Interest break for small companies with tax debt

Good news if you’re a small business with a tax debt, the government is offering you a 12 month break from interest payments to help you through the global economic downturn.

Tax Commissioner Michael D’Ascenzo told the Council of Small Business of Australia that he did not want to see businesses going broke because of interest payments on tax debts during the downturn. The 12-month relief plan has therefore been extended to businesses with a turnover of less than $2 million a year.

"While most small businesses are meeting their tax obligations, global conditions are having an impact, with over a quarter of small businesses carrying a tax debt," Mr D'Ascenzo said.

"We've introduced the GIC-free (general interest charge) payment arrangements and deferred activity statement payment due dates to help those small businesses that are struggling to meet their tax obligations.

"We don't want the GIC or temporary cashflow problems to be the deciding factors between a business surviving and being able to meet its tax and superannuation obligations or becoming insolvent."

The news is fabulous for companies that are finding it tough to avoid laying people off. According to Small Business Minister Craig Emerson the nation’s small business sector is showing great resilience – cutting spending on promotion and other costs, rather than making staff redundant.

"They are hanging in there. It's only a year and a half or so ago that attracting and retaining good quality staff was difficult. They don't want to let them go.

"They are prepared to cut as many other expenses as they possibly can, whether it's marketing and promotion or any other incidental expenses, that may have been appropriate for better economic times. The last thing they want to cut is their staff."

Dr Emerson said the government would do all it could to support small business. The tax break for interest payments joins the tax break for investment and a reduction in red tape already introduced by the government.

For further information regarding the tax break for small business, please contact us today on (03) 9622 0600 or click here to arrange a free consultation.

Bring back the customer

One of the toughest things to do in a tight economy is to close a sale. Customers are more reluctant to purchase. So what can you do to help your salespeople continue to sell?

Sell Solutions, not just products
Explain why your customer should buy your product or service. Unless you’re selling something as well recognized as Coca-Cola, you won’t be able to sell on brand alone. If your product or service is not unique, state the reasons that the customer should purchase from you, rather than the competitors.

A great example of solution selling comes from the Berlei Sports bra campaign from 2000. Everyone knows sex sells, but sports bras are the least sexy of all the lingerie family. However, they are very functional. Berlei used this to their advantage. Using scientific research, their ads showed how much damage an average woman would do to breast tissue during sport, if wearing a normal bra, compared to how little wearing a Berlei Sports bra. This was then summed up in their catchy slogan, “Only the ball should bounce”.

You can achieve the same effect as Berlei without the million dollar budget. All you need is to understand what message is most meaningful to your customers and how to send it to them.

Sell the savings
Does your product offer any sort of benefit in cost or saving in expenses while being used? If so, emphasise this. Use real examples, or testimonials. However, if the benefit will not be seen for a few years, this will not help in the current situation.

Strengthen your weakest link.
If the weakest link in your selling chain is the first point of customer contact, fix it. Provide training for your staff so they can promote the benefits and strengths of your product or service when selling it.

Package and prosper
The volume of products purchased by customers goes down in economic downturns – over come this by packaging products together. Large retailers often use this strategy, offering a discount on an item when purchased with another item, rather than offering a straight discount. This encourages sales volume. Be aware, though that you’re not packaging low margin items together. The best result from packaging comes when you can combine high margin items or combine a slow selling product with a fast moving product.

Creative Marketing
Effective marketing doesn’t have to be expensive. Compile or purchase information on potential customers to create a marketing campaign aimed directly at your target market. A great example of this is the viral marketing campaign by Myer last year. Myer emailed a ‘staff and friends’ voucher that gave the person presenting it a discount on a certain night.  You did not have to prove that you were a friend of a Myer staff member - the fact you had the voucher was enough. The email containing the voucher was forwarded by those receiving it to many others, to take advantage of the discount. The key to the marketing success is to offer something people will get excited about and to offer a time limit to create a sense of urgency.

The Sale has not been achieved until the money is in the bank.
Keep focused.  The old adage that “the sale has not been achieved until the money is in the bank” is truer than ever.  It’s important not to celebrate the wins until the transaction is completed.  A good feeling about a sale prospect is just a good feeling until the money is in the bank or the contract is signed.

The carrot with no stick approach
If your business offers a subscription style service or product, you can bring forward sales by offering a free time period or an upgrade for no extra cost. This approach is often used by telecommunication companies or companies such as Foxtel. If you are using these strategies, make sure that your contracts clearly state what the customer is locked into once the free period is over and ensure you receive at least some of the payment before the free period begins.

Keep in touch
Just because a potential client didn’t purchase your product or service doesn’t mean they aren’t interested in what you offer. Keep in contact through updates, offers and newsletters.  The key is to ensure that you have something relevant to say.  If you are just making contact for the sake of contact, then your time and money is wasted.

Boost your point of sale display
People buy what they can see, therefore you need to show them what your products can do for them. Fashion retailers are a prime example of this, dressing mannequins in their clothes, complete with accessories to show the customer how to style and wear the piece of clothing, not just the piece of clothing itself. This boosts the number of purchases made.

Make sure your small, value-add items are located near the point of sale. Supermarkets are fantastic at doing this, ensuring magazines and lollies are close to the checkout. Bunnings is also a great example, with their smaller items located close to the cash registers.

This strategy can work outside of retailers. It can work for any business where your customers come to your premises. Are your customers looking at pretty pictures on the wall or are you demonstrating the value of what you offer?

Most of you who are business owners would already be aware of these tips, but the real question is, how many of you are putting these into practice?

If you need assistance identifying profit margins, product analysis, the impact of discounting or the best strategies for your business, call us today on (03) 9622 0600 or click here to arrange a free consultation. 

The New Financial Year

New tax rates

PAYG payment instalment for SMEs
Automatic reduction of PAYG instalments take effect for 2009/2010.  Applies to quarterly payers who have their PAYG adjusted for GDP.

Tax equality for same sex couples
Same sex couples and families will be treated the same as married and defacto couples for tax purposes from 1 July onwards.

Education tax refunds now claimable
If you are eligible, you can now claim a refund for education expenses incurred by primary and secondary students from 1 July 2008.  Don’t forget to keep your receipts.

Super changes
The reduction in the concessional superannuation contributions cap (from $50,000 to $25,000) and the reduction in the co-contribution rate (down to 100%) take effect from 1 July 2009. 

Quote of the month

“Human beings are the only creatures on earth that allow their children to come back home.”
Bill Cosby