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A NEW ALLIANCE!

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We have recently created an alliance with a financial planning partner that allows us to bring you an even wider range of services. The alliance lets us concentrate on the things that we do best, while ensuring that you get the same high-quality service when you need any form of financial planning. 

Please click HERE for more information or contact us at info@middlewise.com.au.

Financial Misery or Financial Happiness. What Makes the Difference?

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Most people will quite literally earn millions of dollars in their lifetime. Yet many people struggle financially and live from one pay period to the next.

With the ageing population and many Baby Boomers now continuing to work—at least on a part-time basis—past the traditional retirement age, people are working more years than ever. Even if a person works only 40 years, at average earnings, that's a lot of money.

It is said, “Money talks”, but for many, all it ever says is, “Hello, and Good-bye”.

Have you ever found that the month lasts longer than the money? Or have you ever got your tax return and looked at all the money you have earned over the past 12 months and then thought, “Where has it all gone?”

You're not alone. And the good news is, now there's a simple solution.

There's a great quote from Charles Dickens’ book David Copperfield where the character Mr. Micawber says to Copperfield, “Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

This is so true, regardless of the income level.

Yet keeping track of what you spend your money on, for many, is too hard, too laborious. The benefits of doing so are obvious to anyone, yet the discipline to keep all your receipts, enter the information into a program like Quicken Personal or MS Money (or just to write it into a paper ledger), and keep that going consistently over time is beyond most of us.

Well ... and here's the good news ... what if a piece of software could track and categorise what you spent your money on, but it involved very little effort by you?

Imagine the clarity you'd get if you knew exactly how much you have spent and what percentage of your income is going on the various areas including mortgage/rent, vehicles, groceries, schooling/education, eating out, entertaining, mobile phones and internet, medical and pharmaceutical, and so on.

For most people, it would be a real eye opener.

It is said that knowledge equals power.

That is very true when it comes to your personal finances.

Once you can objectively see exactly how your lifestyle and your habits—that is, you—are spending your money each year, and month-to-month as you go, you then have the power to make decisions on where you can change your spending (and saving!) habits.

In this information age and electronic era, many of us use credit cards, debit cards and EFT when buying things. We have now reached a point for the first time in history where more money is exchanged electronically than through cash transactions.

That's a lot of transactions. And it's a lot of data.

This data is available to be analysed on a societal basis, industry basis, business basis and ... a personal basis.

And that's where a brilliant tool comes into play: Xero Cashbook

Here's how it works ...

Xero Cashbook is online software. It's the non-tax-tracking version of the Xero software used by businesses.

It analyses and categorises all your electronic transactions to give you a snapshot of your complete financial position in an instant. This also organises a view of all your bank accounts and credit card accounts in one place. Very handy.

This is precisely what a lot of people have been waiting for: An easy way to track and control your finances.

Xero Cashbook categorises your spending and saving, so you can tell whether your money is being used for essentials or you're splashing out on other things.

If you are concerned about security, Xero protects your financial data with 128-bit SSL encryption, the same as online banking. Your data is well protected.

You can also invite people you trust, such as your spouse, accountant or other financial advisor, to access your Xero reports for free. This means that as your advisors we can see the true picture of your finances and spending habits, and help you stay on track.

This allows us to help you plan ahead and make the most of your money.

You will never before have felt so in control of your personal finances.

Being web-based, rather than being stuck on one computer like traditional software, you can access Xero from home, work and even on your smartphone such as an iPhone and Android device.

If you'd like us to step you through getting set up with Xero Cashbook, or their Xero equivalent for Business, or both, get in touch and we'll hand hold you through the process. It's not difficult, and once your bank accounts are set up, it happens automatically from there.

The way we see it, the more clients we help keep track of their finances in such an easy way, the more clients who will prosper and find financial happiness instead of financial misery, to paraphrase Dickens' Mr. Micawber.

Your next step... Get in touch with us to make a time to meet and discuss your options. We'll then outline the costs so you know exactly what lies ahead.

It's time to stop saying "good-bye" to so much of your money each year!

Business Owners: Why Cash is King, Profit is Theory

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There’s a saying in business, “You can go broke making a profit.” And another, “Cash is king. Profit is theory.”

As you know only too well, you don’t pay rent, meet payroll or pay your bills with profit.

You pay them with cash.

A business can make a lot of sales, have a book full of orders, have delighted customers and clients, have a great reputation, be growing, and yet still go broke.

Why? Cash flow.

The business might be profitable on paper, but have no money left in the bank. They cannot pay their bills and they become insolvent.

A growing business is often hungry for cash ... hungry for inputs so it can make the business’ outputs, be they physical products, services or a combination of both.

The tragedy in this is that cash flow crises can often be averted. They can be predicted, planned for, and then contingency measures put in place.

For example, if a business has seasonal effects where some months are busier than others, or if a business knows it has some jumps in expenses or fixed costs approaching—such as moving to a larger premises or hiring more staff to cope with growth—then these expenses can be planned for and compared with the planned income in those months.

Which would you prefer to do?

(A) Call your bank manager and ask for a short-term loan or increase in overdraft when you are urgently in need of the cash (and therefore stressed, and desperate, and not in a great frame of mind to negotiate good terms), or

(B) Call your bank manager 6 months in advance and meet with him or her to explain the coming cash crunch, the reasons behind it, and plan for the funding in a calm, relaxed, totally-in-control manner?

Not only would you get the loan, you’d impress the bank manager and strengthen the relationship for further funding, should it be needed to support your growth.

The bank manager would see you are a professional operator with a planned approach to your business, not a fly-by-the-seat-of-your-pants operator. (They see a lot of those. They don’t like doing business with them.)

Apart from the relationship with your bank, there’s the immediate effect of sleeping better at night.

We all seek a level of certainty to comfort us. Knowing what lies ahead in business and planning your cash flow gives you peace of mind and confidence in your day-to-day work that will rub off on those around you...

...in your workplace and at home. It’s a good feeling.

This is one of the reasons we are so passionate about helping our clients put together cash flow forecasts, to help them keep their business on track and to avoid any stressful, unpleasant surprises in the coming months.

It doesn’t matter whether a business is a one-person hairdressing or lawn mowing business, or a 10 person, 20 or 200+ person business.

Every business needs a cash flow forecast.

Running your business without a cash flow forecast is like driving a car at night along a dark country road with only your normal headlights on. It’s hard to see what lies ahead. Some wildlife might come right out in front of you, leaving no time for you to react. CRASH!

On the other hand, a cash flow forecast is like driving along that country road with high beam on. You can see so much more. You can drive with much more confidence. Less stress. And avoid the CRASH!

Another thing we often find in helping our clients build realistic cash flow forecasts, is that we can spot problems and make suggestions that help improve the business’ cash cycle. This puts money in your bank account.

For example, a combination of negotiating better terms with suppliers, tightening up or at least clarifying and enforcing your business’ own credit terms, and reducing stock holding and waste can have a powerful positive effect on your cash flow.

So, if a cash flow forecast is so crucial, why do many businesses not have one?

Simple. Business owners get busy. Busy pleasing customers or clients. Busy dealing with staff. Busy paying suppliers. Busy generating sales.

Also, it’s easy to get ‘too close’ to your own business. “You can’t see the forest for the trees,” as the saying goes.

Having an independent and fresh pair of eyes come in and look at your business—especially cash flow which is its life blood—allows opportunities for improvements to be identified. Things that are there, but difficult for the business owner to see amidst the ‘busy-ness’ of it all.

So, what should do about it? Call us. Take action. A cash flow forecast costs less than you think.

It’s time to turn those high beams on!

Your next step ... Contact us here to make a time to meet and discuss your options. We’ll then outline the costs so you know exactly what lies ahead.

Your 9 Point Checklist for Paying Less Tax This Year (And Why This Checklist Will Be Useless to You in a Few Weeks’ Time)

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Time is running out.

If you want to take a few simple preventative measures to minimise or defer how much tax you will pay for this Financial Year, you need to do two things: 1. Read the following 9 point checklist, then 2. Call or email us as soon as possible so we can make a time to sit down with you to assess which of these preventative measures can be done for you in your circumstances. Depending on your situation, this tax planning process could save you many thousands of dollars. That’s cash in your bank account, rather than the Tax Office’s.

After all, why pay one more dollar in tax than you have to?

I’m sure you have better uses for your money, such as investing in your future or just investing in the here and now and rewarding yourself with a little ‘lifestyle indulgence’. Now … to the checklist. Tick each item you think is relevant to you:

Review debtors Your income tax is payable on any invoices you’ve issued, even if you haven’t been paid. Don’t pay tax on any invoice you know won’t ever get paid. Review the list of those who owe you money and write off those ‘bad debts’ now.

Review your stock levels The value of your closing stock directly affects your business profit, the higher your stock value the higher your profit and tax. Review and identify any obsolete or old stock and scrap it or re-value it to its correct value. Individual items of stock can be valued at cost, market value, or replacement value.

Review your business assets Write off any obsolete asset and claim its remaining book value now. There are also new ways assets can be depreciated, called pooling, that will increase the depreciation expense. This isn’t suitable for all business, but it is worthwhile reviewing.

Defer income — A simple tip that can defer a lot of tax for you If your cashflow allows, you may consider deferring some of your invoices until July. If the income was not invoiced this financial year, it can’t be taxed this financial year. Before taking this option we recommend having a budget to manage these months income and expenses. We can help you with that.

Review your invoices issued If you have invoiced someone in advance for services you will provide in the next financial year, then you may not have earned that income in this tax year. That income may belong in the year you provide the service. Again, this is something we can work out with you when we meet for tax planning.

Pay the June quarter superannuation Superannuation if paid on time is deductible when paid. Since you have to pay the 9.5% superannuation by 28 July, bring it forward a month and pay it now and claim the deduction now. Why wait a whole year to reduce your tax?

Using all of your superannuation cap If maximising your superannuation is part of your retirement plan, then don’t forget to contribute as much as you can into your super fund. We can guide you as to how much you can contribute. It’s a missed opportunity not to do this each year.

Employee bonuses Bonuses to employees are deductible when the business has committed to paying them and it is not subject to any discretion. So finalise and sign off on the bonuses to be paid and reduce this year’s tax.

Capital Gains Tax (CGT) Minimising your capital gains tax is often about timing. Ensure the asset has been owned for at least 12 months. If you already have a capital gain, are there any investments making a loss you can sell? Do you qualify for any capital gain rollover relief concessions? (Again, we can guide you here.) CGT is a whole topic on its own, and the potential savings are so great, it is definitely an area in which you should seek our guidance.

If you ticked any of the above items, then we need to talk. And soon.

Call us now on 1300 574 108 or email us on info@middlewise.com.au to make a time to meet and discuss your tax planning options.

Why Every Business Needs a CFO (and How Small Businesses Can ‘Rent a Slice’ of one)

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Larger businesses have a Chief Financial Officer (CFO) on staff. But what can small and medium sized businesses do in this regard?

Clearly, larger businesses can afford an in-house CFO. But it goes beyond an affordability issue: Large, successful businesses also understand how crucial the CFO role is to their business performance.

The CFO in a business:

  • Keeps a close eye on the numbers and trends,
  • Alerts management when preventative actions are required,
  • Helps management create sound forecasts and plans,
  • Ensures the cash inflows and outflows are managed well so the business never runs out of cash or needs to borrow in haste,
  • Reports on revenues achieved compared with targets,
  • Gives solid information on a range of Key Performance Indicators (KPIs) to the business decision makers, and also
  • Helps management with decision making.
  • This is management input that all businesses require regardless of their size. But how can small and medium sized business access CFO-level input and guidance?

    The answer: You out-source it. You get a part-time, out-sourced CFO until you can afford one full-time.

    That’s where we play a role for many of our business clients.

    Our ‘Your CFO’ service has been developed with input from our clients to make sure it’s the ideal mix of support services and affordability.

    As your CFO we roll our sleeves up and work with you in management meetings throughout the year on:

    • Cash flow – Efficient management of cash flow to provide cash for saving or investing in growth
    • Profitability – Identifying key drivers of profit and focusing on these
    • Business value – Growing a valuable and saleable business asset
    • Structure management – Staying on top of risk and taxation issues 
    As business owners we all need to measure and monitor Key Performance Indicators (KPIs). That is, the handful of numbers that really matter in running our business. 
     
    It is also important that you have a ‘KPI dashboard’ to display your KPI targets compared with your current KPI performance. This helps tremendously in monitoring and managing your business’ performance and, ultimately, hitting your targets.

    As your outsourced CFO, we will bring to each meeting that we conduct with you clear financial reports, easy-to-understand KPI information, as well as our commercial experience to interpret the information, make suggestions and help guide your decision making.

    Items we’ll discuss each meeting include:

  • Profit (historical and future)
  • Cash flow (historical and future)
  • KPIs: A mixture of focusing on Lead Indicators which drive performance and Lag Indicators that measure the outcomes
  • Marketing activity and effectiveness
  • Operational efficiencies such as work-in-progress or workflow
  • Financial indicators such as debtors, inventory, stock turn (depending on your industry and type of business)
  • Team efficiencies, knowledge management, morale and safety.

  • By helping with your forward planning for achieving the next period’s targets, and by being a sounding board for you as you strive to meet your targets, our ‘Your CFO’ service and support gives you a crystal clear focus for what needs to be done to achieve the goals of your business.

    Your next step … Call us on 1300 574 108 or email us on info@middlewise.com.au for a no cost and no obligation meeting to discuss how we can work with you as your outsourced CFO. We’ll outline for you what’s included and what costs are involved so you can see how the service can be comfortably included in your budget.

    Federal Budget 2014 - What you Need To Know

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    Client Alert! May Special 2014             



    Yesterday, the Treasurer Joe Hockey delivered his first Federal budget.

    The budget was in many ways what was expected, below is a summary of the key features and how they could affect you – Please get in contact with us if you would like further details on how these decisions will affect your own personal situation.

    More ‘Tax’ for Higher Earners

    A Temporary ‘Budget repair Levy’ was introduced to tackle the rising national debt. This debt levy will affect higher income earners (over $180,000) – a rundown of the levies is as follows:

    Taxable Income

    Debt Levy

    $200,000

    $400

    $250,000

    $1,400

    $300,000

    $2,400

    Also a number of other tax rates that are currently based on calculations that include the top marginal tax rate will also be increased in line with the Temporary Budget Repair Levy from 1 July 2014. An exception applies for fringe benefits tax (FBT), which will be increased from 47 per cent to 49 per cent from 1 April 2015 until 31 March 2017 to align with the FBT income year.

    Short Term Clarity on Super

    Last night’s budget confirmed the rise of the superannuation guarantee to 9.5% as of 1 July 2014 this is in-line with 2012 legislation. However the proposed schedule has changed to hold the rate 9.5% for 4 years followed by 0.5% yearly rises up to 12% by 2022/23.

    Changes to the excess non-concessional contributions tax means that contributions made since 1 July 2013 can be withdrawn. This is good news for anyone who has accidentally exceeded their non-concessional contributions as they can withdraw it rather than paying the top marginal rate.

    Tighter Welfare Rules

    The government has proposed several clamp downs on welfare including:

    • Reduced deeming thresholds from 2017 making it harder to pass the ‘income test’ for social security benefits
    • Commonwealth Seniors Health Card changes
    • Progressively increase the Age Pension age to 70 from 2025

    We want to make sure ALL our clients are ready for anything this is why we would love to talk to you about a ‘Freedom Plan’. This puts the power back into your hands by clearly identifying what you need to do to retire on your own terms. Call us today to find out how.

    Family Assistance

    Changes to the Family Tax Benefits (FTB) scheme include a change to Part B where the primary income limit will be reduced from $150,000 to $100,000 from 1 July 2015. Also Payment of FTB Part B will be limited to families whose youngest child is under age six from 1 July 2015. Transitional arrangements will ensure families whose youngest child is age six and over on 30 June 2015 will remain eligible for FTB Part B for two years.

    The paid parental leave scheme has been proposed on a smaller scale to what was expected. It will provide six months of paid leave, including superannuation, from 1 July 2015. However, the payment threshold is proposed to be reduced from $150,000 per annum to $100,000 per annum.

    Business & Investors

    The company tax rate has been reduced by 1.5% bringing it down to 28.5%. This reduction, however, will be off-set by businesses that earn more than $5,000,000 in taxable income by a 1.5% levy to fund the paid parental leave scheme.

    For investors, this means that little will change for those invested in businesses who earn less than $5,000,000 as the increased dividends will be offset by a decrease in franking credits. However, for those invested in companies who earn more than $5,000,000 will be worse off as they will have less franking credits as well as a decreased dividend.

    That being said, with the marginal tax rate for businesses at 28.5% and the maximum individual marginal tax rate at 49% there may be some opportunities. Call us to discuss how this may impact you.

    Middlewise Accounting is here to help you make better financial decisions now for a beautiful financial future. Talk to us to find out how we can make the best of a tight federal budget for you.



    Middlewise Accounting

    P: 1300 574 108

    Email: info@middlewsie.com.au


    Cash flow really counts

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    Business owners are busy running their businesses. Cash-flow planning is often an area that people don't plan for. A simple cash flow, customised for your business, keeps you focused on ensuring there is enough money to meet your business requirement.

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    Forecast your finances for improved cash flow

    We can help identify all your income and expenses – including the timing – to allow you to forecast how your bank balance or overdraft looks each month.

    A quick tip... Collect from your debtors (we can help you improve or eliminate them), pay yourself and then employees, loans, creditors and the Australian Taxation office on time and without hassle.

    Contact us if you need some help with coaching and education in the skills needed to manage your cash flow better in the future.

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