Did You Know - Accounting Errors Could Make Property Taxes Increase

Due to an accounting error that has misrepresented the value of the village’s business district, village property taxes could increase in 2012 by 5.8 per cent.

According to Shorewood Village (Wisconsin, United States) officials, the Tax Incremental Financing District No. 1 that blankets much of the business district was recorded and published as $76.7 million too high by the Department of Revenue. This was where the error occurred.

Since the value of the village was erroneous, and that its value must be based on the total equalized value of property in Sherwood published by the Department of Revenue, its property taxes could be artificially high too next year.

Property owners will have to contribute an extra of 5.8 percent in property taxes should this error not be corrected.

This error could mean a total of $2 million extra in property taxes or $442 more for a house assessed at $300,000. This computation was based on the 2011 tax rates.

When the tax district’s value reached the department in an electronic file, it was already wrong. It came from the contracted assessor for the village, the Associated Appraisal Consultants, Inc. This was according to Scott Shields, Section Chief of the Department of Revenue Equalization.

Furthermore, Shields said that a department employee was sent to contact the assessor to confirm the value and the assessor confirmed it.

Image: Shorewood Village trustees and officials discuss their long range financial plan at a meeting Tuesday, when Village Manager Chris Swartz announced the error in recorded TIF value. Credit Rory Linnane

On the same date the data was released, village officials immediately caught the error. However, state officials say they could not change it since it has been published and many other entities are already using the data for planning and taxing purposes.

“As soon as we publish them people are running with them, using them, estimating impacts,” said Shields.

According to Shields, the department has to wait until the following year to correct the error as it is bound by state statute.

“We’re asking the state Department of Revenue to consider that this is just an entry mistake and it doesn’t affect anyone else,” said Chris Swartz.

Source: Shorewood Patch »

Carbon Tax Impacts Make Accountants Worry

According to the results of a survey of accountants, the Australian small business owners’ financial performance will be negatively impacted by the introduction of a carbon tax.

Data from a survey conducted by the Institute of Public Accountants (IPA) shows that 70 percent of the respondents are worried about the financial performance of their small business clients as they believe that their small business would be negatively affected while 66 percent believe that enough consideration about how the tax will impact SMBs have been provided.

IPA chief executive, Andrew Conway, commented on the survey that IPA members were trusted advisers to the Australian small business community. Furthermore, he believed that the perceived bleak outlook for the small and medium business sector over the next 12 months is very alarming for them.

Moreover, Conway said that regardless of the Government statement, that only top polluters will be impacted with the introduction of the carbon tax, it seems that the government has not considered the interests of small businesses.

According to the IPA survey, data shows that 66 per cent of respondents believed that not enough consideration have been given to how the carbon tax would impact small business, while 67 per cent believed that insufficient information have been provided to small business over how the carbon tax might affect them.

The IPA survey comes just days after the Australian Retailers Association released its carbon tax survey. The ARA survey shows that 83 percent of retailers believe that the carbon tax will impact the consumers in a way that they will spend less while 85 percent believed that profitability will be negatively impacted.

High Public Opposition

The carbon tax issue shows a high public opposition and is growing with 60 percent of voters – up 3 percent since last month – against the tax. The figure is slightly under Americans’ disapproval of a carbon tax that was at 70 percent last year.

Likewise, Australia’s mining, energy, agriculture and food industry groups are worried about an expected increase in their expenditures.

Source: Carbon tax to hurt small business: IPA | Dynamic Business »

Accounting Software Can Save Businesses From the Threats of Insolvency

It is clear that investing in high quality accounting software packages is an efficient way to keep a business on the right track and to keep off threats brought about by insolvency.

This came after AAP’s report that there was a 21.1 per cent increase in terms of the number of Australian firms that hit financial meltdown in June.

It is expected that the number will rise further in the coming months according to Taylor Woodings, the accounting firm that did the research.

“Most of them are where there's been a problem for a number of years. It's not indicative of the current economic climate,” said Michael Ryan, managing partner of the firm. It is seen that such problems can build up over time.

By utilizing an accounting software such as SAP Business One, financial issues may be tackled at its earliest stage and may be prevented from becoming a major problem.

This thought has been strengthened by Kevin Wright who is a partner at chartered accountant, Leftley Rowe, saying that small businesses can benefit from using accounting software.

Source: Can accounting software help to stave off the threat of insolvency? | Codestone »

Budgeting Basics for SME Businesses

Budgeting lies at the foundation of every SME business’ financial plan. It is the key to a successful and efficient financial management (if done properly). However, it is often overlooked.

On the surface it seems that budgeting is a tedious financial exercise for your small business, especially if you feel your finances are already in good order. However, good budget can really help your small business keep its spending on track and even unearth some hidden cash flow problems that might free up even more money to put toward your other financial goals.

So if you do not want to learn the value of budgeting the hard way, try to learn some tips on budgeting basics for SME business.

Amanda Falconer, the successful proprietor of the Sydney Small Business Centre, offers courses to help enterprises run more efficiently. She advises small business owners to make a five year-plan and a detailed operating plan and budget for the next 12 months. In her experiences, she also advises small business owners to pick a point five years in the future and determined the value they wanted the business to have at that end point and worked back from there.

Furthermore, Falconer also used another important resource in building her budget and five-year plan. Falconer used the Australian Taxation Office statistics on net and gross profit ratios by industry sector which shows broken down average figures that were achieved by start-ups, established businesses and best practice for each sector as well as data such as typical wages to revenue that ratios businesses can use to help them determine an appropriate budget plan.

Falconer also revealed that she also asked a financial management accountant to develop a detailed budget model into which figures such as staff numbers, sales targets and net profit to see how the business would grow could be inputted. Then they put the budget into their accounting software so that at least monthly they can compare actual performance with projected performance.

Source: Budgeting basics for SMEs - The Sydney Morning Herald »

Recent Developments For Financial Accounting Standards

A review of the latest developments in the world of financial accounting standards for REIT was recently done. NAREIT Senior Vice- President for financial standards, George Yungmann, sat with REIT.com to review such standards.

Yungmann has pointed out that process has been slowed by changes at the top of both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB). By saying process, he pertains to the project being carried out by the IASB and FASB regarding the global convergence of financial accounting reporting standards.

Yungmann said, “We’re going to be well into 2012 before these standards get issued.”

A major impact on REIT may be felt due to some of the proposed changes to accounting for leases, Yungmann noted.

“The new proposal would essentially require that lessors report the sale of the right to use the property. There would be a gain or a loss recognized at lease inception or lease commencement, and there would be no rental income reported over the term of the lease. That’s a very dramatic change not only in the proposal, but in the way lessors report, and we do not believe that accounting will produce useful financial statements,” said Yungmann.

According to Yungmann, exposure drafts will be reviewed by NAREIT and comments will be issued regarding its partners in the Real Estate Equity Securitization Alliance (REESA).

Some screen shots from REIT's interview with George Yungmann. Watch the video here »

Make Your Business Recession-Proof

The business trend will never be the same all throughout. There will be times when businesses will do well. However, there will also be times when businesses will have tough moments. Among these tough ones is the time of recession.

At present, it is the Western world that is experiencing this pinch. However, individuals have to be cautious this early as this recession will eventually flow out into the Australian economy and to individual businesses.

What is important during this time is that business owners have to make sure that not all revenue comes from one source. That is, if 80 per cent of a business’ revenue is just from one client, the risk when this client goes away is very high for the business. It may also not be very wise to diversify just yet.

Instead of expanding or growing the business, it may be wise to just prepare for the rough times that are coming. Here are among the things to do to recession-proof one’s business:

1. Build a cash flow buffer

Cash flow is very important. Eventhough a business has much cash to use, it may be wise to make a cash buffer of at least 3 months overheads. This will protect the company and spare the owner from unwanted stresses brought about by market volatility.

2. Bring forward receipts and defer payments

It is important to convince clients to prepay. This may be done by implementing discounts, credit facility, and retainer.

3. Reduce debt exposure

It is important to consolidate debts to see how much needs to be repaid. In this case, if the interest rates are higher, the debt finance will also be more expensive.

4. Migrate from fixed to variable costs

It will help to reduce overhead costs in absolute terms and to migrate from fixed to variable costs. For example, contract labor is cheaper than maintain everyone in the payroll.

5. Manage employment leave exposure

It will be necessary to convince employees with chunks of leave entitlements to just use these instead of letting the business give out a lump sum.

Decision cycles may have to be shortened. From using the monthly or bi-monthly system, a shift to weekly will be more helpful. This is also considered to be among the important and efficient moves when it comes to cash flow management.

Source: SmartCompany.com.au - How to recession-proof your business »

Carbon Tax - Design Elements and Business Preparations

The carbon tax has just been recently introduced by the Australian government. This means that in order to transform Australia into a “clean energy” economy, there will now be the pricing of carbon dioxide and other “greenhouse gas emissions”.

Though it is yet to be introduced and approved by both Houses of the Parliament, it is expected to be implemented by July 1, 2012.

Design elements of the carbon price mechanism:

• It is expected to be started on July 1, 2012.


• Fixed carbon price for the first three years will be $23, $24.15, and $25.40, respectively.


• By July 1, 2015, a flexible price phase will be introduced. By then, the price of carbon will be determined by an Emission Trading Scheme (ETS) wherein a transitional cap and floor are applied.


• The revenue coming from the sale of carbon permits will be utilized for encouraging lean energy activities and easing burden of transition costs.


• Different sectors will be given assistance through direct and indirect mechanisms.

Furthermore, the following points are important:

- A fixed price will be imposed on carbon tax for the first three years and then flexible prices will follow on the 4th and succeeding years.
- The fixed price is designed to introduce more and flexible prices from 2015 onwards.

What does it mean for business?

It is expected that risks will be numerous in the first year as businesses will still be aiming to learn and understand the system. With these risks, thorough planning and early action will be needed to maximize the opportunities brought about by carbon pricing.

The main effect of the carbon pricing is the increase in cost of electricity and other energy sources. This will need businesses to learn how to identify and manage the strategic, operational, financial, and reporting issues. The requirements are as follows:

• Understanding of the issues


• Assessment of the effects of carbon pricing


• Management of carbon liability


• leverage of the opportunities including assistance and transitional arrangements


• robust governance structures


• strong data integrity, accurate reporting and credible disclosure processes.

There will be a need to examine the financial reporting implications of the climate change plans. It is the potential effect on asset impairment testing that is the most important reporting issue.

The financial report will have to state if the carbon price could potentially impair the value of assets. There should also be statements of the assumptions made and the identified nature of key uncertainties.

Australian businesses are going to be directly affected by these climate change plans. The best thing to do while the preparations are being made by the government, these Australian businesses should also be preparing themselves for the changes that will be brought about by carbon tax.

Source: Preparing for Australia's Carbon Tax - CEO Forum Group »

More Australian Businesses Now Having Online Presence

More Australian businesses are moving online. How about your business?

There is an increase in the number of Australian businesses that are now online. MYOB conducted a research which has revealed that businesses now online have risen from 35 per cent to 39 per cent last November. Another 22 per cent are planning to create their website in the next 12 months.

Compared to the 22 per cent that do not have a website, almost a third of 1000 respondents say that there is increased revenue with being online.

“Today consumers look online first when making buying decisions,” said Tim Reed, MYOB CEO.

“If your business can't be found via a search engine, it's as if you don't exist,” he added.

Western Australia online businesses lead at 49 per cent while NSW and Victoria are at 41 and 40 per cent, respectively.

However, even with these results, people are still not convinced at using the internet for their advantage. This has been revealed as 57 per cent of businesses do not use the internet to promote and sell products. 24 percent do not have any plans of making a website while the remaining do not believe in the usefulness of the internet.

“While only 26 per cent of business owners believe their competitors are ahead of them when it comes to the online economy, I'm concerned for Australia's future international competitiveness if business owners don't do more to embrace the online economy,” Mr. Reed said.

“It's important Aussie business owners take action now to make sure they don't lose market share to global competitors,” Mr. Reed added.

Having the right skills and knowledge are necessary to taking the first step in getting businesses online.

About one in three businesses believe that they are lagged when it comes to using the internet for business, 35 per cent think they are not using the internet enough for marketing purposes, and the remaining 31 per cent say they don’t use online search engines to market their business.

Source: Herald Sun »