Monthly Archives: February 2015

Greater profitability is closer than you may realise

I say this as many business owners don’t realise what can result from making little changes to the main drivers within their business.

What do you reckon would be the effect of improving the following by just 1%:-

  • Increase price of $187 by 1%.
  • Reduce cost of goods sold of $117 by 1%.
  • Maintain overheads at $1,667,904 (they shouldn’t increase).
  • Improve customer acquisition and defection rates by 1%.
  • Increase transaction frequency by 1%

Would you believe by 52%!  Whilst not true for business with a low number of transactions of high value items, this is actually a common outcome.

Are you wondering what the possible outcomes are for your business? 

Why not ask us.

We use Principa’s Game Plan software which models this and performs many other calculations and analysis reports of your business.  So instead of continuing to working harder, let us help and guide you to working smarter.


As I said some weeks ago,

 What you can measure, you can manage …

                … and what you can manage, you can control …

                            … and what you can control gets done.

It will happen one day so you better plan for it

Not only did last week’s blog create some discussion but our estate planning seminar was booked out within a day!

The one certainty in life is that one day we will pass way.  The issue that many fail to address is to plan for that eventuality.

In my opinion this is the most important document in almost everyone’s life (yet sadly only half of Australians have one).

So how good is your estate planning?

To assist you, please consider the following 10 matters that too many people fail to address.  They are not in any order and the list is certainly not exhaustive as there are many other reasons as to why a lack of proper estate planning can lead to a disaster:-

  1. I’ll start with the most basic and common matter. Jointly owned assets (such as a family home) automatically go to the survivor. It doesn’t matter what is stated in the will; a will has no power to deal with jointly owned assets as they never become part of the estate.
  2. One’s superannuation is held in trust. In the absence of a binding death nomination, the responsibility of deciding who the super will go to is the responsibility of the trustees – and for a public fund, that is some faceless group of people who you do not know. With 1 in 2 marriages ending in divorce, there can be two or more parties that can claim an entitlement – it can only get ugly, costly and lengthy exercise.
  3. It is alarming how many times a binding death nomination is found to be ineffective.
  4. One good way of identifying whether you have a good estate planning lawyer or not is that they will have asked to see a copy of your self managed super fund deed –if they haven’t, terminate the arrangement and seek another lawyer. By engaging an experienced lawyer, matters such as (but not limited to) will be addressed – voting rights, reversionary pensions and payment of death benefits.
  5. The danger of wills written long ago is that the nominated executor or executrix may no longer be alive, mentally capable or even one’s best friend. Do you really want them to still administer and distribute your life’s wealth? What if your friend from school is now a drug addict?
  6. Unless there is an unpaid entitlement, the beneficiary of a discretionary (family) trust has no right to the assets of a trust.
  7. A lack of planning as to who will be a replacement trustee (either as an individual or director of a trustee company) of a discretionary trust. There is also the more critical issue of who will be the replacement appointor of a discretionary trust.
  8. If one is a member (and therefore trustee) of a self managed super fund, who will become the replacement trustee?
  9. Who will look after the kids if both parents pass away? Too many wills don’t address this; even less fail to address the associated funding.
  10. Not making or revising a will whilst one is still mentally capable and there are no doubts as to there being any disqualifying acts such as dementia and undue influence.

The above is not to be construed in any order of importance as any one of these could be the most important to you.  Nor is this list exhaustive – there are other many matters that need to be addressed depending on one’s own circumstances.

So will your wishes be carried out as you intend?

As next month’s estate planning seminar has been booked out, we will be re-running the seminar again later in the year.  Please ask Alex Stewart whether you wish to be added to the wait list.


At MRS, we will spend today planning for your success tomorrow.

The most important task

We all work hard.

We make sacrifices.

We think about work at night and on weekends.  It even keeps some of us awake at night.

We do this to build wealth and improve the quality of life of ourselves and our families.

We all have an opportunity to plan the efficient transfer of our accumulated wealth to our intended beneficiaries.  It is amazing though how many fail to create a will, or, equally as bad, have one that is ineffective.

Too many people don’t understand that the most common and valuable assets can’t be dealt with under a will, such as:-

  • Jointly owned assets.
  • Super (particularly that held within public funds).
  • Some life insurance policies.
  • Assets held within discretionary trusts.

It is not uncommon to encounter a will that does not address the distribution of more than 90% of one’s accumulated wealth.  It is not enjoyable explaining this to the beneficiaries.  It is what I hate most about a job that I love.

Worse still, others don’t understand the tax and dependency super laws.  Not planning around these can result in tax needlessly paid and unequal distributions.

Moreover, a lack of proper planning can result in family disputes.  Sadly, they often become rifts that never heal.

At Maggs Reid Stewart, our focus is to assist you our clients to:-
* generate income,
* protect wealth, and
* assist you to plan to leave it your intended beneficiaries in the most efficient manner.
We are not your typical accounting firm only interested in your past; Tax Returns are only part of what we do.

To assist you our clients, we are running an estate planning seminar in March.  Invitations will be distributed during the week.

When growth is bad (and running out of cash)

Last week I queried whether your plan will work and touched upon good and bad growth.

Increasing sales is not the answer to everything.  It is not uncommon to see a business solely concentrating on increasing sales fall part if they haven’t ensured the business has the right team and systems in place to support greater turnover.

Worse still, some businesses even fail as they run out of cash due to the increased revenue not being enough to fund greater expenses and the greater amount of money locked up in debtors and stock.

Consider this……

Take a business that doubles its sales from $1,000,000 to $2,000,000 and everything else doubles from:-

  • Cost of goods sold from $700,000
  • Overheads from $175,000
  • Net profit from $75,000 (average tax rate remains at 40%)
  • Debtors from $125,000
  • Stock from $160,000
  • Creditors from $75,000.

Sounds good?

Actually, it’s a disaster.

Why – because the working capital required has doubled from $210,000 to $420,000 whilst the doubling of profit after tax has only generated an extra $150,000 – of which $60,000 will go in tax.  What seems to be a new dawn will actually prove to be a nightmare.  The business owner in such a case might think they are going forward in the right direction but there is something coming awfully big and fast straight at them!

The problem here is that the owner has concentrated on sales and sales alone.  The outcome would be quite different if other key drives such as debtors, stock and creditors turnover were addressed (and for which we have many strategies from our many years of experience and supporting tools).

We are a member of the Principa accountants network (from which this example was generated).  Amongst many other valuable services, they provide us with cutting edge software that quickly models such scenarios – and does so in a way that you will readily understand.

Why not refer to our web page’s article on business improvement potential.  Or better yet, why not ring Alex Stewart and make a time to sit down and have an obligation free meeting to discuss how we can help your business.

So again I ask, will your plan work?