Managing Your Business Through Tough Times Presented by Nathan Reichstein Director Hayes Knight

Billing & Debtor Issues Make preparing invoices one of your highest priorities. Make sure you have all the right contact details on the invoice, so it can’t get lost. Provide your bank details on all invoices. Include due date of payment and trading terms on your invoices. Send invoices separately from statements. Employ a debtors clerk if you have large debtors.

Risk Management Legal Liability due to your operating structure – Remember that sole traders and partnerships carry with them the unenviable status of unlimited liability, whereas a limited liability company or trust may provide some protection under the corporate veil in the event of disaster.

Risk Management Securing your personal assets – It is often a good idea to separate your personal and business assets where possible, so that if one area of your affairs fall into financial difficulty, the other has some form of protection. Many people use trusts to hold personal assets when they go into business to protect those assets in the event of business failure. – It is crucial to seek good professional advice from a trust specialist, and to ensure that the ongoing compliance (such as financial accounts, minutes of meetings recording decisions etc.) are kept up do date so your trust is not held to be a sham.

Risk Management Directors Liability – Directors hold a higher standard of care under the Corporations Act, and in certain circumstances can still be held liable for the debts of the company despite the protection of the limited liability. This may occur when the Corporations Act has been breached in some way such as reckless trading, fraud or the most common problem, trading while insolvent.

Risk Management Insurance There are many types of insurance available. Remember to consider insuring your intellectual property as well as your physical assets. Sometimes insurances such as Key Man, Shareholders Protection, Disability or Trauma are overlooked but they can be the most important – particularly where the business relies on a few key people. Consult an insurance adviser with business experience before committing to your insurance portfolio. Always remember to insure for public liability or professional negligence. Again, you will probably never need it, but mistakes in this area can be extremely costly and can kill a business very quickly – even if you think you are not at fault. In fact, the legal fees for defending these actions have sent companies to liquidation alone!

Risk Management Directors Guarantees The golden rule is to never provide a directors guarantee, however this is easier said than done. For a new company starting out, the bank will definitely demand a guarantee to secure a loan or overdraft, the landlord will probably require a guarantee on the lease of the premises and some suppliers may require you to personally guarantee payment of the account in the event of the company defaulting. Try to give as few of these guarantees as possible, and ensure that all guarantees given are recorded on a special register and kept in a safe place. Revisit the register at least once every year and try to get guarantees removed once you have built up a solid trading history. It is not uncommon for retired directors and previous shareholders to have guarantees called up long after they have sold the company because they forgot that they were in place. Of course, never guarantee a debt on behalf of someone else, and always assess the risk before you commit to any guarantee. Once they are in place, they are very hard to get removed.

Australian Tax Office Are not as bad as you think. You must keep the ATO fully informed. You need to ensure that all lodgments are up to date. If necessary, they will negotiate with you regarding a payment plan. Did you know? They can garnish your bank accounts if you don’t comply.

Staff Employees Generally, a worker is an employee if they: – are paid for time worked – receive paid leave (for example, sick, annual or recreation, or long service leave) – are not responsible for providing the materials or equipment required to do their job – must perform the duties of their position – agree to provide their personal services – work hours set by an agreement or award – are recognised as part and parcel of the payer's business, and – take no commercial risks and cannot make a profit or loss from the work performed

Staff Independent Contractors An independent contractor is an entity (such as an individual, partnership, trust or company) that agrees to produce a designated result for an agreed price. In most cases an independent contractor: – is paid for results achieved – provides all or most of the necessary materials and equipment to complete the work – is free to delegate work to other entities – has freedom in the way the work is done – provides services to the general public and other businesses – is free to accept or refuse work, and – is in a position to make a profit or loss.

Staff Employees vs. Independent Contractors: There is a difference and the ATO are cracking down to ensure that everything is equal. You need to seek professional advice if people are wanting to work as a subcontractor, but you feel uncomfortable with it. You can enter into a agreement between subcontractors and the business.

Staff If you don’t get the status for the workers right upfront and the documentation right, the workers can come back and demand superannuation (even if you thought they were a subcontractor). The ATO can (and will) audit you. If it is found out they were technically a employee then superannuation is payable, and penalties and interest as well. These payments wont even be a Tax deduction.

Questions? Please contact: Nathan Reichstein Director