Financial Engineering for Entrepreneurs
tips for extra money in your pocket by PCR Accounting & Advisory in Melbourne

Some key items that mean $ in your pocket

You can reduce your tax by hundreds of dollars (if not thousands), with some of the following strategies. Here’s how to do it: The Strategy behind Tax Planning The tax you pay depends on your taxable income, and the tax rates that apply to that income. Therefore, your tax is reduced if you: 1. Reduce your income, or 2. Increase your tax deductions. Seeing we all want to earn more, reducing your income isn’t an option! But increasing your tax deductions definitely is. We have shared below links to two Tax Planning Flyers, which both list a number of items that can be claimed as tax deductions. You can use them as a guide, but you should contact us if you are not sure of anything. To illustrate: If you need something in July that is classified as a tax deduction, it makes sense to bring this purchase forward and buy it in June. You then get the tax deduction this year, and not next year. Warning: Don’t fall into the trap of buying something simply to get the tax deduction from it. If your tax rate (including Medicare Levy) is for example 34.5%, you would only get 34.5% of the purchase price back as a tax refund (or reduced tax payable) from the tax deductible item. You DON’T get 100% of the amount that you spend back as a tax refund (or reduced tax payable). If you do need an item for your business or work and it is tax deductible, we recommend buying it BEFORE 30 June so that you get the tax deduction this year. Your Tax Planning Strategy Checklists Business Owners: Click Here for our ‘Tax Planning Flyer for Business Owners’. Individuals: Click Here for our ‘Tax Planning Flyer for Individuals’. If you are a business owner, we will look at both for you. If you want to minimise your tax burden, then help us to help you, and get in contact with us today! By spending a little bit of time with us reviewing your situation, we may be able to help you save thousands!! Now is the time to do it – please contact our office TODAY to get started.

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Paying super for employees earlier info by PCR Accounting and Advisory in Melbourne

Pay Super for Employees Earlier

To claim a tax deduction for Super, it needs to be physically paid. By paying your June quarter, or month’s Super before the end of the financial year 30th June, you will get a tax deduction for the year. Paying your employees’ Super a month earlier than you need to, can create a significant one-off tax benefit. If you have $20,000 to pay in Super for your employees prior to the 30th June, this can result in a tax saving of up to $9,400. If this is something that you want to do, you will need to ensure that the payment you are making is processed before the 30th June. To ensure this is done in time, it is best to process the payment a week before the end of financial year. Something to note is that, this creates a one-off tax benefit, as you are paying Super that you would usually pay in July earlier, to get the tax deduction.

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Zero sum budgets info by PCR Accounting & Advisory in Melbourne

The Power of a Zero-Sum Budget

In our last article, we discussed the power of budgeting. In this article, we explore my favourite way to formulate your budget. It is called a Zero-Sum Budget. The Power of a Zero-Sum Budget In the midst of the many articles on budgeting systems and strategies, a less publicised (but equally important technique) is the Zero-Sum Budget. This strategy involves “spending” every dollar that you make. However, you are not ‘spending’ your money in the usual sense of the word. In this situation, it refers to allocating your entire earnings into appropriate categories. The following steps demonstrate how you can apply this kind of budgeting: Step 1: Determine your Single or Combined Total Salary For most salaried workers who are paid on a monthly or fortnightly basis, this step is simple. Others may have to put in a little more effort if pay is based on an hourly rate, or particularly irregular. Try to work out your income as a monthly amount – you can then use the strategy of paying for next month’s bills using this month’s income. By always being “one month ahead”, you will find your budget much easier to plan and keep track of. Step 2: Itemise Your Bills Once you know the total amount of money coming in, your next step is to work out how much you need to spend next month for bills, groceries, everyday expenditures, etc. Be aware that some things may be yearly or quarterly expenses. Try and include everything you can think of, as the more accurate it is, the better your budgeting will be. Please find below an example list for your reference: – Mortgage: $1,426
– Fuel/Miscellaneous: $200
– Electricity: $200 (estimate)
– Mobile Phone: $55
– Gas: $25 (estimate)
– Internet: $35
– Groceries: $500
– Life insurance: $77.31 (paid quarterly)
– Daycare: $500
– Rubbish: $56.25 (paid quarterly)
– Health Insurance: $377
Total: $3451.56 Step 3: Compare and Contrast Once you have listed your income and expenses, you will notice how much is left over. How is this money currently being used? You may realise that you are wasting it on things you do not really need, or you may be gradually saving it. Regardless of what you decide to do with this money, the point is, you now have the knowledge of how much is left and can therefore make an informed decision on what to do with it. For example: If a couple had a net income of $7000 for the month, a zero-sum budget may look like this: – Mortgage: $1426
– Mobile Phone: $55
– Electricity: $200 (estimate)
– Health Insurance: $377
– Gas: $25 (estimate)
– Life insurance: $77.31 (paid quarterly)
– Groceries: $500
– Rubbish: $56.25 (paid quarterly)
– Daycare: $500
– Short-term savings: $1500
– Internet: $35
– Long-term savings: $1500
– Fuel/Miscellaneous: $200
– Holiday Fund: $548.44
Total: $7000.00 This strategy may also bring to your attention that you are actually spending every cent you earn. In this case, you might need to start considering the things you could live without. Some possible items you could cut back on are your pay TV, eating out, or excessive entertainment spending. Remember, everyone’s lifestyles and priorities are different and it is up to you how you allocate your money. Step 4: Make a choice and stick to it Once you know your excess cash flow, you can decide what you would like to do with the extra money. You might decide to pay off some debts, save, invest or put it towards a financial goal. The only trick is – if you decide to allocate a certain amount of money somewhere, stick to your decision and put it there straight away to avoid spending it on something else. Step 5: Keep on top of your spending It is important to check in every now and then throughout the month to make sure you are not spending over your self-allocated limit. Try to stick to the motto, “when it’s gone, it’s gone”. It may be painful in the first few months, but it can be one of the best ways to create good habits. Step 6: Make Adjustments It can take a few months before your Zero-Sum Budget is working efficiently. Do not be concerned if you have to make adjustments, as it is all part of the budgeting process. As with anything, you will become more aware of where you may need to allocate more funds to, or where you can easily shave a few dollars off here and there. Don’t Forget One last (but very important) part of your Zero-Sum Budget is an emergency fund. This is crucial in circumstances such as an unplanned medical emergency or car issue, and will allow a bit of leeway so that your whole month’s plan will not have to be abandoned. Just remember that when you have tapped into these funds, try to replace them again as soon as possible. Summary The power of using Zero-Sum Budget is that it allocates all of your money, so the opportunity to spend it on things that you don’t really need is no longer there. It helps you focus and prioritise. If you need help with your budgeting, call our office to make an appointment with one of our Team on 03 5134 1778.

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3 reasons for personal budgeting by PCR Accounting & Advisory in Melbourne

3 Reasons Why Personal Budgeting Is Brilliant, Not Boring!

If a business owner said to you that they run their business without a budget, what would you think? You would think they were incompetent! Or perhaps lazy, or even both? What do most families do? When you think about it, a family is actually like a mini business. There is income, expenses, and hopefully, something left over to invest and to enjoy. So why don’t most families operate to a budget? After all, a personal budget helps you to see your financial direction, and helps you stay (or get back!) on track. It is a great comfort. One reason some people do not put together a budget is because, it makes them feel overwhelmed, or too busy, and leaves them feeling like life is too complex to keep track of all that. Well the good news is, we can hold your hand through the process, which in turn, makes it easier for you. Before we look at the ‘how’ aspects, let’s consider 3 more reasons why a personal budget is such an important tool in helping you achieve your financial goals and dreams. 1. Most of your money is already spoken for long before you get it The money you earn has already been promised to keep the electricity on, make the loan repayments, and pay for the insurance. What most people don’t realise about budgeting is that, it is really honouring the commitments you already have. Now since we are all honest people and plan to pay these bills, the first step is to track these bills, and see what is left over for your day-to-day living. 2. Your day-to-day living money is spread all over the place Some of your day-to-day living money is in the bank, and some is in your purse or wallet. Some may even be with your partner or children, if you have them. You need a simple system that allows you to track day-to-day expenses, such as fuel for your car, shopping, and discretionary spending expenses. We do not suggest you try to keep track of every cent of your day-to-day living money, as this would provide little benefit for the amount of effort that would be required to obtain that level of detail. Instead, you need to identify your main day-to-day expenses, and make allowance for all other minor day-to-day expenses. Here’s a key: You need a system that is so easy to use, that you keep using it. You can track the day-to-day expenses by entering them into a spreadsheet, or better yet, use a tool like MyProsperity. MyProsperity can automatically pull in bank feeds, which can save you a lot of data entry. 3. The Number 1 reason people give up on their budgets is that they don’t have the right attitude It is ALL in the attitude! Have you ever attempted to budget and given up in frustration? What is the reason your budgeting attempt failed? What will make you stick to it? Think about this… One of the reasons, if not the top reason so many people give up at budgeting, is attitude. If you think of it as a penny-pinching sacrifice instead of a means for achieving your financial goals and dreams, how long are you likely to stick with it? Think about the difference between going on a diet, and eating healthy. One is negative and restrictive; the other is positive, and allows you to indulge every now and then while still achieving your goals. To increase your chances of success, work on your attitude first. Many people refuse to budget because of budgeting’s negative connotation. If you are one of those people, try thinking of it as a ‘spending plan’ instead of a ‘budget’. Once you have attempted to budget and failed, the bad feelings associated with any type of failure can keep you from trying again. Don’t give up! The cold hard reality Let’s face it. Money is a tool that enables you to reach your goals in life. But the cold hard reality is that, until you know where your money goes, you cannot make conscious decisions about how to use this tool effectively. A budget (or spending plan!) shows you exactly where your money goes and provides a clear plan. It also lets you save for the things that are important to you, like a new house, a new car, a comfortable retirement, a tertiary education, high quality health care, travel, or whatever your particular goals and dreams happen to be. Now that is exciting! Whatever YOU decide you want to achieve and save for, you can. All you need is the right attitude, a goal to aim for, and a (spending!) plan. Avoid This Pitfall There are several universal budgeting concepts that every successful budget will include. But one of the most important features of a successful budget is, for it to be easy to use and suitable for your needs. Trying to use a generic, complex, one-size-fits-all budget won’t work. A simpler approach makes it easier to stay committed. If you stick to a realistic and effective budget long enough, the rewards will keep you motivated. In the meantime, do whatever it takes to keep yourself going. To summarise, the 3 steps for effective personal budgeting (spending planning!) are: Build a Budget, Track Income and Spending, and Compare Budget to Actual. Once you start budgeting with a positive attitude, you will see the difference a budget (or spending plan) can make in your life. Your next step is to call us on 03 5134 1778 and organise a time to have a chat. We would love to discuss this with you further, and help you to get on track towards achieving your financial goals.

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Accountability and cashflow goals by PCR Accounting & Advisory in Melbourne

Accountability – key to achieving your cash flow goal

A key to creating a budget is to have a goal that you want to achieve; but how hard is it to achieve your goals? Well according to research, without outside assistance, it is very difficult to achieve your goals. There is nothing wrong with asking for help. The people who are the best in the world at what they do ask for help – by hiring Coaches and Trainers. So, why should you be any different for needing help?
The American Society of Training and Development (ASTD) conducted a study on Accountability, and have provided the following statistics: The probability of completing a goal if:• You have an idea or a goal: 10%• You consciously decide you will do it: 25%• You decide when you will do it: 40%• You plan how you will do it: 50%• You commit to someone you will do it: 65%• You have a specific accountability appointment with a person you have committed to: 95%
So, here you can see that just having a goal is not enough. If you want to achieve a goal that you need to budget for, it is important that you plan how you intend to do it, and have some accountability in place to help you achieve it. So, if you are serious about achieving your goals, what is stopping you from getting the assistance you need? As part of our Cashflow Budgeting Service, we can help you create goals and keep you accountable to them. No matter what you decide to do, make sure that you create some accountability to achieve your goals.

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Cashflow management tips by PCR Accounting & Advisory in Melbourne

Cashflow Management

Everyone knows that they should be budgeting and managing their cash, but how many of us actually do it? There is a lot of power to be gained over your financial future, by preparing and taking control of your budget. Better yet, if you start comparing your budget to your actual expenditure, you will get to know yourself better, and be able to make more educated and beneficial changes for your future. A lot of us may have had some goals for 2019 that have already fallen by the way side, but all of us should have some financial goals. Did you know that just by having a goal, the probability of achieving that goal is only 10%? However, if you commit to someone that you will achieve your goal, you can increase that probability to 65%. Even better, if you have a specific Accountability appointment with a person you have committed to, you can increase it to 95%. We want to help You, our Clients, succeed and achieve financial freedom. The first step is to ensure that you fully understand your budget. That is why we are doing this series to help you take control of your budget.

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Understanding partnerships by PCR Accounting & Advisory in Melbourne

Partnership: Are you serious about it?

Going into partnership in business is like a marriage. It is a collaboration of two or more people that share ownership of the business, as well as its profits & losses. It is a serious commitment of time, money and reputation; therefore, deciding to enter a business partnership should be of good judgement. If you are looking to bring other people on board in your business, there are certain things to consider before ‘taking the plunge’: Director & Public Officer Insurance This insurance is like Professional Indemnity for Directors. This is important to have, if they are going to come on board as Directors as well. Shareholders Agreements This should take into consideration how a voluntary exit (i.e. retirement or circumstantial) takes place, a forced exit (i.e. disagreement, non-performance, bankruptcy) or involuntary exit (i.e. death, significant trauma). It is important to get a Shareholders Agreement in place, if you are looking at bringing two or more people on board. Part of that would be looking at how you deal with each exit – what are the terms & conditions that surround that. Another part would be the Risk Management of it – if something happens to one of the partners, or if someone must exit for some unknown or unforeseen reason. Note that whenever you make a business proposal, you must include a clause about agreeing to a Shareholders Agreement and the terms & conditions set out in it. You will need to get a Solicitor to help you make and set in place a Shareholders Agreement. Voluntary Exit – retirement or circumstantial exit Any voluntary exit should be predetermined and managed. This could be an exit where someone retires, or it is just time for them to move on from the business. Shareholders Agreement should cover minimum terms on which a voluntary exit is dealt with. Forced Exit – disagreement, non-performance, bankruptcy Any forced exit might be somewhat more difficult to manage then a voluntary exit. This type of exit can come about due to disagreement, non-performance of a partner or even other things such as criminal conviction and/or bankruptcy. Should this arise, details of what is expected and how this is managed should be covered in your agreement as a minimum, to provide you with the security of knowing how to deal with it. Involuntary Exit (death or some significant trauma)
Buy/Sell Agreements & Risk Management Should one of the owners have an accident, there needs to be the appropriate mechanisms in place to protect the interests of the business and shareholders. A Buy/Sell Agreement covers the involuntary exit and is usually covered via some insurance policies, or vendor finance agreement agreed upon in the Shareholders Agreement. When you bring in two or more people into your partnership, there is a higher chance that something may happen, where someone must exit for some unknown or unforeseen reason. You should be prepared for that, because that could blow things out of proportion in your business. That unexpected change can have significant impact in your business organization and overall performance.

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Conducting business blood pressure test by PCR Accounting & Advisory in Melbourne

Blood Pressure Test

A Blood Pressure Test for your Business When was the last time you had your blood pressure tested? Taking your blood pressure is one of the first things most doctors do before treating you for just about anything. How much pressure your blood is under as it courses through your veins is a reliable indicator of your overall health; and it can be an early indicator of everything from heart disease to bad circulation. Does it tell the doctor everything they need to know about your health? Of course not, but one powerful little ratio can give the doctor a pretty good sense of your overall wellbeing. Likewise, your Value Builder Score can be a handy indicator of your business wellbeing. Like your blood pressure reading, your company’s Sellability Score is an amalgam of a number of different factors and can help a professional quickly diagnose your business’s overall health. Predicting Good Outcomes Too When a doctor takes your blood pressure, they not only rule out possible nasty ailments; they can also use the pressure reading to forecast a healthy life ahead. Similarly, your Value Builder Score can predict good things for the future. For example, based on more than 10,000 business owners who have completed their Value Builder Score questionnaire, we know the average multiple of pre-tax profit they are offered for their business when it is time to sell is 3.7. By contrast, those companies that have achieved a Value Builder of 80+ are getting offers of 6.6 times pre-tax profit. In other words, an average-performing business turning out $500,000 in pre-tax profit is likely worth around $1,850,000 ($500,000 x 3.7). If the same company improved its Sellability Score to 80+ while maintaining its profitability of $500,000, it would be worth closer to $3,300,000 ($500,000 x 6.6). Are you guaranteed to fetch 6.6 times pre-tax profit if you improve your Value Builder Score to 80? Of course not. But just like blood pressure, one little number can tell you and your advisor a whole lot about how well you are doing; and your advisor can then prescribe an action plan to start maximizing your company’s health – and its value down the road. Heart disease is called “The Silent Killer” because most people have no idea what their blood pressure is. People can walk around for years with dangerously high blood pressure because they haven’t bothered to get it tested. The first step on the road to health is to get tested. If you have a great score, you can sleep well at night knowing you have one less thing to worry about. If your score is not where it should be, then at least knowing your performance can get you started down the road to better health. If you’re interested in getting your Value Builder Score, please visit our website for more details.

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