Saturday 22 Jul 2017
*

Latest Accounting News
Hot Issues
Items that heat up your depreciation deductions
Doing a budget is a good idea but ....
Government ‘undermines’ tax system in new moves on property expenses
Taxpayer denied deduction for work expenses of $60,000
Overtime meal expenses disallowed because no allowance received
Key Economic Indicators, 2017
Government to shut down salary sacrifice loophole
Crowdfunding legislation gets greenlight
ATO heavyweight responds to hacking fears
Checklist - Individuals Tax Returns - 2017
Checklist - Tax time 2017 - Company, Trust & Partnership
Checklist - Superannuation Funds - 2017
ATO to ramp up scrutiny of $20K tax break use
‘Bank-like heists’ make way for new wave of cyber crime
ATO reports on key contraventions for 2016-17
ATO, mid-tiers warn on common expenses myths
SMSF trustees told to take action on contributions
Higher instant asset write-off threshold for small business extended
Australian population figures
New data points to spiralling retirement costs
Personal insolvency numbers spike across Australia
ATO cracking down on taxable fringe benefits
Intangible capital improvements made to a pre-CGT asset
The three core pillars of this year's budget
Federal Budget - 2017-18 - Overview
Does your business import or export goods and services?
Federal Budget - 2017-18 - Budget documents
When does an asset cost less than $20,000? Depreciating assets: composite items
ATO finalises guidance for capped defined income streams
Warning on trap with trust deed updates
2011 Census - what was the make up of your area?
It’s no secret that Australians have some of the largest houses in the world.
Resources on our site to help you and your family.
ATO defends approach to SG compliance
Essential steps for SMSF clients before 30 June
New tax incentives for early stage investors
Articles archive
Quarter 2 April - June 2017
Quarter 1 January - March 2017
Quarter 4 October - December 2016
Quarter 3 July - September 2016
Quarter 2 April - June 2016
Quarter 1 January - March 2016
Quarter 4 October - December 2015
Quarter 3 July - September 2015
Quarter 2 April - June 2015
Quarter 1 January - March 2015
Quarter 4 October - December 2014
Quarter 3 July - September 2014
Quarter 2 April - June 2014
Quarter 1 January - March 2014
Quarter 4 October - December 2013
Quarter 3 July - September 2013
Quarter 2 April - June 2013
Quarter 1 January - March 2013
Quarter 4 October - December 2012
Quarter 3 July - September 2012
Quarter 2 April - June 2012
Quarter 1 January - March 2012
Quarter 4 October - December 2011
Quarter 3 July - September 2011
Quarter 2 April - June 2011
Quarter 1 January - March 2011
Quarter 4 October - December 2010
Quarter 3 July - September 2010
Quarter 2 April - June 2010
Quarter 1 January - March 2010
Quarter 4 October - December 2009
Quarter 3 July - September 2009
Quarter 2 April - June 2009
Quarter 1 January - March 2009
Quarter 4 October - December 2008
Quarter 3 July - September 2008
Quarter 2 April - June 2008
Quarter 1 January - March 2008
Quarter 4 October - December 2007
Quarter 2 April - June 2007
Quarter 1 January - March 2007
Quarter 4 October - December 2006
Quarter 2 April - June 2006
Quarter 4 October - December 2005
Quarter 3 July - September 2005
Quarter 2 April - June 2005
Quarter 2 April - June 2004
Quarter 1 January - March 2004
Quarter 4 October - December 2003
Quarter 3 July - September 2003
Quarter 4 October - December 2001
Quarter 3 of 2003
Articles
Small Changes Make The Difference
Enough for Retirement?
Victorian Workcover Claims Obligations
Victorian Workcover Premium Obligations
Superannuation Fund and Instalments
Reasonable Work Expense Claims
Building and Construction Industry LSL Levy
Minimum Superannuation Support
Discretionary Trusts Can Lose Small Business Concessions
Rental Losses and Bankruptcy
Non-resident for Tax Purposes
Workcover Deadline ? 5th September
Salary Sacrifice Arrangements
Unclaimed Super?
A Reverse in Fortune
Applying for Centrelink Benefits ? What?s Involved
Centrelink New Gifting Rules
Compensation for Damage to Depreciable Asset Not Assessable
Protect Family Assets
Company Directors ? Limit Your Liability
Year End Tax Planning - 2003
Year End Tax Planning - General
Tax Checklists: Help Us Help You - Business
Tax Checklist: Help Us Help You - Personal
Small Changes Make The Difference
If you are going to make your business more profitable, you must have a strong understanding of the impact that small changes can have on the business.

Company A has 50 enquiries per day, with a conversion rate of 50%, so they deal with 25 customers each day.

The average unit price of the goods is $40, and on average, each customer buys 2 units. The average individual sale is $80. The total daily sales are $2000.

What happens if we make the following changes?

Increase conversions to 60%
Increase price by 10%
Increase units purchased by 10%

Now Company A has 30 customers per day, average price of $44 and an average quantity purchased is 2.2. The average individual sale is now $96.80.

Total daily sales have increased to $2,904?an increase of 42.5%.

If the business operates 5 days per week, over a 12-month period, this results in increased sales of $235,040, from $520,000 to $755,040.

If the business had an original gross profit margin of 40% the increase in price would lift the gross profit to 45.5%. The overall result is an additional $135,200 added to the bottom line.

Increases to conversion rate, price and quantities purchased become three strategies for growth. How can you increase our conversion rate? How can you increase the average quantity purchased? What small changes can you make that will have a massive impact?

Should you decrease price to stimulate sales? The impact of a price decrease on your level of sales and profitability can have a greater impact than you may think.

If the business above were to reduce its price by 10% (given a gross profit margin of 40%), the number of units sold would have to increase by 33% to ensure that the same level of profitability is maintained.

Are you prepared to increase your volume by 33% just to make sure that you don?t lose any money?

On the other hand, if the business increases its prices by 10%, sales volume would have to drop by 20% before the profitability is adversely affected.

If we assume that the number of customers and quantities sold remain the same, we can see the impact that a price decrease and increase has on the overall profitability of the business:
Item Now Price drop of 10% Price rise of 10%
Sales 520,000 468,000 572,000
COGS 312,000 312,000 312,000
Gross Profit 208,000 156,000 260,000
Overhead Costs 150,000 150,000 150,000
Net Profit 58,000 / 11.1% 6,000 / 2.1% 110,000 / 19.2%
Which is better, a price decrease or a price increase? What strategies are you going to implement to increase the prices in your business?
















30th-September-2003
        
89 Boronia Road Boronia Vic 3155 Phone: (03) 9762 5400 Fax: (03) 9761 1327