Index

Predictive Accounting – An Important Tool

Capital Raising Opportunities for SMEs

Capability Statement – Up to Date?

Succession Planning Helps!

Unlisted Public Companies

What Does It Mean?

Predictive Accounting - An Important Tool

If you have not yet developed Budgets and Cash Flow Forecast for the new financial year it’s not too late to do so.

The preparation of Predictive Accounting Reports will assist in the implementation of the strategies that you have included in your Business Plan or Strategic Review for 2023/24.

The Predictive Accounting Process incorporates four key components:

Key drivers within your business

This is the “engine of the budgeting process” where the detailed working figures are contained.

Budgets

Preferably should be prepared for each operating activity conducted by the business.  In this way the individual manager for that particular operation can receive his/her own budget.  This will assist that manager in having a better overall understanding of how the activity that they are responsible for operates.

Cash Flow Forecasts

Information will be transferred from Budgets, some of the key driver items and Balance Sheet accounts to The Cash Flow Forecasts.

Problems in maintaining an adequate amount of cash in the bank will be able to be identified well in advance which could lead to the business borrowing additional funds (and this raises the question does the business have enough assets that could be offered as security to the lender) or the business could seek to raise capital direct from the public by utilising section 708 of the Corporations Act or Crowd Sourced Funding Equity Raising or if the company is very young raising capital as an Early Stage Innovation Company).

Projected Balance Sheet

This is what the overall financial picture be in future years if the strategies contained within the Business Plan or Strategic Review as reflected within the Budgets and Cash Flow Forecasts are implemented.

This gives you the opportunity to analyse the projected financial picture of the business in three or five years’ time and decide whether you would be happy with that end result.  If not, you will be able to discuss with us implementation of alternative strategies to achieve a different end result.

As indicated earlier the key drivers are the “engine of the budgeting process”.  Some of the items that could be included within the key drivers within a business are:

Manufacturing planning

• Inventory Forecast
• Labour Budget
• Direct Purchases
• Inputs To Manufacturing
• Electricity/Gas/Diesel Inputs
• Sales Forecast
• Debtors’ Ledger – calculation of Debtors’ Days Outstanding is very important. Debtors’ Days Outstanding over 30 days is an indication that the business is not collecting money from debtors fast enough and this is placing additional financial stress onto the business.
• Creditors’ ledger – calculation of Creditors’ Days Outstanding is very important relating to trading conditions that have been negotiated with key suppliers – are you paying those key supplies within the negotiated payment terms because if not they could cut off supply if payments were not made by the stipulated date – what sort of problems would that cause?
• Work in progress – it’s good practice to ensure that progress claims are being raised at least monthly.
• Marketing Plan – including social media and your website.
• Research and Development – has the research and development system been established so that the information required for submission to AusIndustry and the Australian Taxation Office is readily available?
• Repairs and maintenance
• Export Market Development Grant expenditure – applicable for exporting businesses with turnover less than $20 million annually.
• Capital expenditure program
• Bank loans
• Shareholder loans
• Key Performance Indicators summary

Budgets

Within each Budget the key information to be shown could include:

• Income
• Direct costs
• Opening stock
• Closing stock
• Gross profit
• Gross profit percentage
• Key direct costs of that business unit
• Other overheads
• Forecast Profit/loss of that business unit
• Key Performance Indicator information relative to the individual business unit

If you would like our assistance on the preparation of the Predictive Accounting Reports for your business please do not hesitate to contact Peter Towers.

Capital Raising Opportunities for SMEs

There are a number of capital raising opportunities available for small/medium sized enterprises.  The capital raising processes relate to:

• Section 708 of the Corporations Act Capital Raising
• Early Stage Innovation Company capital raising
• Crowd Sourced Funding Equity Raising - capital raising

Each of these processes is different.  Some of the key points are as follows:

Section 708 of the Corporations Act

Enables a private company to raise up to $2 million in a twelve month period without having to issue a prospectus from a maximum of twenty investors.

There is no advertising or marketing allowed under this capital raising process.

This process is best used with family and close friends and is the simplest capital raising process to implement.

Early-Stage Innovation Company Capital Raising

This legislation is targeted to assist companies which have developed new or significantly improved products, processes, services, marketing or organisational methods and are primarily under three years of age (but some could be up to six years of age) with turnover less than $200,000 not including a Grant from the Accelerating Commercialisation Grant Program, and expenditure under $1 million in the previous twelve months.

Companies have to pass one of two series of tests to qualify for this status which then enables the company to utilise that status to attract investors through taxation offset and potential avoidance of Capital Gains Tax.

Crowd Sourced Funding Equity Raising

Eligible companies must have an international turnover of less than $25 million annually and gross value of assets located anywhere in the world of less than $25 million and not registered on a stock exchange anywhere.

These companies can raise up to $5 million in a twelve month period by utilising the Crowd Sourced Funding Equity Raising Process.

Companies that seek to raise capital need advice from experienced professionals.

To be successful in a capital raising activity the company needs to produce a number of documents which can include:

• Information Memorandum
• Business Plan
• Budgets for all Business Operations
• Cash Flow Forecasts
• Projected Balance Sheets

If you are interested in understanding how these capital raising processes could be of benefit to your business please do not hesitate the contact Peter Towers on 1800 232 088 or peter@essbiztools.com.au.

Capability Statement - Up to Date?

Your Capability Statement is an important document that you can upload to your website and send to potential customers to inform them about the capabilities of your business.

The Capability Statement is a tool which will assist you to promote your business and, in lots of ways, is an enhanced business card.

A Capability Statement assists:

• In identifying the points of differentiation in your business – highlights where you are different from your competitors.
• To outline your clearly defined competitive advantages.
• In identifying your unique selling proposition to articulate your business’ competitive advantage.
• To identify the important services that you supply to your customers.

The research that you conduct for the development of your Capability Statement will assist in the development of the “value proposition for your business”.

If you would like to have a discussion relative to the development of a Capability Statement for your business to assist you to promote your business, please do not hesitate to contact Peter Towers on 1800 232 088 or peter@essbiztools.com.au for a chat.

Succession Planning Helps!

Many business operators are too busy in day-to-day activities to give much thought to planning succession within their business.

But, succession is important and covers virtually every position in an organisation not just the owner or CEO.

Let’s start with the team.  Australia currently has a very low unemployment rate.  Even with the low unemployment rate many businesses are complaining about the problems they are experiencing in attracting and retaining talent.

A strategy that some businesses are implementing is to ensure that there is ongoing training and development activities been conducted for the team members on a regular basis.  This assist in training people already within your organisation who understand how the business operates, who the customers are, what the firm’s vision is.

So, the first part of “Succession Planning” starts with your current team.

Obviously, there are many components of succession planning that relate to the owner or CEO.

Some of the issues to be considered include:

• The Strategic Plan which covers the situation if the owner or CEO is not available.
• Is the business a “Family Business” and if so is there a “Family Advisory Board” or “Family Charter” or do you need more information on how these entities operate?
• Are there or do you think you should have “Shareholders Agreements” in place which document various agreements that have been reached verbally with family members?
• Are you planning to sell the business and will an important component be the capability of the Leadership Team? This could mean the difference between getting a sale at an attractive price or having to accept a lower price or even no deal. If this is a concern to you, does the Leadership Team need some extra professional development training?

Succession Planning affects a wide range of areas within a business and periodically it’s a good idea to review these.  Some of these items include:

• Business Planning
• Predictive Accounting – Identifying the Potential Position of the Business in 3 to 5 Years’ Time
• Management Training and Development
• Board of Directors
• Board of Advice
• Business Valuation on an annual basis

It’s a good idea to conduct a periodic review of “Succession Planning” as it operates within a business.  If you would like to have a discussion with us relative to the implementation of a Succession Planning review for your business, please contact Peter Towers on 1800 232 088 or email peter@essbiztools.com.au.

Unlisted Public Companies

An unlisted public company is an entity which is not listed on a stock exchange.  There is no continuous information available about the current value of shares in the company that is provided throughout the day for a listed public company.

An unlisted public company is able to raise capital as a Crowd Sourced Funding Equity Raising Company subject to the same capital raising limit that applies to a private company – $5 million from all capital raising sources in a twelve month period.

The unlisted company also has to comply with the turnover limit of $25 million in a twelve month period and the gross value of assets limit of $25 million.

There is no limit to the number of shareholders that an unlisted public company can have.

An unlisted public company is required to have three directors, two of which must be Australian residents.

An unlisted public company is a popular entity to facilitate the raising of capital that has been targeted at venture capitalists.

Raising capital can be quite expensive and some Boards of Directors of unlisted public companies undoubtedly will be considering the alternative methodologies of raising capital which includes Crowd Sourced Funding Equity Raising.

If you are interested in the concept of forming an unlisted public company for your business operations, please discuss this with contact Peter Towers on 1800 232 088 or email him on peter@essbiztools.com.au.

What Does It Mean?

Accounting Period:  Any period of time utilised to measure accounting performance e.g. 1 year, 1 month, 3 months.

Accounts Payable (Sundry Creditors):short-term or current financial obligations, that are created through the purchase of merchandise, or obtaining of service.

Accounts Receivable (Sundry Debtors): amounts owed to the firm by customers in the form of regular accounts for services rendered or goods supplied.