy it down to a reasonable amount, this is more of a proactive approach. So in reality, it is being realigned to be closer to what your business is actually doing at the moment and in turn, managing cash flow is more important than ever. 

 

NOTE: The PAYG Instalment default calculation of last year + 10% will be changed to 2% for 2023 FY

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

The Impact Of Money Printing On Investors

We invited Nick Webb of RSM Financial Services Australia to share his thoughts on the impact of money printing on Investors 

 

Here’s what he said:

An important focus, for a physio clinic business, is to make sure you are getting a great utilisation from your team. This means the number of hours you are paying them to work, versus the number of hours they are in consultations with their clients. The focus is maximising the dollars that they are brining in the business, for the hours they are working and the salary that you are paying them.

How does QE, or money printing, and QT affects decision making about what assets to purchase?


There is so much money out there in the system. The official figure out of the US was in 2021, they printed essentially 40% of their total currency in circulation, so it becomes a big problem. That’s why we see so many of these inflationary spikes at the moment because people are spending like drunken sailors as there’s so much money that’s being printed. 


Ultimately, it very much goes and devalues currency. It’s about looking at different opportunities across the globe as well. So looking in some countries where they haven’t printed to the same extent as places such as the US.


In periods like we’re in at the moment, domestically, and in Australia, even though it is a shallow market, we’ve got a huge benefit from very high dividend or income-paying stocks. We’ve got the benefit of franking credits as well, which makes it nicer on the top line from a return perspective. 


When we’re looking at QE and tightening on the other side of the coin as well, it’s very much just taking a broader macro view as to what does that flow through to how is that really going to impact upon listed investment markets and other investments that clients will have in their portfolios, such as direct property or any unlisted investments that they have as well. 


But typically, jumping into that commodity space, for a lot of people, they like that because there’s a finite supply of things like gold and silver; whereas, when you turn the money printing press on, there’s an in infinite supply of currency. It’’s just weighing up the current state of affairs and where to from there.


Disclaimer:

The information contained in the video above is intended to be general in nature and is not personal financial product advice

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

Every Business Owner Should Have This

Rainy Day Fund

When we went through the first few months of COVID and lockdowns, there was a valuable thing called a Rainy Day Fund. It is a backup account in case of an unforeseen event, you can get this easy-to-access pot of cash that can save the business. As a business, we shared this concept from 2015 or 2016 onwards wherein we were doing it at workshops. One of the awesome things is we were getting phone calls or emails unexpectedly from people who had come to those workshops back in the day, they started during the middle of lockdowns. 

We’ve been putting away this money for years and it indeed saved our business. It will save our employees throughout turbulent times. I have never seen a better example of this coming in handy as an accountant, but it’s a fulfilling part where people do this and it saves them and exists for that purpose. 

 
 

Start with excess cash and contribute regularly

The idea of a Rainy Day Fund is that you start with excess cash, a regular contribution that you almost don’t notice. The contribution goes from your main trading accounts over to a separate bank. So, it’s out of your normal, login and internet banking, you can’t see it build up. 

 
Our Prices
 

Aim for 3 months expenses

The target to aim for is about three months’ worth of expenses. The thought process there is that if your sales are turned off for three months, will you be okay? Will your business be okay to fund those expenses and keep everything going throughout that time? So, that’s the whole reason for three months’ expenses. In that 90-day window or 3 months, you’re able to do something to turn that around or work that out.

If you’re keen to explore changing accountants, we have a non-obligation process to do that. The first step is booking a strategy call with one of our accounting team. It’s a free 20-minute zoom or phone call where you get to meet us to manage your questions. 

From that point, you can consider doing a “Look Under The Hood” with us. There is no obligation to change accountants, but we give you a second opinion if you’re paying too much tax. 

Throughout that process, we can identify any problems we see with your current setup. Anything that your current accountant hasn’t claimed, or tax you may have overpaid, and strategies of how we might fix that going forward. We can run through with you once you book with us. 

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