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Cashflow Tips – What Will Reviewing Pricing Mean For Profit – Can Premium Pricing Improve Business Financial Health?

Cashflow Tips – What Will Reviewing Pricing Mean For Profit – Can Premium Pricing Improve Business Financial Health?

What Will Reviewing Pricing Mean For Profit – Can Premium Pricing Improve Business Financial Health?

Last post we looked at the nasty hidden effects that discounting can cause to the financial health of a business – which most small business owners are not aware of. We also looked at what to do instead – add value!

A further or alternative step is to look at your pricing for your service or product – have you considered taking an upper or premium pricing strategy? Instead of JUST looking at cutting costs, significant profit upside remains untapped in the area of pricing area, and it is much more attractive than focusing on cost-cutting. It is a quick win that goes straight through to the bottom line. Observe the table to see the amount by which sales would have to decline following a price increase before your gross profit is reduced below its present level. For example, at a 25% margin a 6% increase in price could sustain a 19% reduction in sales volume. If you are running with a margin of 35% and you raise prices by 10%; then you could lose 22% of your business volume and still be no worse off! And if you DON’T lose 22% – you are in front as a bonus!

Premium Pricing Table

Premium Pricing Table

So re-assess the value of your product and services, and ask if you are positioning your business offerings in the marketplace at their true value to the customer? And if you decide that you are worth more; then this table arms you with the courage and conviction as well as a guide to monitor the result to price your services and products at their real value! Surprisingly few price reviews are proactively investigated, let alone implemented. Remember ultimately, decisions on pricing must be measured against other critical factors, pertinent to your industry and your situation. Pricing can be an exercise in both leadership and innovation – But always remember to record and measure – Act on facts not just “gut feel”!

Need help? Not sure? Call for FREE 30min advice / Strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – get them right!

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Business Tips – Are you Aware of the 13 New Privacy Laws – Australian Privacy Principles and Your Business

 

Business Tips – Are you Aware of the 13 New Privacy Laws – Australian Privacy Principles and Your Business

Are you Aware of the 13 New Privacy Laws – Australian Privacy Principles and Your Business

Many businesses may not be aware of the 13 new Privacy laws – called Australian Privacy Principles (APP) which replace the National Privacy Principles that apply to businesses. They are expounded on the website of the Office of Australian Information Commissioner (OAIC). For businesses one of the important areas is the changes to credit reporting.

From the OAIC website –

“Changes to credit reporting laws include:

  • The introduction of more comprehensive credit reporting, which will allow the reporting of information about an individual’s current credit commitments and their repayment history information over the previous two years
  • A simplified and enhanced correction and complaints process
  • A prohibition on the reporting of credit related information about children
  • A prohibition on the reporting of defaults of less than $150
  • The introduction of specific rules to deal with pre-screening of credit offers
  • The introduction of specific provisions that allow an individual to freeze access to their credit related personal information in cases of suspected identity theft or fraud
  • The introduction of civil penalties for breaches of certain credit reporting provisions
  • A requirement for credit providers to be a member of an EDR scheme, recognised under the Privacy Act, to be able to participate in the credit reporting system.

For a more detailed explanation of the credit changes see: Privacy business resource 3: Credit reporting — what has changed

A new mandatory credit reporting privacy code (CR code), developed by the Australian Retail Credit Association, is now registered on the OAIC’s Codes Register and takes effect from 12 March 2014. The CR code binds all credit reporting bodies, credit providers and affected information recipients.

Note, in most circumstances you can request a free copy of your credit report from a credit reporting body.

For further information see our credit reporting reform webpage.

Of note in the section Privacy business resource 3: Credit reporting — what has changed is Changes to the personal information that may be held in the credit reporting system.

Also significant to small business is to be aware of the Guide to Privacy for Small Business especially if you have turnover less than $3 million, and have a look at the Privacy Checklist for Small Business to get familiar with the collection of private information. Have a look at the list on the Web page for Small Business, as well as A brief overview of The Privacy Act and Small Business — a Snapshot.

Get a FREE 30 min answer to your query, and FREE ongoing email or phone support – no-one offers as much! Call and you also get FREEAvoid these GST mistakes” – There’s 18 that the Tax Office see regularly – get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Business Finance 101 – Working Capital – What it is and what it means

Working Capital – What it is and what it means

Working Capital – What it is and what it means

Working Capital is calculated as Current Assets (CA) minus Current Liabilities (CL) at a specific date. The CA and CL amounts are on your company’s balance sheet. For example, if your company’s balance sheet has current assets of $150,000 and current liabilities of $120,000 then your company’s working capital is $30,000.

Working Capital – Current Assets – Current Liabilities
But with a significant amount of working capital, a company can still have a period of cash shortage if its current assets are not turning to cash. As an example, a company with most of its current assets locked up in inventory. Or if a company has a large accounts receivables that are not being collected, the working capital amount isn’t much consolation when you can’t meet the payroll run!
Other financial ratios use the working capital components. They include the current ratio, quick ratio, accounts receivable turnover ratio, and inventory turnover ratio.
Good management keeps watch on current assets (receivables and inventory) to keep the cash coming into the bank.

Need help? Not sure? Call for FREE 30min advice / Strategy session today!

Call 0407 361 596Aust and also get FREE“Avoid these GST mistakes”– There’s 18 that the Tax Office see regularly – Get them right!