ATO Back In TownMay 11 2022 in Cash Flow Finance
The onset of the COVID-19 pandemic saw a flood of Government support for the economy as well as a sharp decline in ATO collection activity, with virtually no applications by the ATO to wind up companies in the best part of the last two years.
There has been much conjecture since the start of the pandemic as to when ATO recovery actions would recommence, if at all. In fact, large parts of the ATO debt recovery teams were seconded to other areas of the ATO.
It has been reported that the ATO’s debt book has risen to $58.8 billion as at the end of June 2021
and as at the end of December $61.4 billion, with experts believing it to be much higher allowing for unaccounted tax debt.
ATO are collecting debts again
ATO recovery action has well and truly recommenced in recent weeks with a reported 50,000 warning letters sent to company directors around the country. These warning letters are issued as:
● Director Penalty Notices pertaining in the main for unpaid superannuation, PAYG withholding and GST
● Warning letters to directors via debt reporting powers provided to the ATO in 2019 [which took a backseat during the pandemic], that the ATO may report company taxation debts to credit reporting agencies for any businesses that owe more than $100,000 in tax and are more than 90 days in arrears without a payment plan.
These warning letters are being sent to the director’s residential address as per ASIC records and even if the address is no longer current, the ATO deems that it has been received whether the director[s] actually sees it or not as it is the responsibility of the director to keep ASIC records up to date.
If debts to the ATO have been correctly reported within prescribed timeframes, the director has the opportunity to remit their penalty by paying the debt or by placing the company into voluntary administration, liquidation or appointing a Small Business Restructuring Practitioner (SBRP) within 21 days of the date of the notice (NOT the date the director received it).
If debts have not been reported correctly and within prescribed time frames the penalty is a “lockdown” penalty and the director can only avoid the personal liability by having the company pay the outstanding amounts in full.
This does not leave much time for a director to consider their options and take the necessary action. If a director has received a warning that they may receive a DPN, they really need to plan now to deal with any penalty they might receive in the future. Both directors and accountants [on behalf of clients] need to engage with the tax office, as ignoring these warnings might result in a company director becoming personally liable for the company’s tax debts.
The ATO will no longer be perceived as an unofficial Line of Credit
Directors can no longer avoid penalty by just entering the company into a payment plan with the ATO.
Directors will remain personally liable for the debts (unpaid PAYG withholding, net GST or Superannuation Guarantee Charge [SGC] obligations).
Directors now have 21 days from the date of the DPN to exercise one of 4 options:
● Pay the liability in full
● Put the company into administration
● Appoint a Small Business Restructuring Practitioner (SBRP)
● Put the company into liquidation
It’s important to note that even if you’re no longer a director, you could still be liable for director penalties equal to the unpaid liabilities of the company, if liabilities of the company were due before the date of your resignation, fell due after your resignation when for PAYG withholding and net GST (inclusive of LCT and WET), the first withholding event in the reporting period occurred before your resignation and for SGC liabilities, the date the charge became payable.
So plan now and this is where cash flow finance options such as those offered by BCashflowPositive can assist. Freeing up cash in unpaid invoices to relieve the pressure on cash restraints whilst waiting for the customers to pay.
So, what is the real cost of the facility?Mar 21 2022 in Cash Flow Finance
The question most asked but rarely answered by many of our competitors. The reason? Their pricing models and funding costs are constantly shifting, so they really don’t know what the real cost of the facility will be for a customer.
At BCashflow Positive, it’s actually a straight forward question with a straight forward answer. To get to the bottom of why many of our competitors have trouble answering the question, let’s look at this in more detail.
Recently, we’ve seen advertising in the media from a home loan lender which satirically has its competitor running around, spruiking fees and this is pretty much on the mark in the invoice factoring space as well.
Invoice factoring has traditionally been a product offered by the non-banking sector, however in the last 20 years the banks have gotten on board as they see the potential money to be made in fees. Due to the way they manage the facility, banks refer to the product as invoice discounting. Your business still needs to qualify under the bank’s underwriting standards, which assesses your business’ eligibility based on the quality of the business to meet their lending ratios, not the quality of the customers buying your products. The banks charge an interest rate on the money out the door and a buying fee for the invoices initially purchased. Often, to qualify for the bank’s factoring facility, you will need to do all your banking with the same institution, which introduces a range of other fees attached to these accounts.
As banks are usually deemed to be the leanest when it comes to pricing as they have the cash reserves to do so, it might sound like a good deal for a business. At the end of the day though, you still need to qualify under their standards. As their facilities often focus on the larger business sector, many small to medium sized businesses will not qualify.
Banks often have a lower interest rate for the funds in use (perhaps 5% p.a. calculated daily) but they also have a buying fee which is often capped around $80,000 p.a. because it is hard to justify this fee constantly growing as a percentage of turnover when there is also the interest component, activity fees, line fees, unused limit fees and other account fees to consider.
A big issue has therefore arisen from the model used by the banks, as many non-bank lenders in the factoring space have copied this model of multiple fees to benefit their bottom line. Many of these lenders have a ‘cost of funds’ – a borrowing cost they incur and need to cover.
The majority of these lenders essentially borrow money and then lend it and as such need to cover the costs of doing so. With a simple fee structure that is more difficult to achieve. What has evolved is that many of our competitors have adopted multiple fees within their factoring facilities that reflect what the banks are doing.
At BCashflow Positive, we have many businesses who are currently factoring elsewhere and exploring alternatives, tell us when they ask the cost to fund an invoice, they can’t get a simple answer. We decided to look at some of the fees our competitors are adding in:
• Management fee / invoice buying fee: a fee charged on the purchase of the invoices being factored. The majority of lenders now require all invoices raised be processed through the facility and as such this fee captures each and every one and will vary based on the deal size or level of turnover. With a minimum ranging from $1,800 through to $2,500 subject to deal size.
• Interest rate: the interest rate will be applied to the funds in use or drawdown. As we already noted, the majority of lenders have a cost of funds and this interest rate will always be higher than that offered by the banks. We have seen in recent times this being as high as 10%-15%.
• Unused Limit Fees: to offset the savvy client who manages the funds in use to minimise interest, a number of lenders now have unused limit fees which is a fee that is charged for the funding gap between the money being used and the facility limit set.
• Audit fees: an audit is a field review that the factoring company may conduct at a desired frequency ranging from monthly, quarterly or six monthly. The audit cost could be as much as $1,000 per auditor per visit.
• Additional fees: other fees we have seen from our competitors include credit note fees, older debt fees (overdue accounts), overdrawn account fees, establishment fees, application fees, limit increase fees, legal fees, annual review fees, credit reference fees, insurance fees, misbanking fees and more.
With so many added fees, it’s no wonder many of our competitors can’t give a straight answer for the cost of the facility.
At BCashflow Positive, we believe in total transparency and provide a simple fee structure. We charge 1.80% flat for 30 days and then 0.06% per day thereafter for the time the invoice is outstanding between you (the client) and us.
So, for example, $100,000 for 30 days of funding is $1,800 as a discount of the value of the invoice(s). If the window between you and us is greater than 30 days, it is a further $60 per day based on this example. This makes it easy for our clients to calculate the cost per invoice, because we do not lend money at a rate of interest. We purchase invoices at a discount and charge as a percentage discount from the face value of each invoice. There is no third-party cost of funds that needs to be covered.
Many business owners and financial professionals treat factoring discount rates as interest rates on a loan, leading them to the incorrect conclusion that factoring is too expensive.
Let’s use our above example: If a business sells $100,000 worth of invoices to BCashflow Positive and the fee is $1,800 on invoices that are paid in 30 days, the tendency is to take the 1.8% fee, multiply it by 12 months and think that that’s an annual return of 21.60%. This is incorrect! Our charge was 1.8% on that sales transaction alone, no different than if you were to sell your own product or service to a client at a 2.50% – 5.0% discount.
With three decades of experience, BCashflow Positive has become a leading factoring company in Australia. We want to help small and medium businesses, even start-ups, to thrive and manage their cash flow needs. There are no quarterly audits or intrusive shadow software. We give you the freedom to run your business.
If you’re an SME looking for a flexible cash flow solution, call 1300 937 292 and speak to one of our factoring experts to fast-track your application.
Note: BCashflow Positive Facilities start at a minimum of $100,000 per month in factored sales
Managing Cash Flow: Supply Chain Finance Vs Invoice FactoringDec 10 2021 in Cash Flow Finance
Cash flow management is a critical component of business planning. Constant cash flow allows businesses to meet operating expenses while also enabling a business to grow and thrive.
While there are several strategies businesses can use in an effort to improve cash flow, including sending invoices promptly and restructuring payments, when companies are late to pay invoices, it can present significant challenges for businesses.
Many large companies offer supply chain finance as a means of providing early payments and maintaining control over their suppliers. Another far better, more convenient and controllable option for small and medium sized businesses is BCashFlow Positive invoice factoring, a tool that businesses can use to get money on outstanding invoices immediately.
At BCashflow Positive, we have over three decades of experience helping Australian businesses improve their cash flow. Our goal is to assist our clients at every stage of their business with transparency, flexibility and top-notch customer service. In this article, we will explore the differences between supply chain finance and invoice factoring as tools to help businesses manage cash flow.
What is supply chain finance?
Supply chain finance programs (also known as reverse factoring) are buyer-led financing options and can be a way for suppliers to get cash quickly at a discounted rate. It’s essentially a three-way financing solution requiring the supplier, a financial institution and the buyer to all be actively involved and facilities are normally set up or engaged by the buyer.
In reality, this is a complex transaction that disadvantages the small supplier (SME) who made or supplied the product in the first place, by providing them with a far reduced payment.
With supply chain financing, a buyer of goods or services engages a third party to pay the invoices owing to its supplier at a discounted rate. For large businesses with many suppliers, supply chain finance can be particularly beneficial as the cost can be either absorbed by the buyer over extended payment terms or as in most cases, passed onto the supplier by way of large discounts taken for early payment. Suppliers should be aware of the potential to be taken advantage of via the buying power of their customers (particularly much larger corporations).
As mentioned above many big companies are using supply chain finance schemes, partnering with third party providers to fund early payments for suppliers at a discount with the reported strategy of taking much longer than the recommended 30 days to pay bills.
The Commonwealth’s Payment Times Reports Register became public last month, allowing small businesses to access information about payment practices from large companies and government agencies. It covered the six months to June 2021 and highlighted and named some of the big companies paying their invoices late while also using supply chain finance programs.
It could be argued that they are forcing the hand of suppliers to adopt the supply chain option if they wanted to be paid on time and it is clear that these large corporations would not enter into such arrangements if there was not a cost benefit to them.
What is invoice factoring as offered by BCashFlow Positive?
Also known as invoice finance, invoice factoring enables businesses to unlock instant cash flow. While it sounds similar to supply chain finance, invoice factoring works in the opposite direction to reverse factoring.
In supply chain finance/reverse factoring, the buyer initiates the process where a financial institution factors the supplier’s invoice. On the other hand, traditional invoice factoring is initiated by a supplier who requests early payment at a discounted rate for their own outstanding invoices using these unpaid invoices as a form of security against the debt.
Invoice factoring enables the supplier to negotiate the terms, tailored to their specific circumstances. Essentially invoice factoring or financing enables businesses to access cash flow from their unpaid invoices at the time of issue, rather than waiting for the buyers of their goods or services to pay the invoices.
Is BCashFlow Positive a better option for your company?
Effective cash flow management as supplied by BCashFlow Positive is essential for businesses of all sizes. Often there is significant working capital tied up in unpaid invoices and businesses could certainly benefit from accessing that cash for immediate use.
When it comes to supply chain finance, the supplier will not be able to negotiate discounts and other terms, so it’s important to weight up the pros and cons of each to determine which is better for your business.
As a leading invoice factoring company, at BCashflow Positive, we offer invoice factoring for small to medium sized businesses. A form of finance with no hidden fees, invoice factoring allows businesses to finance sales invoices to help cover the gap of slow payments. If you’re unsure whether invoice factoring is right for you, speak to an expert at BCashflow Positive today by calling 1300 937 292.
Top New Year’s Resolutions For Business SuccessJan 15 2020 in Cash Flow Finance
It’s the start of a new year and the beginning of a new decade. This is also the perfect time to reflect on what your business has achieved in the last year, and what’s needed to achieve future goals.
Here are some top New Year Resolutions to consider for fuelling business growth:
Set SMART Goals with KPIs and Benchmarks
Every journey begins with a destination in mind, and for businesses setting SMART (Specific Measurable Attainable Realistic and Time-bound) goals is an important first step when planning for growth.
When setting your goals, make sure you have Key Performance Indicators (KPIs) and benchmarks set for every goal. This will enable you to measure the milestones that are key indicators for your success.
Plan your Success
The key to many successful businesses is planning everything down to the smallest detail. Make sure that planning is one of your resolutions this year and don’t leave your success to chance.
Planning every step of your business journey will help you decide what you’re going to do, when you will need to do it, and what you should avoid doing to grow your business.
The best way to put your plans into action is to review your most recent success stories to determine what you did right and can duplicate, instead of reinventing the wheel.
Track Your Cash Flow
It is important to track your cash flow, particularly the peaks and troughs periods. This will help you determine whether your business has sufficient working capital or should look into getting cash flow financing to improve cash flow.
Also, make it a resolution to periodically complete a cash flow analysis for your business, as this will give you a clear picture of what your cash flow requirements are.
Get Paid On Time
It’s not a surprise that a large number of businesses struggle to get paid on time. As a result, they find it difficult to manage their cash flow.
Make it part of your cash flow strategy to follow up persistently on late payments. If your payments aren’t being received by the due date, send customers a follow-up email or make a phone call. Include a late payment policy in all your contracts which clearly explains the penalties that will be enforced if there’s a delay in payment.
Look Into Cash Flow Financing To improve Cash Flow
For businesses that offer flexible payment terms to customers, cash flow problems can be substantially compounded. Waiting for 30, or even 90 days to get paid, forces many businesses to fund their operations using some form of finance.
A flexible form of business finance is cash flow financing.
Cash flow financing can help improve your business cash flow by reducing the time it takes for you to receive payments. At BCashflow Positive, we can fund your sales invoices in as quick as 4 hours, so you don’t have to wait 30, 60, or even 90 days to get paid.
BCashflow Positive’s cash flow financing can help inject immediate cash into your business by advancing up to 90% of the face value on your invoices upfront. The remaining 10% is credited to you when your customer pays us. This will make it easier for you to meet your ongoing expenses such as ATO obligations, staff wages, and supplier payments.
If you are looking for a faster way to access the cash tied up in your invoices and to give your New Year cash flow a boost, call BCashflow Positive on 1300 937 292 for more details or CLICK HERE to get a quote.
Top 3 Tips To Clear Your Tax ArrearsNov 01 2019 in Cash Flow Finance
Tax arrears are an increasing cause for concern among business owners as falling behind has serious repercussions on growth and profitability. According to the Australian Taxation Office (ATO), it is the primary cause of business liquidation.
Aside from the financial stress it can cause, battling tax arrears can divert your energy away from important activities such as growing your business.
Tax arrears can also put you at a disadvantage when seeking finance, as some lenders will consider tax liabilities as added risk and can increase their pricing accordingly.
Here are three ways to get rid of tax arrears and get back in control of business finances:
- Keep On Top Of Your Expenses And Cash Flow
Businesses in the start-up phase often run into financial difficulties during the second year when they receive their provisional tax invoice. Typically, a large amount of money is invested in costs such as equipment purchase, recruitment, rent, salaries, and marketing.
If your business does not have adequate cash reserves, you could struggle to meet your tax obligations. Cash flow is the heart of a healthy business, and one of the ways to ensure you have sufficient cash is to pay your taxes on time is through having the right finances in place.
Cash flow management is important at the operational as well as business level. Both are needed to help you plan your business’ financing needs.
With operational cash flow management, you are essentially mapping out cash coming in and going out of your business weekly for the next 8 to 12 weeks. It helps in identifying any blips in your cash flow from month-to-month.
Strategic cash flow management is about the bigger picture where you look at monthly cash flow for the coming 12 to 18 months. It’s about understanding the cash flow implications of your business strategies. It’s what you need to find out how much cash your new growth strategies will generate. You will also know how much money is required to fund growth objectives.
- Enter Into A Payment Arrangement
If you’ve fallen into tax arrears, it’s important to settle your dues as soon as possible.
One of the ways to reduce your tax outstandings is to enter into a payment arrangement with the ATO. This is essentially an arrangement where you agree to make deferred payments until your tax is paid off.
This will improve your cash flow position and take back control of your business.
- Use Cash Flow Financing To Clear Tax Arrears
An effective strategy to improve cash flow and clear tax arrears is through cash flow financing.
Through cash flow financing, you can receive an immediate inflow of cash from the cash flow finance company. The cash can be used to pay taxes as well as expansion opportunities.
Essentially, cash flow financing allows you to unlock funds owed to you before they are paid by your clients or customers. Cash flow financing can also relieve you of the burden of following up with clients or customers, as this can be taken care of by the cash flow finance company. This can free up your accounting staff’s time and reduce overhead costs.
At BCashflow Positive, we make the process of cash flow financing simple and fast. Up to 90% of your invoice value is made available to you in as quick as 4 hours. The remaining 10% is credited once your client pays us.
There are no hidden costs or quarterly audits required. You choose what invoices you would like funded and leave the rest to us. It is also free to apply and we will get back to you within 24 to 48 hours with a response.
If you’re looking to bring your tax arrears under control and would like to take advantage of supplier early payment discounts, finance business growth or boost cash reserves, then give us a call on 1300 937 292 or Click Here to get a quote.