Client Newsletter [April & May 2016]
In addition to benefits provided by employers directly to current employees, the following are also subject to FBT. Fringe benefits provided to:
- employees who have not yet commenced working for the employer;
- former employees (ie an employer continues to provide a low-interest loan to a former employee); or
- associated persons of employees (ie a spouse); or
- employees by third persons with whom the employer has entered into an arrangement.
is the amount of cash you have available to pay your bills; and
is more than the amounts of money moving in and out of your bank account, it is the timing of those movements; and
can come straight from retained profits, your overdraft, or some other finance facility.
The bottom line is that if you cannot pay your creditors, they may refuse to supply goods and services. Listed below are some ways to address cashflow concerns.
- Invoice immediately As soon as the job is finished, issue the invoice. For jobs that may take an extended time, negotiate with your customer for progress claims to be made.
- Insist on payment immediately An easy way to avoid having to wait for payment is to request a payment on completion of the job on the agreed terms. Prepare the invoice earlier or take your invoice book with you when working. Hand over the invoice right then and there and ask for payment while you are with the customer.
- Make sure you inform your customers that payment on completion is a term of the contract. This has two benefits, it will ensure an excellent cash flow, and if a customer is reluctant to agree, then you are able to “weedout” problem accounts.
- Get deposits If you have to purchase large amounts of materials at the start of a job, then negotiate a deposit from the customer to pay for those materials, preserving your cash flow.
- Let customers pay by instalment Customers also have cash flow problems, and may not have sufficient cash to pay your entire bill at once.
- Perform credit checks Good cashflow comes from having good customers. Credit checks from independent agencies, and trade references from others within your industry, will enable you to develop a client base of good customers.
- Use barter instead of cash You could reduce the strain on your immediate cash if you need goods or services from someone and can barter goods or services of your own in return.
- Consider consolidating your loans If you have several business loans or related loans such as cars, equipment, credit cards etc, you may be able to consolidate two or more of these into one lower interest account. This should reduce your total monthly payments, reducing the pressure on your cash flow. Note: you will still have to pay the total; it will just be over a longer term.
- Sell for cash or credit card Do this, if your industry practices permit.
- Add late payment charges, fees, or interest, when possible.
- Pay bills only on their due date It may be that you are paying your bills sooner than you are getting paid which can cause problems. Pay only on due date (or later if possible) unless there is a discount for early payment.
- Spread payments Make payments to suppliers throughout the month.
- Reduce stock If it is possible, only carry the most necessary items.
- Have a sale If you have obsolete, excessive or slow-moving items, have a sale and move them on.
- Lease This can be a significantly cheaper than purchasing and can ensure you always have up-to-date equipment.
- Look at selling to the general public You can do this particularly if you have traditionally only sold to the trade. The public will expect to pay for goods and services immediately.
- Give a discount for prompt payment Many customers will pay early for a small discount. Have a firm policy on discounts, to whom it is offered to and its expiry as some customers will take the discount even if they don’t pay on time. Also, monitor discount levels to make sure you are not giving away all of your profit.