Tracey Newman: For the 20% that we can't teach and that you don't know. You need a lifeline, so to speak, to call over and get guidance. We accountants call that the honeymoon period. It's just a little innocent box, but you know, when you go back over two years, this client was then up for a liability of about 50,000 Australian just because they had missed that tick box.
[Voiceover]: Welcome to Add to Cart, the podcast that Express delivers all you need to know in the fast moving world of e commerce. Every month, Nathan Bush from 12 High and an E commerce industry expert will share the news, research and insights that you need to know to keep you at the top of your game and of course, keep your customers adding to Cart.
Nathan Bush: Hello and welcome to Add to Cart.
Nathan Bush: My name is Nathan Bush, host of
Nathan Bush: Add to Cart and director at ecommerce
Nathan Bush: talent agency E Suite. Buckle up.
Nathan Bush: We're going to talk tax planning with an accountant. Don't say I never bring you the thrills. But wait, this isn't any accountant. Tracy Newman joins us from Bean Ninjas.
Nathan Bush: What a cool name. Bean Ninjas specializes in chartered accounting, bookkeeping, technology and education to help seven figure
Nathan Bush: e commerce businesses continue to grow profitably.
Nathan Bush: That's all they do, just e commerce finance.
Nathan Bush: So, given that we're about a month out from the end of the financial
Nathan Bush: year, I thought it was really timely that we asked Tracey all about what e commerce businesses should be doing to prepare for the end of year tax, lodgement and also planning for the new financial year. But our conversation actually goes much beyond
Nathan Bush: this and includes covering some of the best technology that Tracey recommends to improve financial visibility and the difference between fixed, variable and extraordinary costs that you need
Nathan Bush: to keep on top of, especially in
Nathan Bush: these high growth times.
Nathan Bush: So, as the best accountants say, time is money. Thanks to our partners, Shopify plus and Signet.
Nathan Bush: Here's our conversation with Tracy Newman from Bean Ninjas. Tracey Newman, welcome to ADD to cart.
Tracey Newman: Thank you, Nathan. I really appreciate you having me on your podcast.
Nathan Bush: Well, it is perfect timing because we are leading into the new financial year and I'm sure there's lots of listeners, especially business owners out there that are really looking for some advice on how to structure their tax for this year and also how to plan for the new financial year. So I'm really keen to hear your thoughts on that. But before we do, can you give us a little bit of an overview on yourself and Bean Ninjas and what you guys do?
Tracey Newman: Sure. So, as you've said, my name's Tracy. I. I'm a chartered accountant And a tax agent with Bean Ninjas Australia. And our firm specializes in offering tax bookkeeping and advisory services to the e commerce community. Where we're maybe a little different than the rest is we only work with e commerce clients. And so I think that the chat today will focus on e commerce specific issues and been specializing in e commerce for about the last four years.
Nathan Bush: Okay, cool. And what are you finding about e commerce clients over those four years that are different from other businesses that you work with?
Tracey Newman: Well, I'm obviously going to generalize so please don't get too upset if I, if I get some of these assumptions wrong. But, but generally speaking, e commerce clients tend to be very tech savvy. So the things that we find when we meet e commerce clients is we can cut through a lot of conversation very quickly about, about concepts like APIs where systems are communicating with other systems. Most of those e comm clients tend to be a little younger, but that's not always the case. And so when we meet a typical e commerce client they often have their tech stack pretty sorted. Except for the finance area, it's not an area they've often looked to. So they've got their shopping cart, they've got their CRM system, they maybe have looked into inventory, but not so much. Often the general ledger accounting systems, they tend to prioritize front end over back end, but that's true of most business customers. So by the time we meet them they've often got an amazing concept, a product that potentially is selling millions of dollars a year and they're very, very good at social media promotion but not necessarily so good at compliance. So the back end of things like business activity statements and tax returns, month end reporting, they come to that conclusion that they need those things often a little later in the piece and often when we meet them, they've been trading quite successfully for a year or two.
Nathan Bush: Yeah, that makes total sense. Now we're going to focus in on tax time and new financial year because that's where we find ourselves. There's lots of other topics we could dive into and we might touch on them later. But if we're talking about tax prep, because we're at the start of June, everyone should have their heads around getting ready for this time, whether they do it in house or whether they partner with, with someone like Beninjas to prepare this, what is your process for making sure that businesses are ready around that June period? What should we have in place to be ready for tax finalisation?
Tracey Newman: So I think the most important thing, and it may seem obvious, but sometimes it's lost on the day to day craziness of getting your business arranged is that you need your bookkeeping system up to date. So when you take a look at your financials, you're able at the beginning of June to run a year to date report that will show you the election 11 months to the end of May. And that financial report needs to be correct as well. And I guess we'll probably delve into some of the specific issues around what needs to be considered. So it's very, very difficult for an accountant to meet with a client and do something we call a tax planning session unless we've got numbers that are reliable and we can understand. So what does that mean practically? Well, if you're using a system like Xero or myob, it means all of your uncoded transactions have been recorded in your accounting system. But in and probably for E comms I would say one of the most important is you need a read on your inventory. So most E commerce clients sell what we call widgets in accounting profession which are just something you buy and sell. But very few E comms, particularly at the beginning of their lifespan, have a good system that can just drop out a report that says, that says I've got this many widgets at this cost and this is the total value. So that's probably in terms of tax planning, the starting point. But you also need to have a good handle on historical transactions from years prior to. So things like what is your superannuation concessional limit? It's something we tax agents can work out. What is your franking balance in your company? So what we do with our client base is around the beginning of May we open up a four week window which we call tax planning and we get in touch with all of our clients. It's an optional service and Maybe I'd say 20 to 25% probably take it up. And that's a really comprehensive process where we take their year to date month or their year to date results. We then extrapolate it out for the rest of the year based on questions they answer. And we then estimate what we think their likely tax liability will be for the year and we make recommendations about how to minimize that tax.
Nathan Bush: Okay, they're really great steps on the bookkeeping front and this has always fascinated me. Do you find that bookkeeping has to be done in house? Because when you're reconciling transactions, do you need a little bit of business knowledge around how to do that or is it fairly generic that you can outsource bookkeeping pretty easily?
Tracey Newman: Well, the question is it's both of those things. So I think that about 80% of bookkeeping can be taught to the client. And if you're at the startup stage of your e commerce journey, it's often area you see clients want to keep in house because they're trying to save money. And what I say there is get into a partnership with a good accountant because for the 20% that we can't teach and that you don't know, you need a lifeline, so to speak, to call over and get guidance. And at the beginning of my firm's journey, we offered that service probably that was the biggest take up. So we would have a lifeline and the clients could say here's a screen print, I don't know what to do. And we would then educate them. Now we've moved on and we now service larger e comms. But there will be many, many firms out there that offer those services. Once you're at, I guess a more mature stage of your E Com lifecycle, maybe a couple of years in, hopefully you're doing seven figures if you're promoting your product in a big way. I'm a huge advocate of completely outsourcing the function. And what tends to happen when we take on those bookkeeping jobs is that we have a really intense relationship with the owner for a month or two where we ask all sorts of questions and get education about their particular circumstances. And then we have a meeting once a month where we ask further questions and that seems to be enough to give us the data we need to then process their books.
Nathan Bush: Brilliant. So a bit of investment upfront in terms of time and training and then it just streamlines everything from there on.
Tracey Newman: Mostly we tend to use a ton of automation in our tech stack for bookkeeping and so most things are guided by rules and algorithms. So if you see buddings, code me the repairs and maintenance. And most businesses tend to be quite repetitive in terms of their financial transactions. So yeah, the beginning conversations tend to cover off most of the education.
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Nathan Bush: You mentioned inventory in there. Now, from an inventory perspective and getting that ready for tax time is the old stock take method two times a year. Is that still the way to go?
Tracey Newman: Great question, Nathan. So I guess again the answer is it depends. It really comes down to the owner's need for real time information. Because if you're only counting your inventory twice a year, then you will only have really two times a year where you'll get a read financially of how your business is performing. If you don't mind, I might just take a quick minute to explain that a little further. Most ecom businesses that we pick up in the early stages are working on what we call a cash method for inventory, which means when they buy their inventory, all of the expense associated with those purchases goes straight back to the profit and loss. And what then happens is you'll have these really strange months where you may bring in a season's worth of goods and it might cost you $500,000, but in that particular month you may only sell $100,000 worth of inventory. And so mathematically you would show a $400,000 loss. And that just doesn't make any sense. And so what we try to educate our clients about in the inventory space is that you need to move the inventory that is unsold back to the balance sheet and then match the cost of the inventory against the sales as you then sell the inventory. Now, if you're only counting twice a year, that's impossible to do. So we really recommend as early as you've got the headspace to conquer the project to put in place a proper inventory solution that's reporting cost every day, every week, every month.
Nathan Bush: Brilliant. And from a technology point of view, what are the most common inventory solutions that you are seeing implemented for e commerce businesses in Australia?
Tracey Newman: Nathan, do you mean in terms of giving you some specific names of inventory products?
Nathan Bush: Yeah, if you can.
Tracey Newman: Yeah, sure, sure. I would probably say there's there's three main categories of inventory products out there which are the, the cheap and cheerful. The second would be, I guess the mid size and then there would be full on ERP type platforms. So back in the cheap and cheerful, probably the three that we see most commonly, but there would be hundreds and we're not endorsing anything specifically. Yeah, stocky tends to be the most popular. That's a product that's owned by SH and it's fully integrated. So if shopify's your shopping cart, that's a great one to take a look at. Order metrics is another One that we see stock and buy, there's no end of them. And if you go to the app marketplace of the shopping cart that you use to power your E comm, there'll be quite a few choices there. Why are they cheap and cheerful? Well, they don't really address a lot of the more complex inventory requirements for a business. For example, if you have back orders or you need to see where an inventory is located on a particular shelf or you've got a multi location type scenario, a lot of those really cheap solutions don't address those issues. And probably the biggest problem we see at that level is the concept of landed cost. So if you're bringing in a product and you pay for packaging to a separate supplier and you pay for freight to a distributor, that product's not capable of then landing and then bringing in all those costs in the mid market, probably the top four here in Australia would be things like sin7 Unleashed trade, gecko deer are probably the top four. That and we're seeing a couple of contenders from the United States such as Locate and Finale tend to be two big ones that are getting a lot of attention. Those ones will set you back. It's based on normally on the orders you sell a month tends to be how they're priced. But you can take your budget up, say from a stockie which might be anywhere from 1999amonth to maybe 30 or $40 a month, you're probably lifting then to 3 or $400 a month for these mid sized solutions. Okay, but they will deal with all of those really complex needs that you have that I mentioned previously. And then at the really high up level you've got full fledged ERPs like Netsuite, Great Plains, those sorts of SAP business one and those are going to be sending you out thousands to tens of thousands of dollars.
Nathan Bush: Yeah, that makes total sense. Thank you for sharing the names because I think the more specific we can be about this, it really helps people who are taking those next steps in their business from a technology implementation point of view.
Nathan Bush: And if we talk to that mid
Nathan Bush: market range, anyone who's looking to take that step up from the inbuilt Shopify inventory management to that next level. Is there a lot of tech setup to be done?
Tracey Newman: Yes and no. I mean it's getting easier and easier. And for the techies out there listening to this podcast, you can probably appreciate, you know, if you can get something down in a CSV type format, most of these systems can read them quite easily and import export. So if you're reasonably tech savvy, you can often run those projects yourself with maybe some assistance from the actual supplier. For example, we're just doing a project with Finale right now and we're not involving a cloud integrator and between ourselves and the actual supplier where we're managing that job. But it can become very complicated and it really comes down to the SKUs. Like if you've got hundreds of thousands of SKUs, you've got a lot of complication around, maybe a distribution network, multi location. All of those would maybe point you in the direction of engaging someone called a cloud integrator. And those particular professionals are specialists in the inventory space which can help you make a selection and then hold your hand as you do the implementation.
Nathan Bush: Yeah, brilliant. So if we go back to tax time and if we're thinking annual tax or even bas along the way, what are the most common mistakes that you see? E commerce businesses. When they're lodging.
Tracey Newman: These. When they're lodging. Well, those are kind of two very different areas. Maybe we'll talk about the business activity statement first because. So I guess probably one of the most common mistakes, if you want to call it a mistake, is not realizing they have to be registered for GST in the first place. I'll speak about Australia specifically. So the rule is if you sell more than $75,000 a year, you must register for GST. But sometimes E comms get confused about that because they're not selling in Australia. So Maybe they're selling 100% of their product to the United States and they're not collecting any GST at all. And they think because of that they're not required to register. But that's in fact not the case, that annual turnover is no matter how much GST you're collecting. So that's an important thing to point out. So sometimes we'll meet e comms that aren't registered because of that misinterpretation. Other times we meet e comms that know they have to be registered for GST but just have grown from 0 to 100 so quickly that they haven't had time to look at that. And it's a very frightening concept because they may have configured their Shopify or their shopping cart to collect the gst. So the consumer is getting an invoice when they check out saying GST of this, but the actual business hasn't registered themselves properly yet. And they're quite frightened about what's involved in lodging and also then paying those the tax liability. So that's probably when you Say common mistakes. Another one that I see all the time. I know I've mentioned Shopify quite a bit been in this conversation and that's because from my client base, that's the shopping cart we work most commonly with. But that can be set up incorrectly and that's really quite frightening. So I had a client the other day that had set up GST properly on their products that they sell, but they had forgotten to tick the box that says charge GST on shipping. It's just a little innocent box but you know, when you go back over two years, this client was then up for a liability of about 50,000 Australian just because they had missed that tick box. So and then the other thing is there may be a mixed use supply in gst. So the client might sell something with GST such as a bread box and then the bread inside it is GST free. So we see a lot of problems with the Shopify setup and then of course with the E comm setup there's a lot of rules just hitting, I like to call it the wild west of E commerce where countries all over the world are recognizing that they have all of these untaxed activities happening. For example, I'm an Australian company, I'm selling all of my product to New Zealand. I'm not collecting GST because it's overseas. And so probably the most too recent movements there have been New Zealand has announced last year they're calling it their low imports tax. I'd have to double check, I think it's 65,000 New Zealand. So if you sell more than $65,000 worth of, and this is in New Zealand dollars, so that might be like 60 or 55 Australian, you must register and collect tax in New Zealand. And then the United Kingdom on the 1st of January with their exit from Brexit announced that from the very first dollar you sell the United Kingdom you must register and collect vat. So we see all sorts of ecoms that innocently don't necessarily understand their requirements.
Nathan Bush: And how do you find the platforms like Shopify are at keeping up with those tax requirements to allow businesses to set up their GST settings essentially to meet those requirements. Are they fairly responsive or does it take a while to kind of come into the, into the system?
Tracey Newman: Well again, I can only speak for Shopify and Amazon. Those are probably the two that we see most commonly. They've both been very much on the front foot and they've sent emails to all of their clients that they think may be effective. And then we've had A few reach out to come through us. In fact, sometimes that's how we tax agents learn because as you can imagine, there's hundreds and hundreds of countries and it's impossible. So with Bean Ninja specifically, we've got representation in three different jurisdictions. So we've got a Europe division, we've got America and ourselves here in Asia Pacific. And we're just starting a roundtable so we can come together to talk about new developments and make sure that our clients are updated.
Nathan Bush: Yeah, brilliant, brilliant. That's a really, really great tips and I think everyone might be stopping this podcast to double check their Shopify settings now and then. If we talk to the annual income tax, what kind of mistakes do you see made there?
Tracey Newman: I think the biggest mistake we see in this area, and again, I don't know if mistake is the right word, but the biggest eye opening experience is for E comms that grow, as I mentioned, 0 to 100 really quickly. And as we both know, in E comms that can happen more frequently than probably any other industry. So you're onto a cracker of a product, all of a sudden it becomes a fad. You've sold a million dollars in the space of a year. What happens with brand new E comms is the tax office doesn't tax that revenue until they become aware of your existence. So if you think about an E comm that starts on the 1st of July, they then don't have to lodge their tax return until the 15th of May, the year after the 30th of June. So they have almost, they have about 23 months before the tax office even becomes aware of their existence. And they may have a tax bill of, let's say $200,000. Now that's something they're probably preparing for. But what makes them so surprised is when that tax return gets lodged, the tax office then doesn't wait another 12 months to take the tax for the second financial year. So they have the bill of 200. But hot on the heels of that bill comes a second bill saying, well, you've paid for those first 12 months, but there's still 11 months for the second year that you've not paid for. We're going to assume that you have achieved at least the result you've achieved in the first year. Here's another bill for $200,000. And we accountants call that the honeymoon period. Which means, you know, this brilliant time of 23 months where you're earning money and paying no tax, which no PAYG employee has experience and it's happy days and it's vehicles and boats and houses and then all of a sudden tax bills arrive and you've not prepared for them. So my advice would be get in early with an accountant and have those conversations as soon as you realize you're onto something exciting.
Nathan Bush: And it's ironic because most people are actually broke on their honeymoon because they've just paid for a wedding. When you're advising people who are starting E commerce businesses for the first time or scaling pretty quickly, how do you recommend that they set up, say their bank accounts or to put away the right amount of cash for things like PAYG or income tax or bas? How do you normally structure that to make sure that they don't kind of all of a sudden get this bill that they're not prepared for?
Tracey Newman: Great question. So I think my number one tip would be, and this is a little bit of a, not completely related to your question, but when you do start up a business, even if you're a sole trader, that is you're not structured as a company or a tr, make sure you have a bank account that's purely for business. We see E Comm owners all the time mixing personal and business and that makes things really confusing to then extract. Secondly of all, how do they, how do they tuck away the money for the sales tax and the income tax? You very often see owners, and this is I think subscribing to a profit first methodology where they will open bank accounts called GST savings tax savings and then they use a percentage, for example, 10% of all sales go in into the GST account and 30% of all sales go into the tax account. So that's one way. And if it depends on how you, I guess you process information and if you're very visual, that might be a good way to make sure that you've tucked away enough money. Other more sophisticated maybe environments you might see that they draw those funds over temporarily into their personal, maybe an offset on a mortgage, but they've got it tucked away. But I think my biggest piece of advice is get a relationship going early with an accountant and have frequent meetings and be very sticky in that relationship and get updates from them as to what the tax liability is looking likely to be.
Nathan Bush: Yeah, it makes sense. And if you're using something like a Xero and I think is that the most common accounting software that you see E commerce businesses use?
Tracey Newman: In my experience, yes.
Nathan Bush: What are the most important reports that you think a business owner should be looking at regularly in Xero in between those meetings with their accountant?
Tracey Newman: Well, the number one report that I'd recommend all business owners be looking at frequently. But this is, this is with a caveat that their information is up to date and they're running an inventory system that that's feeding in to that is looking at their gross margins. So it's a profit and loss statement and it's looking at their sales and looking at the cost of sales and looking at their margins. And maybe, Nathan, you might circle back to this, but I'll talk about a little later. About what. What is considered a cost of goods sold because it's a much more comprehensive definition than just the cost of the product.
Nathan Bush: Let's dive into it now.
Tracey Newman: Oh, okay. So in the. In the cost of goods sold for E Commerce, in my view, there's really four main drivers in that particular area. So the most obvious is if I sell a widget and I buy it from China, it's the cost of that widget. So I might sell it for $10 and I might buy it for $5, and my gross margin would be 100%, if that makes sense. I've made a $5 profit and I divide that into the cost of the product.
Nathan Bush: Thank you for keeping these numbers really round numbers for me.
Nathan Bush: It helps.
Nathan Bush: It helps my brain.
Tracey Newman: So the other three areas that I think that should deserve a rightful place in cost of goods sold are merchant fees. And traditionally in other environments, you will see these as what we call a fixed expense. And just to explain a variable expense is something or a cost of goods sold expense is something that increases as your sales increase. So if you think about merchant fees, that they'll be a flat 2 to 4% of the sale usually. Whereas your cost of rent would be the same no matter how much you sell. So that's kind of how you decide where they sit in the P and L. So merchant fees for an E comm will sit up in cost of sales where normally you'd see bank fees sitting down in a fixed expense for other types of businesses. The third area I think that has to sit in the E. Com cost of goods sold is freight and delivery. And that can be inbound and outbound freight. So inbound is obviously the freight you're paying to land your goods into your warehouse. Outbound is the freight you're paying to distribute it out to your customers. And the fourth, and this is often one like merchant fees that accountants get wrong is pay per click advertising. So most of our E comms are relying very, very heavily on Google. AdWords and Facebook advertising are the number two or the two main ways that they're. And there's an absol correlation between how much they pump into pay per click and how much they're selling. So when we look at gross margin, we're considering those four components as deducted from the sale to then look at the margin and you know, someone might proudly say, Well I get 100% markup on my $5, I sell it for 10. But really it might be more like I make $2, not $5 on that equation because pay per click in particular can be so expensive.
Nathan Bush: What are you seeing as a good margin at the moment for an E commerce business?
Tracey Newman: Well, I like to say that E comm businesses play two games or have to pick one game or another. So they either sell a story or they're selling a product based on price. So the margins will really differ based on which side you align with. So if I'm selling ink cartridges, I'm probably competing on product and margins on something like an ink cartridge can be as low as look 5 to 10%. It's pretty low because, and it's a constant battle as I'm sure any listeners are probably agreeing with when you're selling based on price because it's a volume game and it's a price game and the consumers are constantly checking maybe on Amazon or on some sort of comparison type product to get the best price. So the only way to make great money there is to sell a lot. And the only way to sell a lot is obviously get great SEO, get great advertising, get great awareness of your website. So if you think of like the Kogan's and you know, those sorts of websites tend to be very, very good at that and they're competing on price. And then you've got websites that sell a story so they may have a really neat concept about how the product got developed. They may have a story, you know personally about maybe a child that got sick and they developed some sort of product to improve that child's quality of life. And those margins can be very open ended but tend to be very, very high compared to the price gains. So you can see 60, 70% margin on those sorts of products.
Nathan Bush: They're the nice businesses, aren't they?
Tracey Newman: Well, they tend to be a lot easier to manage but they're a lot harder to dream up.
Nathan Bush: Yes, exactly. Good point. When you talk about fixed and variable costs, obviously Covid and the growth of COVID through a lot of spanners in the works, we saw people investing heavily in say technology or team or warehouses. Even that Might traditionally be fixed costs, but had to kind of expand pretty quickly. Is it been harder to plan fixed cost with the explosion during COVID Yes,
Tracey Newman: and there's always, I guess, a bit of a story that needs to be told in those interim periods where again, we accountants seem to have words for everything. Funnily enough, I'm sure it's true in any profession. But we call something that's not tending to reoccur an extraordinary cost. Okay, so for example, let's say you go from one warehouse to two and there's two months of warehouse for the second location that really aren't generating much revenue because it's a brand new concept. And so what we'll often do in the month end reports is we'll still treat it as a fixed cost, but we'll put some notes at the bottom explaining that this was, you know, a very high cost in relation to the revenue to plan for it. Look, I think most ecoms, and again I can only speak for my own specific experience, but they've had an unprecedented opportunity through Covid to tap into markets that were not normally receptive to buying online. So we've seen a lot of E comms get quite aggressive and opportunistic in this time. For example, I've got one client that off the uk. I think the more locked down the population, the more receptive they've been to online purchasing. So a lot of Australian businesses have been looking to Europe as a really receptive marketplace. And so they've been really, really aggressive and very brave in terms of making some big expenditure. And the payoff that I've seen in that particular instance was amazing.
Nathan Bush: Yeah, that makes total sense. Okay, so if we're coming back to end of financial year, has there been any changes, any regulatory or budget changes that E commerce business owners need to keep in the back of their head as we go into the new financial year.
Tracey Newman: Well, interestingly, with this particular budget, and I have had this theory endorsed by a few peers as well, there's not a lot in it in terms of changes from a business and how they account for things and what they're allowed to deduct. I guess probably the better handle to put on it is there's been a continuation of some concessions that were put in place last year that will continue longer than we had hoped for. Probably the biggest one is something called temporary asset deductions. Unlimited temporary asset deductions. So this means, for example, if a business decides to make an expenditure that's called capital. And what I mean by that is, it's maybe a forklift for the warehouse. It's something that normally you would have to take a deduction over a number of years because that asset is benefiting you over a number of years. But the government's allowing you to take the tax deduction all in one year. So this unlimited temporary asset expensing has been extended for another year. So it will last until the end of 2022 instead of finishing at the end of 2021. So that's something I guess to take note of. Some of the other changes that were announced I don't think have a lot of applicability in E comm type environments. Probably the biggest one that the accountants are discussing is the removal of the casual superannuation limit under $450 a month. But maybe some E comms obviously would get affected if they've got some warehousing staff that are coming in.
Nathan Bush: And what's the implication of that?
Tracey Newman: So what it means is if right now, if an employee earns less than $450 a month, there's no requirement for the employer to pay a compulsory super contribution for them. Whereas when this legislation takes effect, which is still a year away, the super will have to be paid from the first dollar.
Nathan Bush: Gotcha.
Tracey Newman: So assuming rates don't change, it's going to be an increase of about 10% in real costs for the employer.
Nathan Bush: Yeah, that's an interesting one. I hadn't heard of that. That's great.
Nathan Bush: Thank you.
Nathan Bush: You.
Nathan Bush: How do you like your cocktail gift boxes? Shaken, maybe stirred perhaps.
Nathan Bush: Broken, Definitely not.
Nathan Bush: Cocktail gifting company Cheers Sweetie were finding
Nathan Bush: that they were regularly coming up against
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Nathan Bush: Cheers to that.
Nathan Bush: Visit signet.net.au blog to find out more.
Nathan Bush: When you talk about the unlimited temporary asset deduction and as we're going into the end of the financial year, if we've got E commerce businesses with a bit of cash still there, they've had a great year and they need that forklift. What are kind of the things that you put over the top of it to work out whether we should be investing in that pre tick over to the next financial year?
Tracey Newman: Well, it's a pretty straightforward calculation actually. So if the business a has the cash surplus and that's a really big, big condition. Because if they don't have the money, I always like to say to clients, yes, you'll save the tax, but you'll still be out of pocket the pre tax amount. If they've got the money. What would be involved is we would take a look at what marginal rate that client sits in. So this depends on whether they're being paying tax on the money in their personal names or maybe it's being taxed at the company level. And we say then for every thousand dollars you spend, if you're in a 30% tax bracket, your tax tax bill will be reduced by $300, for example. So that we try to keep it quite simple to think about. Yeah, that makes sense I should point out as well. And you'd need to take tax advice, of course, but if you're considering vehicles, there are some limits on vehicles called the luxury tax limits that overarch those temporary unlimited. So you can't unfortunately go out and buy that car that costs $200,000 and get a full deduction.
Nathan Bush: Still can't buy your Tesla in bitcoin
Tracey Newman: and then claim that unfortunately there will be a limit to that deduction. Yes.
Nathan Bush: What are the most common types of assets that you see e commerce businesses investing in at this time of year?
Tracey Newman: Probably the two most common that we see with our client base is if they need equipment for their warehouse. So clients as you know that are warehousing either will be using three PLs which are third party logistics so no equipment needed in that sort of scenario, or they run their own. So they often are considering buying things like shelving and forklifts and just various equipment for the warehouse. So that's an easy win if you need that sort of equipment. The other thing we see calm environments investing in and again depending on their logistical operations is buying things like vehicles, particularly vans, like delivery vans, or just vehicles for themselves personally. But I'd highly recommend that they speak to their accountant before buying a vehicle because there are a lot of of other rules. If it's a personal use vehicle, not an industrial type vehicle.
Nathan Bush: That's brilliant. You've given us so much. In the back of my head when we write the email to tell people there's a new episode dropping. I always give three things that I get out of it and I try to make them as practical as possible. I'm like there's so much here. How do I bring that down to 3? 3. So I really appreciate how specific and practical this conversation has been. Tracy, thank you.
Tracey Newman: No worries.
Nathan Bush: What's next on your radar for yourself and Bean Ninjas?
Tracey Newman: Well, with Bean Ninjas, we're really focusing, as I mentioned, on the next level of E commerce. So our ideal client right now is an E commerce client that maybe is doing about seven figures or more. They're recognizing that their financial side of things really needs to be improved and they're looking for a close advisory type relationship. So the sorts of projects we're eyeing off for the next year is, is becoming really authoritative in the space around worldwide implications. So I'm an E Comm in Australia. I've got a product that's an absolute cracker and we're looking at selling in the United States, United Kingdom. What are the implications for sales tax, for income tax? So that side of things is really exciting and really complicated as well. So lots of learning to do there. And probably the other area, well, there's two more areas we're eyeing off. The second is the, oh, I just had a mind gap there. I'll move on to the third thing and then I'll come back to the second thing. The third thing is right now we're building out an app. We're recognizing that for lots of shopping carts, the integration with Xero is woeful. And we feel that developers, without partnering back with accountants, are really missing an important piece there. So we're right now developing an app between Neto and Xero called Crossbeam. And that's really exciting to put on that hat and take off the accounting hat. So for if you're a Neto user, please reach out. We've got some information on our website. And the other thing is benchmarking. Interestingly, as we work with more and more e commerce clients, we find that when we're having a conversation, say with husband and wife in Adelaide that are selling widgets that they're paying sometimes extortionate fees to the payment gateways. For example, I'll pick on PayPal, but you can pick any of these sort of published rates are about 2.2%. And it's never really occurred to that husband and wife that they may be at a level now that they weren't at two years ago where they could start to dictate some terms back to PayPal about the percentage they should be paying. And having that conversation about we're a big player now. And so we find it extremely helpful on an on the myth space is to say, well, did you realize the husband and wife in Perth that are selling black boxes and they're selling $6 million a year and now paying 1.7% with PayPal and armed with that information, it's a bit like a mortgage, right, with an interest rate. It's no different. The Adelaide has been a way for going to PayPal and saying, well I know the Perth mob is now getting 1.6 and it sounds like their circumstances are similar. So we'd love to start some benchmarking services in E Com to help mid sized e comms understand what offers are being extended, what people are doing in this space. As I mentioned, it's a bit like the Wild west and maybe client B had a TikTok influencer unbox a product that they sell and they've had 100% return in terms of their sales growth. Well, all of the other E comms are probably really interested in that case study and want to understand that. So we think there's a lot of opportunity to do some cross advisory and benchmarking in that space.
Nathan Bush: Oh, that's a huge opportunity. I think that's such a smart service is to kind of of lift the lid on and connect other E commerce owners so that everyone has an equal footing.
Nathan Bush: It's great.
Tracey Newman: Thank you.
Nathan Bush: So if that all sounds interesting and we've got people who want to be in touch, whether that be PayPal or whether that be E commerce business owners looking for advice, how can they get in touch?
Tracey Newman: Well, the best way to find us is just to come through the website which is Beninjas.com and there's a book, a call or a discovery session there. You can leave us a bit of information about your E commerce commerce business and then we can offer you a complimentary call where we have a chat about your needs and then go from there.
Nathan Bush: Brilliant.
Nathan Bush: Thank you so much, Tracey.
Tracey Newman: Thank you, Nathan.
Nathan Bush: See, I told you it wouldn't be a boring accounting chat.
Nathan Bush: There was so much practicality in there that Tracy shared to help you maximize the visibility of your financial situation and optimize your tax bill.
Nathan Bush: Pretty good way to spend 45 minutes if you ask me. The thing that surprised me was the
Nathan Bush: connection and the dependency between good financial
Nathan Bush: practices and good technology.
Nathan Bush: Whether this was having the right finance
Nathan Bush: product in place, the right fit inventory
Nathan Bush: connection, or something as simple as the GST settings in your E commerce platform configured correctly.
Nathan Bush: Having the right technology will no doubt streamline your financial efforts.
Nathan Bush: Along with a good accountant, of course. To finish up, I have three resources for you. Firstly, if you're a first time listener of ADD to CART and you want to stay up to date with new episodes, head over to addtocart.com and you can sign up for our weekly newsletter. We'll let you know every time a new episode drops, as well as giving you my three takeaways from each episode and a link to the transcripts so you can know that this is an episode that you want to dive straight into. Secondly, if you want a weekly roundup of the best e commerce case studies tools and research, sign up to the High Five Friday newsletter which is delivered to inboxes at 8am every Friday morning. I read all the e commerce news and send you the bits that I think you can take out action from. Sign up at 12high12h I g h.com au forward/high5 and the last thing if you are looking to explore your next e commerce opportunity, head over to esweettalent.com we are a dedicated e commerce talent agency connecting the best e commerce talent
Nathan Bush: with the fastest growing brands.
Nathan Bush: Check it out. Sign up to the account email and get in touch with me if you want to discuss your next move. Until next time, thanks for listening and keep those customers adding to cartoon.
