New Year Resolutions For Cash Flow Management

Poor cash flow management is one of the main reasons 50% of small businesses fail during their first five years. For small businesses that have faced challenges over the last few years, that might seem like a scary statistic.

But cash flow management doesn’t have to be complicated.

Setting clear targets, promptly invoicing clients and putting the latest technology to good use in the business can be simple but effective means of managing cash flow for small businesses.

Here are three simple methods you can employ in your small business to manage cash flow for your business.

Send Out Invoices Quickly

By promptly sending out invoices to your clients and customers, you are avoiding delaying the payment. There might be roadblocks and delays in receiving payment that can’t be controlled on the client’s end, but avoid adding to them by waiting to send out your invoice. Make time in your week to create and send out invoices to bring in the cash as soon as possible. You may even want to set aside a day in the week or fortnight to action invoice deliveries.

Offer Different Payment Options

Avoid making payment an awkward and time-consuming process for you and your client by giving them plenty of options for paying. Cheques, Eftpos, paying online, or even cash can be valid methods of payment – and some are a lot quicker than others. Work out what works for your business and your customers.

Keep Detailed Records Of The Business’s Cash Flow Situation

Unless you keep maintained and accurate records, it’s unlikely that the cash flow situation of the business will be clear to see. Keep detailed financial records to refer back to, such as how many invoices are currently being processed and what bills need to be paid.

What To Do Before Renewing Your Insurance Policy For Your Business

Many businesses simply renew their existing insurance policies each year. This can be a costly mistake.

You may be paying unnecessarily high premiums based on outdated information, miss out on a better deal that has become available, or may be failing to cover your business against new risks that have arrived with growth.

Here are some things to consider before you next update your insurance policy.

Using A Broker

Deciding whether or not to use an insurance broker is an important decision. Brokers are expensive and for a small business with very straightforward insurance needs, this can be an unnecessary expense.

However, the more complex your business is, the more likely you are to benefit from the expertise of a broker. A good broker is aware of which insurance companies excel in specific areas and will be able to customise the best possible package of products to suit your needs.

It is also common for brokers to be influential in persuading an insurer to approve your policy. If you are a member of any professional association it is a good idea to seek out any recommended brokers.

You may benefit from an associated discount, and the broker will likely have a sound understanding of needs specific to your industry.

Recording Your Assets Accurately

Ensuring that the information you provide to your insurance company is completely up-to-date and includes all your relevant information is extremely beneficial. Regularly cross-checking your list of assets with what you have will ensure that you are paying manageable premiums to cover things you no longer own.

Consistently updating the value of assets that are depreciating will also help to bring down your premiums. For example, it is common for businesses to be paying to cover the value of a brand-new car when its value is now significantly reduced.

Good Risk Management

It is well known that a robust risk management plan is the best way to protect your business. Many businesses overlook that a good risk management plan can significantly reduce your insurance premiums.

If you have updated or improved your risk management systems, you should let your insurance provider know, as it may change the risk category in which you are placed.

Additionally, over time a good safety record will significantly reduce your premiums.

What Impact Could A High Interest Rate Have On Your Debt Payments?

If you’re looking into making investments or purchases, such as a house, you may have been hearing a lot about interest rates.

Interest rates are the fee that you are charged for borrowing money, which is expressed as a percentage of the total amount of the loan. Often they are discussed as a key indicator of how the economy is performing – but how do interest rates affect you?

Whether an interest rate rises or falls is determined by the RBA (Reserve Bank Of Australia).

The primary objective of the RBA is to ensure that the price growth (inflation) remains low and stable, by using its monetary policy to achieve that specific outcome.

The monetary policy primarily involves either increasing the cost of money (through interest rates) to slow the economy down, or lowering the cost of money to encourage spending.

For many Australians, rises in interest rates can affect their mortgage repayments, loans and credit cards. If the interest rate rises too drastically, that can make for a difficult time. A lower interest rate can instead lead to a respite for those making repayments as they can lower the amount required to be paid, or provide an opportunity to get ahead on the mortgage.

An increase in interest rates:

  • Increases the cost of your mortgage interest payments
  • Reduces the personal disposal income available to you
  • Increases the incentive to save, rather than to spend
  • Strengthens the value of the Australian dollar
  • Reduces consumption and investment

A decrease in interest rates:

  • Makes mortgage interest payments more affordable
  • Increases personal disposable income
  • Encourages spending
  • Weaken the value of the Australian dollar
  • Encourages investments in property.

When it comes to interest rates, knowing if they are forecast to rise or fall will allow you to adapt your payments better, and help to plan out your strategy to deal with the impact. You can speak with a financial advisor, or come to us if you’re looking for advice on how to handle the impact that interest rates may have on your plans.

How To Make Your Bank Account Work For You – Simple Tips For Financial Growth

Banking is often more complicated than you expect it to be with different types of accounts, fees and fine print to take into consideration. You are able to get more out of your bank account if you pay closer attention to certain details.

 

Re-evaluate Your Bank – Is It Still Suitable?

Due to the competitive market space, new offers that might be much better suited to your needs than the 10-year-old bank account you are using may be available. Keep a lookout for these offers so that your bank account is helping you put more money into your pocket.

 

You should also consider changing accounts if your bank is asking you to pay high fees or requires a high minimum balance. You may find that other banks are offering better options or attempt to renegotiate the terms of your account with your current bank.

 

Don’t Assume Your Bank Is Giving You The Best Interest Rate

Your bank may not be giving you competitive rates and assuming that they will do right by you lets them get away with this. Make sure that you keep up to date with different types of rates and what they should be. Discuss these with your bank and how they might be able to give you more competitive rates to the ones you are currently receiving.

 

Plan Interactions With Your Bank Strategically

Other than when it’s regarding an urgent matter, plan interactions with your bank ahead of time. For example, if you need to visit the bank about your mortgage, aim to have a mortgage specialist with you, this will ensure that you get the best out of your visit.

 

You may be able to resolve your request by calling the bank. In this case, aim to call in off-peak hours to reduce waiting time. Before you call, make sure you’ve checked whether the bank has provided an online method to complete the process.

 

Forgotten Bank Cards And Accounts Can Be A Money Burner

Carrying a spare credit or debit card is okay as long as you aren’t being charged annual fees on it. If you find that you rarely use the card but it has a high annual fee, it might not be worth continuing to pay for it.

 

The same applies for bank accounts that you may not be using, or using rarely. Banks may charge a dormant account fee if there is no activity in the account over a period of time (check details that apply to your bank). However, using your bank account every few months should be enough to prevent dormant account fees from being charged.

If you’re in need of assistance with financial planning, we are equipped to help you with advice, strategies and general information that could benefit you.

There’s A Strange Transaction That You Don’t Recognise On Your Statement – How Do You Deal With That?

Streaming subscriptions, grocery shopping, click and collect. There are so many ways now that your card or bank details can be used online to pay for goods and services. Those details may be stored by retailers, and the data that those retailers possess may be in danger of being breached.

That’s an ongoing risk of being an online shopper – the fear that somehow your card details will be leaked, or that a fraudulent transaction will appear on your bank statement. It might seem scary, but most banks and credit card companies have measures in place to ensure that you’ll be protected from breaches like that.

So what if you find yourself facing transactions that you certainly did not make on your bank statement? Here are some important steps that you should take immediately.

Call Your Card Provider Immediately

Most of the time, banks and card providers will notify you if they happen to notice something amiss with your account transactions. However, if the spending is in line with your usual habits, it might slip through the cracks by them. Notify your provider immediately when you discover the fraudulent activity, as this will prompt them to investigate the breach and issue you a new card.

Change Your Passwords

Be sure to review all of your financial accounts and change the passwords and pins for your bank accounts and cards. This should assist in keeping your accounts secure and away from the breach.

Monitor Your Card Statements & Credit Reports

Keep an eye on your transactions and statements for a few months after the fraud or breach occurs – it can take time for the charges to appear. You may then be able to approach the breach and resolve it without it impacting your credit score or your bank account.

Check Your Online Shopping Accounts

If the breach has occurred as a result of fraudulent activity with a card, it can be best to remove the card (and any stored cards) from your online shopping accounts in case they are no longer secure.

While anybody can be a victim of fraudulent transactions, nobody has to have their life or even their day ruined as a result of it. You can also help to keep your accounts safe and secure with strong passwords and regular monitoring.

After Purchase, Your Afterpay Debt Doesn’t Have To Be Scary

Afterpay was originally conceived as a new way to buy now, pay later. It provided people with the means to buy products if they did not have the currently available funds, without requiring interest to be paid on the amount to be paid back.

It’s a proven method popular with people under 30, but there are some hidden traps that you’ll need to look out for if you choose this method of payment.

First of all, while Afterpay does not charge interest on the money that it lends you to make the purchase, it actually charges the retailer a merchant fee. This can be anywhere from 4-6% of the value of the transaction, with an additional 30c on top of that. To cover this cost, retailers often raise their prices to compensate, which affects the customers who don’t use Afterpay.

Secondly, though Afterpay does not charge initial interest, it recoups its losses by charging for late repayments. A flat fee of $10 for late fortnightly payment will be incurred, and if the payment is still outstanding after a week, a further $7 is charged to the debtor.

If you’re someone who can afford to make the repayments on time, this might not seem like a dealbreaker. However, for those who may struggle, Afterpay can be a tantalising but lethal drain on your finances.

Buy now, pay later schemes like Afterpay are not subject to the Credit Act that regulates other lenders, including its responsible lending obligation. This obligation requires the lender to perform credit checks and verify a customer’s income and ability to repay. In Afterpay’s case, the onus of knowing if you can repay the debt or not lies solely with the person who has requested the money.

Here are some easy ways to ensure that you can meet your repayment obligations:

  • Set aside the amount that you will need to repay on a weekly basis for your Afterpay debt – make room for it in your weekly budget.
  • Pay the amount as soon as possible to avoid accidentally missing repayments and incurring late fees.
  • Know your financial limit, and don’t commit to a larger debt than you can comfortably afford.

If you are experiencing difficulty with money management, you can speak with us for further advice and assistance in planning out debt repayments, budget management or more.

Lights Are On Because People Are Home – Lockdowns & WFH Life Increasing Your Power Bill? Here’s What You Can Do.

It’s one of the most inescapable costs of living that the average person may encounter. Whether you are renting, leasing or own your home, the energy bill is an unavoidable circumstance that everyone faces.

With many individuals currently working from home and cutting other costs involving travel, it’s not surprising that your own energy bill’s total may have increased as a result. Regardless of this unexpected outcome, the bite of the energy bill in your monthly budgeting will not have to sting as much if you employ some of these tactics to decrease the total and save overall.

While many initially look at the total of the bill, it can pay off to examine the finer details. Checking the pricing tariffs of the peak, off-peak and shoulder periods can be useful in identifying not only what your energy usage pattern is costing you, but whether or not the cost is reflective of other providers offering similar services for what you are currently paying.

Keep an eye out for providers who offer discount-based incentives to pay on time (or even earlier) by direct debit. If you can afford to use this option with your available funds, this may be a simple means through which you can lower the overall cost of the bill.

You may be particularly conscious of the impact that your energy usage may be having on the planet, and have chosen a supplier dedicated to energy efficiency and lessening their carbon footprint. However, this option can cost substantially more than other suppliers, so you need to measure whether or not you stand by your beliefs and take the extra cost, or look for an alternative.

Finally, a hidden cost that you need to consider is the impact of the loyalty tax, and the increases that can occur during renewals. Like any of your current policies and utilities, don’t grow complacent with what you have. No matter how convenient it may be, don’t roll over your insurance policies and/or other contracts automatically. Instead, set up an alert for 60 days in advance of when they are due to renew, and then shop around online for the best deal.

Working from home is already challenging enough without increasing costs. Using these tips may save you a little extra money in the long run, but for more financial advice about budgeting, planning and more, you can speak with us.

Is Your Home Loan Right For You?

For many, a home loan is a purchase that’s already been made, a regular expense that will stick with them for up to 30 years (depending on the home loan conditions set out at the time of agreement). But don’t expect to simply set and forget your home loan.

Your circumstances may change, and the home loan that you once thought was the perfect deal might not be so anymore. By simply running a few checks, you can figure out whether or not your home loan is still the right fit for you.

Bonus Features To Your Home Loan – Are They A Trap?

Find out all of the home loan features that your current home loan may have. These features may seem confusing to the untrained eye, but there are benefits and disadvantages to a home loan containing them.

For example, some home loans may come with redraw facilities, which can be a handy home loan feature if you’ve made extra repayments in the past and need to access that cash for an unexpected expense. Other home loans may instead have an offset account, which is a bank account linked to the loan in which any cash in the account is offset daily against the home loan principal.

These features may sound good but can attract additional fees. Compare the benefits of the feature with what you are actually paying overall to see if it’s worth the cost.

Interest Vs Comparison Rates: Do You Understand The Difference?

Interest can seem like the silent assassin to many a home loan, but it’s important to not be lured into a new agreement by a rate that seems (at first glance) to be lower than it actually is. You should consider two rates when re-evaluating the interest payable on your loan – interest rate and comparison rate.

Interest rate is the annual interest cost for borrowing money but does not take into account any fees. The comparison rate incorporates the annual interest rate, as well as most upfront and ongoing fees. It’s a good idea to use comparison rates as your base for looking at alternative home loans, as they provide a clearer picture of how much money you may actually end up paying.

Ask To Reduce Your Home Loan Interest Rate

It might seem that a lower interest rate on the market is the perfect opportunity to switch home loans – but wait! You can also contact your current lender and inform them that you are considering making a switch and (if you have a good credit rating and more than 20% equity in your home) you may be able to negotiate with the lender from a better position, about your interest rate

Want advice on how you could improve your home loan, or about the repayments to your home loan? You can come and speak with us, as we are here to help you with your financial planning.

Should You Join An Employee Share Scheme?

Known as an employee share purchase plan, share options or equity scheme, employee share schemes are used to attract, retain and motivate employees. Schemes can vary depending on the company (and the terms of the scheme can differ depending on the company) so it is important to consider carefully what the pros and cons are before becoming involved in an employee share scheme

Employee share schemes are designed so that you can receive or buy shares in the company that you work for. Often those shares are available to you at a discounted rate from what is currently the market price. Employee share schemes are a great way to reward or remunerate employees for their work. They also incentivise employees to stay with your company for longer and share in its success

There are different ways of paying for shares, such as:

  • salary sacrifice
  •  over a set period (say, 6 months)
  • dividends
  • received on shares
  • a loan from your employer
  • full payment up front

You may be able to receive shares as a performance bonus or as remuneration instead of a higher salary. In a large company, this may come as “ordinary shares” which give an equity investment, but in a smaller company you may only receive dividends.

Each share scheme is different, so look at the terms and conditions of the offer. Check:

  • when you can buy or sell the shares
  • if you will receive dividend payments
  • what happens to your shares if you leave the company
  • the tax benefits

What Is Ethical Investing?

Ethical investing is gaining traction, with more and more investors selecting where their money will go based on their personal principles. This style of socially conscious investment holds companies accountable for their negative impacts and is driving many investors to select their investments dependent on their mutual shared values.

Ethical investing can align with moral, social, political, religious and environmental values, and takes them into account prior to making investment decisions. The primary objective of ethical investments is to create a positive impact by investing in companies that take environmental, social governance (ESG) and ethical issues into consideration and make an effort to address or prevent the business from contributing to the issues.

Rather than only receive a financial return on their investment, investors also receive a social conscious return that has an overall impact on them and the planet. 

There are two ways that ethical investing can be done. 

Personal Screening

An investor chooses to invest in industries/sectors/companies whose values align with their own values. As an example, they may look towards companies who are environmentally and socially conscious, who treat their workers fairly, have high governance standards and carry out environmentally sustainable practices.

Negative Screening

This is when an investor avoids industries whose values directly differ from their value – those involved in fossil fuels, gambling, military ammunition and tobacco are automatically crossed out from ethical investors’ choices. Treatment of workers can also determine to an ethical investor whether or not a company is worth investing in.

Ethical investing, while praiseworthy, needs to consider the soundness of their investments as well as their values. To examine whether the investment is sound and has the potential to reap significant returns, a review of a company’s history and finances is necessary. It is also important to confirm the firm’s commitment to its declared ethical practices and measures.