Following the Senate’s decision to pass the $20,000 tax break, Australia has experienced a surge in the small business sector. This is an indicator of positive green shoots in our economy. More Australians are encouraged to venture into the SMB world and are on the lookout for savvy business advice.
Know what tax deductions you can claim
When time comes to lodge your tax return, there are some deductions to keep an eye out for to make sure you’re not paying too much tax. If you’re running your business from home, you may be able to claim home office costs such as repairs to home office furniture, fittings and cleaning expenses. If you use your personal mobile to call clients or staff you are able to claim the cost of your work-related calls. Don’t forget your computer, landline and ISP fees are also deductible! The recent regulation in Australia that allows businesses with turnover of less than $ 2 million a year can be effectively leveraged by SMBs to minimise taxes, and invest the hard dollars in scaling up.
Stay focused on cash
We’ve all heard it before but cash is king and managing cash flow is the key to small-business success. It is highly recommended to stay focused on minimising “Operating Cash Cycle”, or the time it takes to convert your net dollar cash input tied to sales and operating processes to cash inflow. Create innovative business models that enable you to collect most of your cash up-front and push payouts as much as reasonably possible. When it comes to invoicing, simple measures such as making sure you invoice your customers on time and that they are error free (name, company details, address are correct), and sending timely reminders to customers a couple of days ahead of time, can play a huge role in ensuring the working capital cycle is in motion and that you are generating cash flow each month. It may be worthwhile to have credit card details of customers on file, so that the moment an invoice is due and customer approval is in place, the amount can be released. Always stay focused on cash and never let your cash burn rate get ahead of cash generation rate.
Migrate to the Cloud
A 2013 study undertaken by MYOB revealed that SMB’s that use cloud computing were 106% more likely to experience revenue rise. Cloud computing provides a host of advantages over running software and hardware on site which will lead to savings across the board. These include a decrease in power usage, IT requirements and office space as you will no longer need that server room! A 2014 Grattan Report estimates that across the Australian economy, cost savings from widespread cloud adoption could add between $2 and $3 billion to GDP. This enables you to invest a greater share of your capital in growth rather than locking it down in infrastructure.
Hire the right people
Making sure you have the best people on board is the most critical element of a successful business. Hire people that are competent, have the right attitude and a proven work ethic. At Appster, we’ve implemented a rigorous 22-hour job application process to ensure we find the right person who’s committed and willing to put their money where their mouth is. Time is money and making a wrong hire can set you back months after you take into account the missed sales opportunities, strained client and employee relations, and resources used to hire and train candidates. According to US employee screening service Resoomay, it can cost in excess of $800,000 if a company hires a dud (based on a second-level manager earning $59,000 a year over about three years of employment). Also, if you surround yourself with the right people then they will be able to open doors and connect you when you look to scale.
From a cost management perspective, focus more on doing less traditional marketing such as mailings and newsletters and more on modern marketing such as social media. With limited budgets to spend on marketing and advertising, make the most of free social media platforms such as LinkedIn and Facebook to grow your brand and attract top talent and clients. Social media allows you to open a dialogue with your customers and engage in a real-time two-way interaction where you are able to take on board feedback on ways to improve and grow your business.
About the Author:
Sanjeev Handa is the CFO of Appster, the leading mobile app and product development company with offices in Melbourne and San Francisco.