Key issues to be on top of in 2014



The most successful businesses in 2014 will be those that recognise growth opportunities in a tighter market, ensure their due diligence and financing is appropriate and engage their workforce to drive productivity.

So says Kim Hutchinson, national chairman of RSM Bird Cameron, who believes directors that stay on top of the following changes and challenges will achieve the best outcomes in 2014:

A rapidly-changing sales environment: “Gone are the days of business owners simply waiting to take orders from customers as decreased consumer demand leaves a gaping void,” says Hutchinson. Directors need to start preparing for a completely different sales environment to ensure their businesses are sustainable and successful. Evolving consumer buying behaviours and preferences are changing the face of how a business approaches its selling function.

Increased investment in innovation: Productivity is a key area for improvement. Most businesses need to look carefully at how they can innovate to increase efficiency and improve their competitiveness. Businesses shouldn’t try to compete on price. Instead, they need to consider their real competitive advantages, which can be gained through smart innovation.

Superannuation Guarantee (SG) payments: There has been a significant amount of activity by the Australian Taxation Office (ATO) in relation to reviewing the timing of SG payments and Hutchinson says this is unlikely to change. Employers are currently required to pay 9.25 per cent into the employees’ superannuation fund by the 28th day after each quarter-end. If a company is late in paying, the company (and potentially the directors) are liable to a Superannuation Guarantee Charge (SGC) as well as penalties and interest.

Transfer pricing will be talk of the town (again): The recent OECD Public Consultation considered country-by-country reporting, transfer pricing documentation improvements, new guidance on the transfer pricing aspects of intangibles and the transfer pricing aspects of the BEPS (Base Erosion and Profit Shifting) Action Plan.

Corporate governance and probity issues: As companies look to auditors and risk professionals, including internal auditors, to take on more risk than they did 12 months ago, the issues of corporate governance and probity remain high. It is essential to a company’s reputation and credibility that effective corporate governance practices are in place at all levels, are working effectively and that there is a process of continual improvement. Businesses should also focus on eliminating inappropriateness and ensuring correct procedures are followed.

Due diligence in business transactions: Businesses can’t afford to make mistakes when it comes to financial transactions. The risk associated with covenant breaches and shareholder scrutiny is more pronounced than ever. The due diligence process is key as it focuses on the issues likely to affect a decision to proceed with a business transaction and the factors which may affect the value or price. Due diligence provides businesses with the ability to evaluate a business transaction appropriately. A strategic approach to due diligence is critical to the success of a merger or acquisition. Further, the assessment of all risks in business deals is imperative and a core part of due diligence. An effective risk management strategy will uncover any “skeletons in the closet”. These issues may change the terms or value of the business transaction. Particularly in cross-border transactions, due diligence is vital as the acquirer often does not have an in-depth understanding of the target company and local market. The key areas to look at in the due diligence process are historical trading results, quality of earnings, company balance sheet and financial information forecasts.

Cross-border demand will increase: The term multinational isn't just reserved for large corporations. In today’s digital environment, it’s easier than ever to go global no matter what your size, says Hutchinson. Many companies are going global and the tax implications are serious. The ability of organisations to profit from a worldwide market can be limited by the ever-increasing complexity of tax rules in Australia and around the world. These shifts in client service demands will create important growth opportunities for accounting, tax and consulting firms with cross-border capabilities.

Changes to the Personal Property Securities Act (PPSA): These alter the way in which security interests in personal property are dealt with across Australia. The 24-month transitional protection period will expire on 30 January 2014. Any holder of a security interest in personal property must register it on an online Personal Properties Security Register (PPSR). Many business owners don’t fully understand the potential effect of not doing this. If not perfected, the security interest will be defeated by other perfected interests, it will be void against a liquidator or administrator and it will be extinguished in case of a sale. Goods that are in the hands of a liquidator or administrator in which security interests are not registered will be sold without payment to the owner. Failure to perfect a security interest may also prevent a creditor from relying on personal guarantees.


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