business topic 3 (chap 10-11)) Flashcards
SMEs in AUS have sig contribution to AUS’
GDP, balance of payments
employment
invention & innovation
e
generate increasing amt of AUS total exports
-provide wide range of products used by large businesses
-earn more proits and pay more taxes > large bus
wualitative and quantitative measurements to determine SMEs
Quantitative measurements
-statistical calculations,
-eg. use no. employees to determine the size of a business
qualitative measurements
-personal observations, description of the business.
-eg. business’s legal structure.
sources of finance
market share
<200 employees
common features of SME (3 most important ones)
-
non-manufacturing, <20 (small) employees
-manufacturing <100 employees
-quantitative measurements -
locally based
-diff to have <20 emps spread across range locations -
not dominant in industry (small share of total industry output)
-if limited to max 20 emps in non-manu industry etc, diff to produce outputs = bus with considerably larger workforce
micro <5 INCLUDING OWNER
medium: 20-199
large > 200
why do many SME owners wanna stay small
avoid pressures and difficulties experienced by larger businesses
-content knowing offer personalised service to customers
why is it diff to provide accurate no. SMEs operating in AUS 2 reasons
- no universally accepted definition of SME
- SME sector extremely dynamic constantly changing
-new bus enter sector, size sector increases, –> other bus diff surviving, ^ comp –> bus fails, sector decreases size
SMEs conribution to GDP
-produces wide range of g&s
-total output of SMEs range from highly specialised professional & technical firms to local corner store sig contribution to economy
boom: no. SMEs increase but recession: no. failures > no. establishments
SMEs contribution to employment
employed ppl use wages to buy g&s to satisfy needs & wants, support businesses and opening more opp for job creation
-major generator of new jobs in AUS eco
-improve living standards and reduces burden on state to provide unemployment benefits while boosting revenue received by GVT (employees pay income tax) for community g&s
economy
system determines WHAT to produce, HOW to produce it, how to DISTRIBUTE production
AUS is MARKET CAPITALIST economy
-eco questions answered by private buyers & sellers (market forces)
over last 25 yrs, AUS exporting industries became more/less competitive in global markets
more
summarises eco transactions of an eco with the rest of the world
SMEs contribution to balance of payments
exports, international trade
increasing awareness to service overseas markets
-SME AUS exporters grow > large exporters (agribusiness, manufacturing, professional services)
-more successful at exporting than large businesses
-adaptability & flexibility of SMEs more responsive to needs of overseas markets
-fed gvt promotes export growth with various programs
BOP Balance of payments
record of country’s int trade and monry flows, (financial trans) usually 1 yr
favourable, eco growth maintained: export > import
SMEs contribution to invention & innovation but also why its hard
-main source, constantly research, develop and test new ideas & products for improved efficiency and increased productivity
-SME spending on R&D rapidly increasing, can use venture capital (investors take equity position in bus (own some of it) and provide supplementary finance)
difficulties of R&D
-obtaining adequate finance
-banks perceive finance request as high risk
how SMEs can enter global market for long term growth
4
- selling directly to customers in export territories
- marketing products through local distributor
- participating in joint venture with local business partner
- selling through website
HOW CAN SMEs enter the global market by selling directly to customers in export territories?
-easier entry to countries through trade agreements
-rapid expansion in e-business, brought by development of internet, can sell direct to consumers across national borders
-enter by selling directly to customers in export territories, marketing products through local distributor, participating in joint venture with local bus partner/selling via website
-diff lvls cost, risk, control
how can marketing products through local distributor enable SMEs to enter the global market
-local presence in markets they wanna export to
-distributors buy products from bus and resell to own customers
-D offer bus benefit of established local contacts & market knowledge
-but bus has minimal control over way D deal with customers/market product
how can participating in joint venture with local business partner enable SME to enter global market
with local business partner provides beneits of local market knowledge & contacts
-org sets up business relationship with company in local market
how can SMEs enter the global market by selling through a website
simple, low-cost
-global customers can visit any time to place orders
-to improve chances of success, need to prepare website pages specific to diff markets wish to export
-need product info in local language, prices in local currency
-suitable for products don’t require demonstration/explanation by sales representative
psychological and financial pressures of SME owners
often be owner, accountant, marketing manager, sales representative, stock clerk, receptionist at once
-long hours, holidays rare
-major challenges juggling home and work responsibilities
challenges of entering global market as business
- how to export to countries
- how to keep up with demand & manufacture large quantities of orders
- how to tailor product to suit tastes of overseas consumers
- how much to charge, accounting shipping costs overseas
5 keys to SME success EIFNR
Entrepreneurial abilities
-drive, enthusiasm, optimism, risk
access to relevantINFO
FLEXIBILITY
focus on MARKET NICHE
**
REPUTATION for quality & service**
access to info for SME success 3 pieces of info u need
-diff to choose relevant info and gauge quantity of info needed
-as minimum, operator must have info regarding:
1. profitability
2. quality of g&s
3. employee performance
-accurate, up-to-date info allow owner to make better decisions
flexibility for SME success
-small size –> owner adapt quickly to external enviro changes
-fewer lvls management, decisions made quickly
-close contact betw owners and customers allows establishment of personal relationships to respond quick to changing tastes and preferences
focusing on market niche for success of SME
can concentrate efforts on small market of consumers to
-fulfil needs
-develop strong, lasting relationship,
-opp for SME to become more specialised
-deliver high lvl service
most likely to succeed if adopt niche marketing strategy
-fundamental threat to SMEs is ultra-competitive and over-advertised global marketplace
-to overcome despite low budget,small market niche to operate in enviro with less comp
SME classified as failure when it is
-
UNINCORPORATED and declared BANKRUPT
-legal process distributing among creditors the property of bus who can’t pay debts -
INCORPORATED and FORCED LIQUIDATION/VOLUNTARILY closs down
-cant pay debts and faces cash flow problem
is a business considered a ‘failure’ if owner ceases operating bc of ill health/loss of partner/personal reasons NOT associated with FINANCIAL problems?
NO
SME failure trends
female owned businesses have higher survival rate > men/jointly operated by men and women
failure rate accumulated as years pass
(1 yr –> 20%)
(10 YRS –> 70%)
top reasons for SME failure (ranked)
- insufficient leadership & management + planing and execution
- inadequate market research, marketing, sales
- poor financial management
- underestimating impact of externalities
- poor governance structures regarding partners, family
undercapitalisation towards failure
does not have sufficient capital to conduct operations and pay creditors, not generating enough cash flow or is unable to access forms of financing such as debt or equity. without suficient capital, unable to purchase stocks & materials –> lose sales
business plans towards failure
Fails to develop business plan –> imminent failure
-no goals no blueprint for bus’ future growth
external bus enviro reasons for SME failure
- new competitors
- eco downturn
but main reasons for failure from internal bus enviro within direct control of owners, managers
most common causes of small bus failure
- managerial inexperience & incompetence
- undercapitalisation
- lack of planning
lack of adequate financial reporting and evaluation
personal qualitiy influences in estrablishing SME
QSMECG
qualifications
skills
motivation
entrepreneurship
cultural background
gender
majority of rewards motivating ppl to begin bus are non/monetary
non-monetary
personal qualities of entrepreneur
QUALIFICATION
commonly 15-29 yrs of age
-over 1/4 small bus owners work excess 50 hrs per week
-dont require academic qualifications, knowledge can come from experience working for other bus
-combine to form desire to create new business
1. motivation
2. entrepreneurship
personal qualities
SKILLS (experience
EXPERIENCE
-for management experience, complete management training course/undertaking management role within business, esp work in type of bus they intend to become self-employed
experiences can be
-organisational skills
-time management
-customer service
-leadership
personal qualities
SKILLS for SME owners (education/training)
-uni, tafe offer courses eg. degree in bus management or diploma in human resource management, marketing
-some courses expensive and take years to complete (not always available for small bus owners who want knowledge quickly) **
-gvt agencies** provide opp to learn starting (business enterprise cetnres) offerstart-up assistance, bus growth mentoring, business skills training, networking opp
avenues for edu allow owner develop essential skills:
-accounting
-staff management
-bus organisation
-marketing
personal qualities MOTIVATION
freedom to choose when and where they work, whom they work and whether to work from home
-no 1 motivator (stats) being boss, passion, better work-life balance, greater control of life, potential for greater financial reward (non/monetary)
personal qualities ENTREPRENEURSHIP
-must be confident in decision making and willing to accept all responsibility for their decision
-need determination to recover from poor decisions/mistakes
-creativity to create/seize opp for bus, new niche markets/new g&s
- NO1: ability to set goals and have vision for bus future, adjusting to changing bus, eco and customer markets
burdens of entrepreneurship
-work hrs invariably longer than employee’s
-consumes their personal life
-if succeeds, owner may only have little money to spend apart tom salary pay themselves
-need to reinvest profits to generate long term growth
personal qualities
CULTURAL BACKGROUND
traditions and beliefs
-many migrants
-cultural influence from experience in trades/services eg. thai food
personal qualities GENDER
gvts od feveloped ecos realise employment growth from creation/expansion of small bus sector
-policies to assist small bus & change in social attitudes
-clear upward trend since late 1990s of women owners
women stats
-~1/3 small bus in AUS
-industries are service oriented
problems women face when establishing & operating SMeS
-diff finding work-life balance
(family obligations restrict entrepreneurial potential)
-authority is undermined
professional advisers to help SME owners
owners needs good relationship with accountant, solicitor, bank manager, regularly
-management consultants to restructure business
-advisers can examine bus objectively and provide independent analysis of org, more aware of legal, eco, financial enviro changes
best advisers
1. accountants
2. solicitors
3. bank managers
4. management consultants
accountants as professional advisers
valuable advice on all financial management issues & tax obligations
-access latest changes to taxation & financial reporting requirements
solicitors as professional advisers
info concerning bus structures, registration, contracts, partnership agreements, legislation
-up to date with changes to COMPANY law
-advise owner how best to deal with this
bank managers as professional advisers
**info and advice on financial services, sources of finance and basic bus management
-wide range of experience
-able to access resources of bank
management consultants as professional advisers
for bus management problem that owner cannot deal with, advice
-objective, unbiased perspective
-when outsourcing, check credentials and experiences
federal gvt provision of gvt agencies to help SME owners
**ATIC (trade and investment commission)
-trade, investment, edu promotion agency help bus develop international markets by providing info, advice, services
using tech advice to help SME owners
establishing online bus presence, networking computers within bus premises/max use of mobile devices improve bus efficiency
-ICT consultant
set up vs ongoing costs of online vs physical store
ONLINE
set up: website
ongoing: digital marketing, staff
PHYSICAL
set up: shop signage
ongoing: rent, electricity, staff
chambers of commerce and how they can help SME owners
local associations of businessppl usually centred on suburb/region
-legal and financial help,
-taxation advice
-explain legislation and industrial relations info
how trade associations can help SME owners
specific industry info and assistance
-AUS Retailers Association
-AUS Medical Association
-each made up of orgs in same line of business to provide specific details abt product development and industry trends
ABS help for SME owners
valuable data on social, eco, demographic trends
-specialised data on bus activities
-Demographic Trends and statistics
-household expenditure surveys
-owner can analyse changes to external enviro
3 inspiration for business ideas of SMEs can be generated by:
listening to others
-esp ideas on g/s wanted, but not readily available
research (social media)
-gvt stats and info
-new tech/products from overseas
find improvements could be made on existing product, identify gap in market (demand not currently satisfied)
identifying bus opportunities
something entrepreneur can see as avenue to success, believing they can provide g/s better/diff way from those already on market
-new products, customers, ways of operating
how can entrepreneurs identify a business opportunity
- analysing parts of market to find opening for certain g/s
-larger bus unable/unwilling to provide (do things u cant buy in bulk and focus on services) - identifying if many others share certain hobby/interest
-main catalyst in identifying
-must have large enough market to sustain sales of g/s
after identifying a business opp, the (most vital) next step is to
consider compettion
steps in considering competition
- decide which market to compete (mass/niche) broad or specialised
- identify lvl comp and main competitors
- how to make bus comp?
-develop customer base/gain market share from comp
- mass market –> extensive planning to create market share
2 ways of achieving competitiveness
-
COST OF PRODUCTION
-depend on production techniques
-produce g/s lowest cost possible and sell at lowest price has greatest ability to attract market share -
DIFFERENTIATION
-uniqe/better than rivals
3 establishment options for SME
- setting up NEW BUSINESS from scratch
- PURCHASING EXISTING business
- purchasing FRANCHISE
CONDITIONS more favourable for starting new business from scratch
-created sumn unique, to market innovation or invention
-recognise gap in market (customer needs not satisfied by existing bus’)
-market grown and existing bus cant supply all customers
if these conditions don’t exist, starting from scratch more dif cause existing SMEs more competition
4 advantages of starting business from scratch
-can determine pace of growth and change
-no GOODWILL(monetary value attached to bus reputation) owner has to pay
3 disadvantages of starting business from scratch
-high risk without revious bus reputation, diff to secure finance
-time to set up, develop customer base, employ & train staff, develop lines of credit
- business may not generate profit for long time
when buying an existing business, what is associated with the purchase
-stock and equipment
-existing customer base
-staff
-reputation & goodwill
-location
what does the potential purchaser need to know before purchasing existing business
why business is for sale
-if struggling, bad
examine detailed accs for last 3 years at least
-use accountant to verify financial state
shouldn’t overestimate value of bus reputation
-consultation with accountant to confirm accuracy of value placed on goodwill by seller
5 advantages of buying existing business
sales to existing customers generates instant incme
-good business history –> increase likelihood of success
-proven track record easier to obtain finance
-stock already acquired and ready for sale
3 disadvantages of buying an existing business
-existing image of bus may be diff to change esp if bus had poor reputation
-success maybe from previous owner’s personality and contacts, maybe lost when bus sold
-diff to assess value of goodwill with likelihood newcomer pay more than worth
franchise
buying rights from another business to distribute its products under its name
franchisOr and franchisee
ind/bus GRANTS franchise (or)
-supplies known bus name, required training and staff development, management skills and materials
:) receive fee & % of profits from each of franchises
ind;bus PURCHASES franchise (ee)
-supplies startup money & labour, operates business and a**grees to abide by terms & conditions of franchise agreement
:) receive benefits of successful bus & reputation
why do people buy franchises?
avoid problems of starting new business
-for set fee, small bus owner receives benefits of successful bus, well-recognised name and established trademarks
-success rate ~3x independent business bc involves established bus name backed by managerial expertise
-already goodwill
-fastest growth in AUS
4 advantages of buying a franchise
-leverage benfits of established brand
-opp for franchisor to diversify income streams (and develop additional)
-support from large multinational network to increase market share
6 disadvantages of buying a franchise
-franchisor controls operations,
-profits shares with franchisor through payment of ongoing franchise fees
-franchisor charges additional service fees for advice
-franchisee cannot shop for cheaper supplies
-contracts can be biased in favour o franchisor
-franchisee shares burden of franchisor’s mistakes
3 market considerations when establishing SME
- g&s
- price
- location
feasibility study
assessment of bus idea’s potential for success, determine how practical idea is and if can translate successfully to market
feasibility study may include 3
-
ASSESSMENT OF THE MARKET
-analyse level & type of demand for new/improved product
-who & where potential customers are
-strengths and weaknesses
-what bus’ competitive advantage is - CONSIDERATION OF OPERATIONS
-describe product that’ll be sold
-resources needed (plant, equip, materials, staff)
-location
-legal requirements - ANALYSIS OF COMMERCIAL FEASIBILITY
-consider financial aspects of business idea(how long until 1st sale, how price will be determined, –how much finance needed to start and sustain operations, forecast sales, costs, cash flow, profit)
market considerations
g&S
-NEED CUSTOMERS, fail without market (c) always MARKET RESEARCH (systematically collecting, analysing info concerning specific market problem)
-w/o reliable info, product fail to sell
2 steps for market research (surveys, questionnaires, focus groups)
market research: evaluating the viability of a g/s by researching potential customers
2. COLLECT DATA FROM PRIMARY & SECONDARY SOURCES
-1st hand (online, observing customer buying patterns)
-existing data sources gathered by specialise companies
-
ANALYSING AND INTERPRETING DATA
-determine what results mean for business
can clearly identify whether gap in market exists, sufficient customers for bus, type of g/s modified to succeed
market considerations
price
too high, drive away potential customers
too low, diff to achieve profit
recall chapter 8 3 pricing methods (cost based, market based, competition based)
market considerations
location
-consider all factors affected by location (shopping centre, retail shopping strip, online presence, home-based)
zoning
local councils allocate land for diff uses (residential, commercial, recreational, industrial)
-determines where some types of bus can operate (LOCATION)
-keep bus activities separate from residential areas and prevent households disturbed by bus operations
suburban shopping complex
shopping centre complex(suburban) with supermarkets and small specialist stores (hairdressers), full range of specialist retail outlets
-great if no competition
-leasing expensive, remain open during shopping centres hrs (all week)
retail shopping strips
near public transport
-may struggle to compete with growth of shopping centre complexes offering off-street parking and air-conditioned enviro
-high visibility for passing traffic
-lack of parking
online presence
no longer limited to dealing with ppl who can physically visit premises
-expand
-avoiding physical associated expenses eg rent
-keep up with competition while retaining retail store
success depends on right investment of time money and resources into setting most effective e-commerce business
home based businesses
plumbers,dont need bus location, performing services in customers home
-online ordering and payment allow expansion of home based retail businesses
-owner doesn’t face substantial expenditure on rent/purchasing premises
-risk reduced when starting
-flexibility when owner works, reduces commuting time
-**diff **for owner to keep work and home life separate
difficulties for SMEs to access finance
esp diff for startups,
-banks reluctant to finance startups from high risks
-entrepreneurs bootstrapping (only use existing resources) ventures from personal credit products (credit cards) to finance working capital needs
-MORE diff to access unsecured loans
-bus need to provide security (real estate eg. house) to obtain finance from banks
-delay expansion until funded from retained profits
-interest rates on loans to SMEs higher than mortgage holders/larger businesses
impact growth, employment, investment
steps before borrowing finance
- consider:
-how much need
-how much debt can afford
-what funds available,
-how much capital to operate - determine most appropriate source of finance
- choose appropriate term/length of time (short <1 yr/long term >1yr)
options for sourcing finance
contribute own funds (equity/capital) INTERNAL
-retained profits
-private investors
-shares
obtain finance (debt) from EXTERNAL SOURCES
-SHORT TERM: overdraft, commercial bills, factoring
-LONG TERM: mortgage, leasing, debentures, unsecured notes
debt finance adv & disadv
short and long term borrowing from external sources by business
-owner doesn’t have to sell any ownership in business (no 1 advantage)
-owners receive tax deduction for interest payments
-most popular when starting
BUT ^risk if debt from FIs (interest), principal has to be repaid & regular interest payments
short term borrowing aka working capital
money needed to fund daily operations of business
current assets (cash, accounts receivable, inventory) - current liabilities, (accounts payable, debts).
main types of short term finance OCF
OVERDRAFTS
-bank allows bus to overdraw acc to agreed limit for specified time to overcome temporary cash shortfall
* (daily op, cheap, but higher IR)
**
COMMERCIAL BILLS
-short term loans issued by financial institutions for larger amts for 30-180 days (>$100 000** usually)
* cheaper, quick, no security needed but only available some companies
FACTORING
-selling accounts receivable for discounted price to a finance/factoring company
* save time & effort collecting debts, no security needed, but customers alerted of bus’ cash flow since notified factor taken over receivables)
leasing recommended for
eqipment becomes obsolete very quickly
-computers,
-expensive items (land, buildings, new tech, industrial/office equip)
main types of long term finance MUD
MORTGAGE
-loan secured by property of borrower (business)
* IRs can change during term
DEBENTURES
-type of bond issued by company for fixed rate of interest for fixed period time
* interest tax deductible, cheaper, equity (ownership) not reduced,
* but interest periodically paid to holder & needs security
UNSECURED NOTE
-loan from investors for set period of time, not secured against bus’ assets
* interest tax deductible, cheaper, equity not reduced, no security
* higher IRs periodically
equity finance 3 adv and disadv growing (if owners willing to give portion of company)
funds contributed by businessowner/s to start and expand business ( eg. selling shares in company to investors)
-money doesn’t have to be paid back with interest (cheaper)
-investors contribute money and become part owners, entitled to a share of profits over time
-owner contributes equity to bus retains control over how finance used
small amt of finance may generate only low profits and returns
-need to sell ownership of bus to raise funds
common sources of equity finance SFPSC
SELF FUNDING
family/friends
PRIVATE INVESTORS
shares
CROWDFUNDING
self funding aka BOOTSTRAPPING(source of equity finance)
owner/s use personal finance to fund bus (raised from ppl outside bus)
risk: owner/s lose all investment if fails
bootstrapping: bus finances operations w/o borrowing from external sources
-funded purely from personal finances and revenue made
-SUPER CAUTIOUS BRUH of expenses
family or friends (source of equity finance) start
-easy, quick for extra finance
-relationships could be adversely affected
-most common for small businesses
-owners may experience diff obtaining debt finance since don’t have track record and high risk of failure
private investors (source of equity finance)
contribute funds to business in return for share in bus’ profit and equity
-often provide support and advice to ownerand receive ROI
but owner will lose complete control of bus (investors part owners and have say in how business operates)
shares (source of equity finance)
raise funds by offering shares in bus
-only companies can use
-public listed companies can access more capital > private limited companies (able to issue shares to public) aka IPO
IPO: listing on stock exchange so public can freely trade shares
-expensive, complex option
crowdfunding (source of equity finance)
raise finance by using social media networks
-crowdfunding platform appeal to ppl for launch of product
-set goal for project, provide details of it and invite ppl to contribute finance
-Go FundMe
-quick to raise finance with few fees
-allows owner connect potential customers and receive feedback
-, no guarantee owner reach funding target
-failed project may tarnish reputation
cost of finance depends on TST
type of finance
-influence cost of capitl
-debt financing requires money from external source (bank, finance company, building society)
-cost of interest (borrowing money) charged by institution
, source,
-equity finance: no interest charged bc entrepreneur and shareholders invested money
-return paid at end of financial yr if makes profit (dividend if COMPANY)
term (time)
also can be measured in terms of liability
liability measuring cost of equity finance
unlimited if business operates as sole trader/partnership
-creditors sell all bus and personal assets to recover debt
limited (company)
-limited to just assets of company and all funds from shareholders
-cost of capital depend on term and type of finance used by business
financing options available to bus (HARD SHEET)
TRADING BANK LOANS
OVERDRAFTS
PERSONAL LOANS
LEASING FINANCE
OWNER/SHAREHOLDER’S EQUITY
LEGAL INFLUENCES ESTABLISHING SME
NZHO
business name
zoning
health
other regulations
legal considerations for businesses and what theyre for
-
obey regulations when operating bus
-risk losing customers, reputation, fines, losing right to continue trading - promote fairness, protect consumers and encourage efficiency
business name legal consideration
ASIC responsible for name registration service
-Pty Ltd, Motors, Associates, Co
-prohibit others from trading under similar name
-doesnt protect/establish rights to name (that’s for trademark with federal agency for intellectual property IP AUS)
ONLINE presence
-domain name (address of bus’ website on internet)
-unique to represent activities, easy to remember and spell
-multiple domains possible for easier search and prevent others from registering similar domain name for confusion
health regulations legal consideration
local gvt imposes health regulations under Public Health Act 2010 (NSW)
-local council (esp food) w/ requirements to meet to receive licence to operate
-temp for food storage,
-cleanliness, labelling
health inspector assess premises regularly, to ensure standards maintained
factors to consider when choosing location
fast food outlet:
-zoning regulations
-visibility
-proximity to comp
-car parking
dental surgery
-cost of premises (rent)
-zoning reg
-parking facilities
demographic factors, proximity to target market, public transport access,
other regulations legal consideration
Competition and Consumer Act 2010 (Cwlth) protects consumers & bus
-consumers from deceptive/misleading practices
-regulates trade practices of bus that can restrict comp (monopolistic power) (affects price and quality of goods)
misleading practices illegal under competition and consumer act 2010
MISLEADING/DECEPTIVE CONDUCT
-ads cant use deceptive words/claim product has quality doesn’t have
REFERRAL SELLING
-bus offers customer special deal/price if refers other potential customers to seller
-illegal, encourage consumers to spend more money than planned,
employment regulations legal considerations
tax payments for employees, welfare( health and safety )
- discrimination and equal employment opp
human resources (skills and costs [non/wage]) in establishing SME
- staff employed
-ads
-universities, schools, tafe
-private recruitment agencies - -skills of staff
-forecast future staff skills and requirements
most important requirements deal with skill lvl of employees –> more productive –> create wealth for bus
skills (HUMAN resources for SME)
recruit qualified applicants with msot suitable skills
-more productive, wealth
- provide TRAINING for existing employees
- recruit those with required skills
msot important include:
good teamwork, communication, problem solving, initiative, quick learner, plan and organise
human resources for SME (cost: non/wage)
only employ if ROI higher than cost
-pay for wage/salary and employee expenses **(on-costs) **
on-costs: payments for non-wage benefits
-superannuation
-annual leave
-public holidays
-sick leave
-leave loading
superannuation (on-costs)
requires employers to make financial contribution to fund employees can access when retire so money can be used:
-for retirement
-federal gvt
annual leave loading (human resources, non- wage costs)
employees except casuals entitled to min 4 weeks annual leave for each year they work
-extra payment received on top of annual leave pay (17.5%)
-common feature of most modern awards
taxation for SMEs
- **federal (ATO collects) and state
- local rates** and charges
taxation compulsory payment of prop of earnings to gvt
5 major FEDERAL taxes that apply to businesses (levied by…)
-
INCOME tax (PAYG)
-takenfrom salary/wage directly
-progressive rates - **FRINGE BENEFITS TAX
- GST**
-10% on most g&s - COMPANY tax
-earnings of company, calculated using company’s net profits
-full rate 30%, lower 27.5% -
CAPITAL GAINS tax
-calculated on profit made on selling assets including sale of bus/prop bought & resold within 1 yr
3 taxes levied by NSW GVT
-
STAMP DUTY
-levied on transer or property
-individual/business -
LAND tax
-tax land owned by indi/bus over certain value
-land used for primary production/ind’s primary residence exempt (free) -
PAYROLL tax
-payable on wages paid by employer to employees on payrolls >$1.2mill at certain rate
how should SMEs manage tax
structure records and finances so they have necessary info and money to efficiently manage taxation obligations
-must become familiar with appropriate tax requirements to fed and state gvt on basis of what they earn, own and sometimes purchase
-diff taxes apply to diff bus
GST
10% on most g&s in AUS
-more diff for bus & find operating in ‘cash eco’ to avoid tax
-bus become responsible for collecting tax on behalf of gvt
input tax credit
tax deduction bus can claim for GST included in price of bus inputs (raw materials, electricity - gst on inputs)
BUSSINESS ACTIVITY STATEMENT BAS
document records bus’ claim for input tax credits and accounts for GST payable
