Be Informed Winter 2013

CHARTERED ACCOUNTANTS & ADVISORSwilliambuck.com

Newsletter, July 2013A William Buck Publication

Be InformedSTRATEGIC THINKING | TAILORED ADVICE | INTEGRATED SOLUTIONS

— Accessing the export market development grant — Divest and prosper — Five super changes you should understand — Understanding the R&D tax incentive — New transfer pricing rules introduced — Guest columnist: Jordan Eliseo — Having your head in the clouds could save you time and money

The winter edition

_THE WILLIAM BUCK NEWSLETTER

Over the last decade, the business world has seen a substantial shift from local to global. Markets, communities and business partnerships are all being formed across borders. Businesses operating in this environment need the support of a collaborative international network with local experts on the ground in their chosen markets.

William Buck has been the representative firm in Australia and New Zealand for Mazars since 2007. Mazars is a global accounting network represented in 85 countries with 750 partners and 13,500 professional staff.

Originating in France, Mazars audits more than one third of the country’s top 40 listed companies. However, over the last twenty years, Mazars has expanded across every continent of the global.

Unlike other networks, Mazars recognises that an integrated solution for its clients does not lie in centralisation. Rather, it has been structured around regional platforms which provide solid governance, innovative decision making and performance excellence at a local level.

Mazars is also one of the founding members of the Praxity alliance of which William Buck is a member.

William Buck acts as auditors and tax advisors to the Australian subsidiaries of many Mazars clients.

01 —A message from the Managing Director

02 — A Great Business Alliance — William Buck & Mazars

These clients range from new start-ups requiring outsourced accounting services and structuring advice to large well established subsidiaries in need of ongoing audit and taxation services.

A few examples of the Australian subsidiaries for which we act are:

— Hachette Australia – Part of the Legardare Group. Hachette Australia is a book publisher and logistics outsource supplier with a state of the art fully automated warehouse facility on the Central Coast of NSW

— Essilor Australia – Part of the Essilor Group, the world’s leading supplier of eyeglass lenses

— Lawrence & Hanson – Part of Sonepar SA, the largest private company in France

— Morpho – A subsidiary of Safran Group, a major player in global aerospace, defence and security markets

As a representative of Mazars, William Buck has access to their technical resources around the world which allows us to provide high quality advice on any international aspects of our Australian clients’ businesses.

Pictured above: Nikolas Hatzistergos, Managing Director

Welcome to our Autumn Edition of Be Informed

Welcome to the new financial year. Once more we have collated a selection of articles that are informative, current and topical for our clients and friends.

Our lead story explores cloud accounting. Cloud accounting has been around for many years; but it is now gaining traction with businesses using it as a tool to provide real time information.

Also in this edition, we discuss our alliance with Mazars. William Buck has been their representative firm in Australia and New Zealand since 2007. Mazars is a cornerstone member of our Praxity Alliance and provides us with resources and expertise in many international markets.

We are also joined by Jordan Eliseo, Chief Economist from ABC Bullion, Australia’s oldest and largest independent bullion dealer giving his insights on investing in gold bullion. I hope you find this an interesting read!

As we say goodbye to one financial year and welcome in a new one, we would like to say thank you for your support in the past and look forward with enthusiasm for a more prosperous year ahead.

As always, I appreciate your thoughts, if you have any feedback about this newsletter or any of our services, please contact me directly at [email protected].

Whilst we always ensure that our information is accurate and well researched, advice tailored to your own situation should be obtained. Please contact your client Director of choice to discuss your specific circumstances.

Best Wishes

N.T. Hatzistergos Managing Director

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Twitter:@WilliamBuckAU@WilliamBuckNZ

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THE WILLIAM BUCK NEWSLETTER_ PAGE 3

03 — Accessing the export market development grantThe Export Market Development Grant (EMDG) scheme aims to support small to medium sized businesses to break into export markets by reimbursing up to 50% of the expenses relating to export promotion.

In 2011-12, close to 3,000 exporters received assistance through the EMDG scheme. The total value of the grants for that period was $125.6 million.

The financial benefitUnder the scheme, Austrade will reimburse up to 50% (to a maximum of $150,000) of eligible export promotional expenses above $20,000. First time applicants may claim expenses incurred over the last two financial years.

Who can apply?Any Australian individual, partnership, company, association, co-operative, statutory corporation or trust that has carried on export promotion activities during the year can apply for a grant.

To be eligible, the business must have:

— Income of not more than $50 million in the grant year

— Incurred at least $20,000 of eligible export promotion expenses under the scheme

What expenses can claim?The EMDG supports nine categories of promotional activities, including:

— Overseas representation – costs of maintaining an overseas representative on a long-term basis in a foreign country

— Marketing consultants – costs of engaging a consultant to undertake market research activities

— Marketing visits – costs of travel made for the purpose of export promotion

— Communications – communication costs with a potential buyer, distributor, representative or consultant

— Free samples – the costs of providing samples of the products you are promoting for export

— Trade fairs, seminars and in-store promotions – external costs related to participating in a trade fair, seminar or in-store promotion

— Promotional literature and advertising – external costs of promotional material

— Overseas buyers – the cost of bringing potential buyers, who are non-residents, to Australia

— Registration and/or insurance of eligible intellectual property – costs of granting, registering or extending rights for eligible intellectual property and costs of obtaining insurance to protect these rights

Need more helpApplications for 2012-2013 open on 1 July, 2013 and close on 2 December, 2013.

For further information about the grant or to find out if you are eligible please contact your local William Buck advisor.

Under the scheme, Austrade will reimburse up to 50% (to a maximum of $150,000) of eligible export promotional expenses above $20,000.


04 — Divest and prosper A guide to splitting a business

A well planned divestment can, among other things, allow the parent business to focus on its core capabilities and free up capital for investment in other areas. It also allows the business to be ‘divestment ready’ should an unexpected opportunity present itself.

An effective divestment strategy in many ways mirrors an acquisition strategy. It involves looking at the core capabilities of the business and working towards strengthening these areas or removing areas that are not core to the primary business.

There are a number of key steps to consider when planning a successful divestment strategy as follows:

Step 1 – Establish the rationaleThe divestment of a business unit is most often reactive. It occurs as a consequence of changing market conditions or a downturn in the business lifecycle. Consequently, the process is seldom

systematic. Proactive divestments on the other hand tend to be more closely tied to the business’ long-term strategy.

There are many reasons why a business may choose to divest a business unit including:

— To allow the business to focus on its core capabilities or assets

— To obtain funding

— To access new opportunities

— To unleash a specific business unit and allow it the freedom to grow outside the parent business

— Because the business unit was a poor strategic fit

— Attracting and retaining staff in a more focussed business

The rationale for the business divestment will determine the nature of the divestment. For example, if the business wishes to obtain more funding, a trade sale or private equity sale may be most appropriate.

It is important to put a dedicated team in place to manage the divestment process and ensure that attention is not taken away from the core business.

Step 2 – Determine what is being sold and who your buyers are:

Fit and valueAlthough it may seem to be common sense, determining which business units should be divested can often be a challenge. In tough economic times it can be tempting to off-load those business units that are underperforming. Business units should be tested for both fit and value.

To determine fit, management should ask if a unit contributes to the core capabilities of the business and if it is essential to the business’ long-term growth. To determine value, management should assess the unit’s performance and ask if the unit is worth more within the business than it would be outside the business. For a unit to be considered for divestment it should fail both of these tests.

Valuation as a stand-alone business It’s important to determine which assets are included in a business unit, which may include

The sale of a business unit or division is often looked on as a last attempt to access capital when times are hard. With a solid divestment strategy, however, the disposal of assets can present an opportunity rather than a hasty solution.


products, services, systems (in particular IT systems), facilities and support services.

To attract serious buyers, the business unit must then be valued as a stand-alone business. This may require financial statements to be adjusted to account for costs shared by the parent company such as administration, finance and marketing costs.

purchaser it is then possible to make a compelling case for buying the business unit.

Conducting vendor due diligence at this stage is advantageous as it provides verified, credible information on the business unit as a stand-alone business. It can also provide objective forecasts on when the purchaser is likely to realise value on the investment.

Be honest about the business unit’s weaknesses and outline steps that the purchaser should take to enhance its value. Providing the information upfront will save the purchaser a lot of hassle and can help close the deal.

Step 3 – Plan for the separationA successful divestment lies in the planning. The complexity of the plan will depend largely on the level of integration of the business unit. Some of the key issues that an effective plan will take into account include:

— Forecasted costs – it is important to accurately forecast the costs associated with the divestment upfront and add some fat into the budget for unexpected costs

— Brands and patents – consider brands and patents early. The upfront cost of obtaining legal advice on how to deal with shared brands and patents can pale in comparison with the associated costs of legal action later down the track

— Shared services – carefully consider shared services between the unit and parent business. Both the seller and the purchaser must have a plan in place for providing these support services. It is not uncommon for the buyer to provide a Transitional Service Arrangement (TSA) for 6-12 months. This allows the purchaser time to set up the facilities and services required to support the acquisition

As a vendor, it is important to carefully assess the business’ ability to provide these services before entering into the agreement.

Stranded costs Stranded costs include people costs and property that are no longer required by the vendor following the divestment process. Planning for this may involve reassigning them to other parts of the business, disposing of further assets or implementing redundancies.

Cultural challengesIn developing a divestment function the human resources function will be key. A significant challenge lies in motivating employees to see the divestment through to completion when there will no longer be a role for them at the end of the exercise. An effective incentive plan based on completion targets can help keep staff motivated.

A divestment involves a number of moving parts which if not managed correctly can distract the management team from the core business. For assistance in developing a divestment strategy please contact your local William Buck advisor.

An effective divestment strategy in many ways mirrors an acquisition strategy.

It’s also important to consider if you are selling the business or shares in the company as this may have tax implications for the parent.

Appeal to buyersWhen a business unit is underperforming or has been identified as a divestment candidate, it can be tempting to ‘milk’ the business unit by extracting the remaining value. This is a common mistake.

Buyers want to purchase assets that still have value. It is important to know the market including who the potential purchasers are. They may be competitors, suppliers, employees and/or private equity firms. Having identified your potential


05 — Be preparedFive super changes you should understand

Superannuation guarantee increaseFrom 1 July 2013 the superannuation guarantee increased by 0.25% to 9.25% of an employee’s salary. Employees that are salary sacrificing to a superannuation fund should ensure that this additional superannuation support will not push them over the $25,000 limit.

As with any year, employees should also check their contributions based on any pay rises they may receive and adjust their voluntary superannuation contributions accordingly.

Additionally, from 1 July employers are required to make superannuation guarantee payments for those aged over 70 which they previously did not have to do.

Proposed increase to superannuation caps for over 60sThe limit on concessional contributions (such as superannuation guarantee, salary sacrifice and personal tax deductible contributions) remains at $25,000 for the majority of taxpayers for the upcoming financial year.

However, it has been increased to $35,000 for those over the age of 60. From July 2014, this increase will be extended to those over age 50.

It is worth noting that the Government has dropped the concept of providing a different limit on contributions depending on a taxpayer’s superannuation account balance.

Proposed increase of tax to those earning in excess of $300,000Questions have surrounded the Government’s proposal to tax contributions to superannuation at a higher rate for those earning in excess of $300,000 per annum. The Government released a draft Bill to enact this change and reiterated its intention in recent budget announcements.

Major changes to superannuation are on the way following announcements by the Federal Government. While some of the changes have yet to be legislated, it’s important to understand how they may impact on you.

This change is intended to apply from 1 July 2012 and if passed will impact on contributions made after this date. It is anticipated that taxpayers will receive a notice for excess tax on contributions upon lodgement of their tax returns. Your superannuation savings can be used to pay this levy.

Although the tax on contributions has increased, superannuation remains the most attractive savings vehicle for your retirement. It is worth remembering that once in a superannuation fund, earnings are taxed at 15% not the marginal tax rate (currently 45% for those earning over $300,000) plus the Medicare levy.

Low income super contributionA low income super contribution has been introduced for those earning less than $37,000 per year and is effective from 1 July 2012.

This contribution is paid to a superannuation fund and offsets the contribution tax on concessional contributions such as superannuation guarantee and salary sacrifice contribution. This could make contributions to superannuation more attractive for those on lower incomes.

Tax on pensions for the over 60sFinally, in the lead-up to the budget there was speculation about pensions for those aged over 60 being taxed. This has not eventuated and instead, the Government has proposed to tax a member’s superannuation income stream with earnings in excess of $100,000 at 15% as opposed to the nil tax rate they currently enjoy. This legislation is yet to be put in place.


06 — Understanding the R&D tax incentive A guide to making tax savings

The Federal Government’s Research and Development (R&D) incentive program can offer sizeable tax savings and even refunds of up to 45% of an entity’s R&D expenditure, where it is in a tax loss situation.

However, in spite of the generous incentives on offer, more rigorous reporting requirements and a lack of understanding around the changing R&D legislation has led to uncertainty among many businesses as to their eligibility.

What is the R&D tax incentive?Administered jointly by the Australian Tax Office (ATO) and AusIndustry, the R&D tax Incentive applies from the 2012 income year onwards and replaces the previous R&D tax concession.

The incentive allows eligible entities to claim the following tax offsets against their R&D expenditure:

— A 45% refundable tax offset for entities with an annual aggregated turnover of less than $20 million

— A 40% non-refundable tax offset for entities with an annual aggregated turnover of $20 million or more.

It is important to note that aggregated turnover includes that of affiliates and connected entities.Any company incorporated under Australian law (or that are Australian residents for tax purposes) with R&D costs of at least $20,000 per annum may apply for the incentive. Certain foreign corporations may also apply where they are residents of a country with which Australia has a double tax treaty in place and they are carrying on business in Australia.

What is an R&D activity?Eligible R&D activities are broken down into two categories - core activities and supporting activities.

Core activitiesCore activities are those that are experimental - the outcome of which cannot be known or determined based on current knowledge. Core activities must be based on the principles of established science and undertaken under a systematic process, typically proceeding through the following stages; hypothesis, experiment, observation, evaluation and conclusion.

Certain activities are specifically excluded from being core R&D activities, including (but not limited to) market research, commercial, legal and administrative aspects of patenting, licensing, and, activities associated with complying with statutory requirements or standards. For a full list of excluded activities please contact your local William Buck advisor.

Importantly, excluded activities may be eligible as supporting R&D activities but are subject to the dominant purpose test outlined below.

Supporting activitiesAn activity is a supporting R&D activity where it is directly related to a core activity. An activity will be considered to be directly related if it has an immediate, direct or close relationship with the core activity. A supporting activity is usually required for the core activity to take place.

Supporting activities do not need to be produced or developed at the same time or location as the core activity.

Applying for the incentiveThe R&D tax incentive is a self assessed program comprised of two steps:

1. Registering the R&D activities with AusIndustry

2. Claiming the tax offset in the company’s tax income tax return. The tax return must be accompanied by the ATO's R&D tax incentive schedule.

While the incentive is self-assessed, it is important that the company has adequate documentation to meet their compliance responsibilities. Both AusIndustry and the ATO undertake annual audits in areas they believe will to be at the highest risk of non-compliance.

A series of recent cases put before the Administrative Appeals Tribunal (AAT) have revealed that the documentation required to substantiate R&D tax incentive registration and claims is far more stringent than that required under the previous R&D tax concessions program.

Substantiating core activities will involve showing documentation of its systematic progression. Substantiating supporting activities will involve evidencing the connection between its main purpose and a core R&D Activity.

Documents may include (but are not limited to) technical project documentation, trial plans and results, log book records, minutes of meetings with project staff, photographs or videos of prototypes and summary reports.

To ensure that your company is compliance ready it is important to instil best practice reporting and record keeping throughout the company. Ideally, the R&D tax incentive requirements should form a core component of your R&D planning.

Eligible R&D activities are broken down into two categories – core activities and supporting activities.

The dominant purpose requirement

Certain supporting activities are subject to the dominant purpose test, these include activities that:

— are excluded from being core R&D activities; or

— produce, or are directly related to producing, goods or services

An entity must be able to prove that the prevailing or most dominant purpose for undertaking these activities is to support the core activities. In determining the dominant purpose, the following considerations should be taken into account:

— Is it a routine activity normally undertaken for non R&D purposes?

— Would it have taken place even without the R&D core activity?

— To what extent are normal commercial practices disrupted?

— How great is the risk that production outcomes will be significantly compromised as a result of the core R&D activity?

— Will the activity facilitate future activities which are not core R&D?


07 — New transfer pricing rules introducedThe Australian Government has introduced the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013 amending the transfer pricing rules.

These reforms will have a substantial impact on all businesses operating internationally.

The new rules will apply to income years commencing on or after the earlier of 1 July 2013 and the day the Bill receives Royal Assent.

Broadly, the new rules may automatically deem the amounts taken to be paid or received for goods, services to be different to the actual amount paid where the parties are not considered to be dealing on “arm’s length terms” and a transfer pricing benefit is obtained. By altering the transfer price amount, tax liabilities may be manipulated.

It should be noted that the rules apply to any “commercial or financial relation” between cross border parties, including interest charges on loans.

Taxpayers often forget to include in their transfer pricing policies internally generated services such as HR, accounting and finance, marketing and

sourcing which is often done in a central office on behalf of the cross border group. This is often overlooked and the ATO will require the pricing of these to the overseas entity to be based upon a third party rate.

Key reformsArm’s length conditionsThe new rules focus on arm's length conditions and require that dealings between international related parties be priced on the basis that the actual conditions between entities in their business dealings are ignored and prices must be determined on “internationally accepted arm's length principles”.

For the transfer pricing provisions to apply, it must be determined that independent entities would not have done what was actually done given the options available to them.

The identification of the relevant arm's length conditions must be done in a way that best achieves consistency with prescribed guidance material, particularly the Organisation for Economic Co-operation and Development (OECD) guidelines. There may be some difficulties in applying the new rules where the Australian “conditions” and OECD Guidelines do not directly correlate.

Thin capitalisation and transfer pricingBroadly, the thin capitalisation provisions operate to limit the deductibility of interest in respect of certain cross-border financing arrangements.

The transfer pricing provisions might either reduce or increase the deemed interest charge.

The transfer pricing provisions only require the interest rate (not the quantum of debt) to be set as if arm's length conditions had operated. However, the ATO may determine the level of acceptable interest charged based on an arm’s length level of debt. This figure may be lower than the actual

It should be noted that the rules apply to any “commercial or financial relation” between cross border parties, including interest charges on loans.


08 — Guest columnist: Jordan EliseoGoing for goldThis edition’s guest columnist is Jordan Eliseo, Chief Economist from ABC Bullion, Australia’s oldest and largest independent bullion dealer.

Investing in gold has come under criticism of late due to a significant correction in the first half of 2013. Despite the negative press, gold, which comfortably outperformed the share market over the last decade, remains a popular and growing component of many investors’ portfolio, including SMSF Trustees.

Gold and other precious metals are often used to balance out the risk of an investor’s portfolio. They are known to keep their value better than other assets during times of economic uncertainty and periods of rising inflation. Typically, when other asset classes are struggling, investors turn to gold, driving its price up.

On the other hand, when other assets are booming, precious metals tend to underperform.

Whilst gold doesn’t pay a yield, the potential for capital gain in low interest rate economic environments draws investors to it.

Choosing a DealerIt’s important to research which gold dealer you buy your gold (or silver) from. A reputable dealer should be able to provide an assessment that certifies the purity and value of the gold bar that you are purchasing.

It is also important to have the serial number of the gold bar recorded to your account. Gold bars commonly have four marks to identify each unique bar. A good dealer will assist you with this process in an open and transparent manner.

You can’t actually buy gold at the ‘spot price’, so ensuring your dealer offers competitive premiums is also important.

BrandAll gold bars are branded. Gold from all reputable brands will be 99.99% pure. This is the minimum purity for gold that you should accept for investment purchases.

Buying a reputable brand is important because if you want to sell your gold back at a later date, you will find this very easy if you have a recognised brand (hallmark) stamped on your bullion bar.

StorageWhile it may be tempting to keep your gold at home so that you can look at it, secure storage is important. Precious metals are compact, valuable, and easy to re-sell. Unfortunately, these qualities are also desirable to criminals.

Gold vaults (such as private vaulting company Custodian Vaults) typically have the most up to date technology and protocols to protect your gold and offer insurance included as part of their service offering. This is particularly important for SMSF investors who have reporting obligations to adhere to in their role as trustee.

If you are interested in investing in gold, it is important to do your own research to ensure you are comfortable with the volatility, and speak with your financial advisor, to ensure that it is appropriate to your personal circumstances.

loan amount. It will be necessary to perform a transfer pricing analysis of all cross-border financing arrangements.

DocumentationWhere the ATO has concluded that there existed a sole or dominant purpose to obtain a transfer pricing benefit, any transfer pricing adjustments may attract a minimum penalty of 50% of the tax shortfall. Where documentation supporting a reasonable arguable position is provided, then the minimum penalty may be reduced to 25%.

There will be no penalties for transfer pricing adjustments where the amount of additional income tax or withholding tax payable as a result of an adjustment falls below:

— for trusts and partnerships, the greater of $20,000 or 2% of the entity's net (taxable) income per the tax return; and

— for all other entities, $10,000 or 1% of the income tax payable per the tax return.

In many cases, taxpayers will be required to undertake a full transfer pricing analysis just to determine if they fall within such low levels.

Amendment periodsThe new rules will require transfer pricing adjustments to be made within seven years of the date on which an entity receives an assessment. This is considerably longer than the ordinary four-year amendment period the ATO has for most other tax adjustments.Self-assessment

Transfer pricing is now in the self-assessment regime. This means that there is a much higher burden on taxpayers. Taxpayers will have to consider transfer pricing to ensure that taxable income is consistent with arm's-length conditions.

What does this mean for you?These reforms will have a substantial impact on all businesses operating internationally. Taxpayers will need to revisit their approach to transfer pricing. In particular, they will need to ensure that:

1. adequate documentation is in place before lodgement of relevant tax returns; and

2. their transfer pricing approach is fully and accurately reflected in the International Dealings Schedule lodged with their Australian tax returns.

The new rules will mean that more transactions will require transfer pricing rules analysis. The onus is placed on taxpayers to ensure that they have correctly calculated their taxable income. Therefore, if the transfer pricing rules are not considered, taxpayers could incur increased tax assessments and penalties.

Whilst gold doesn’t pay a yield, the potential for capital gain in low interest rate economic environments draws investors to it.

07 — New transfer pricing rules introduced (cont.)

Considerations for buying gold

Physical gold or paper gold.There are two common ways to invest in gold; buying physical gold bullion or buying a gold Exchange Traded Fund (ETF).

ETFs are ‘paper gold’. An ETF is a kind of unit investment security that is traded on the stock market and closely tracks the value of a commodity such as gold or silver, or an index such as the ASX200. It gives you exposure to the gold price, but it does not eliminate third party risk, typically can’t be redeemed in physical metal, and an ETF will also attract an annual management fee, which erodes the value of your investment.

Gold bullion or physical gold is real, tangible gold. It comes in a variety of sizes and brands (or hallmarks) all of which will affect its resale value.


While cloud computing has been around for a number of years, only now is it beginning to be adopted as a mainstream business tool.

As business advisors, we’re often asked about what exactly the cloud is. In the simplest terms, cloud computing involves storing and accessing data and programs over the internet instead of your computer's hard drive or server. Service providers use large networks of remote servers with specialised connections to share the load of processing and storing data on behalf of their users.

Cloud computing allows users to increase capacity or add capabilities without investing in new infrastructure, training new personnel, or licensing new software.

What is cloud accounting?“Cloud accounting” is more specifically the utilisation of bookkeeping and accounting software in the cloud for the processing and recording of your business’ financial transactions.

The development of cloud based accounting software represents the next generation of record keeping technology and can be a more efficient and innovative way to monitor and follow the financial performance of your business.

The benefits of cloud accountingFor many business owners, a cloud accounting solution can have many benefits over traditional desktop accounting solutions including:

One data fileCloud accounting programs have a multi-user function allowing you and your accountant to access the same data and work on the data simultaneously, savings enormous amounts of time.

No longer does your accountant have to contact you for a file, update it and send it back. Adjustments to entries can be processed instantaneously by you or your accountant. Spending less time on data management translates to less cost to your business.

Additionally, data can be set to ‘read only’ rights for some users, allowing your key stakeholders to access information at any time while maintaining its integrity.

Daily bank feeds and real time information Your business’ bank transactions can be retrieved daily. Daily bank feeds allow you to access information about the performance of your business in real time. This puts you in a better position to take advantage of opportunities or address financial issues faster than ever before.

09 — Having your head in the clouds could save you time and money


09 — Having your head in the clouds couldsave you time and money (cont.)

Name: Siobhan SellickPosition: DirectorDivision: Business Advisory Years at William Buck: 1

How did you get started in business advisory?When choosing an area in one of the big 4 accounting firms to join as a graduate, I put down a division called “Entrepreneurial Services” as my first preference, mainly because I liked the name. It was described as a service line that provided tax, accounting and audit services to privately owned businesses and their owners.

While the name was the initial appeal, over time I found that I preferred working directly with the owner/operators of privately owned businesses and adding value to them. 20 years later I still enjoy working with the individuals and their related entities and get great satisfaction when I feel like I’ve added value to them personally and/or their business.

Is there any one mistake you see individuals and business owners making more frequently than others?One mistake I see most commonly with privately owned business clients is that the individual owners consider the assets, especially cash of related trusts and company’s their own and continue to support their lifestyle by drawings of cash from the operating entities. This not only has adverse tax consequences but can also impact on the working capital required to support the business. With the right advice upfront it is possible to structure in a way to minimise the tax costs or cash flow impact to the group.

What is the most valuable lesson you’ve learnt in your professional career?One lesson that I heard repeatedly early in my career is “be proactive and be available”. To me this means having a good understanding of your client’s business and their needs together with an ability to have a commercial discussion that is relevant and meaningful to them on a regular basis. It also means always returning calls and emails on the same day.

10 — Director profile Siobhan Sellick Additionally, by combining your accounting

software with electronic banking, many transactions can be prepared automatically. This removes the need to handle repetitive transactions multiple times.

FlexibilityCloud accounting enables users to access their data from any location as long as they have an Internet connection. This provides the ability to work from home, while travelling or from a second location.

Many of the large providers are also configured to operate on tablets and smart phones.

AutomationOnline software is regularly updated for changes in the accounting and taxation environment, such as new tax rates or legislative amendments. Not only will this ensure your data is being treated correctly, it also eliminates the need to purchase and install regular software updates, saving both time and money.

Access to third party programsMost cloud accounting programs run on an Open Application Programming Interface (Open API) which allows third party providers to create modules and add-ons. These can cover anything from payroll and HR to ecommerce, inventory tracking and property management.

It is important to apply the same stringent assessment techniques to choosing third party modules as you would to choosing a software provider.

Data securitySince cloud computing emerged, security has been a major concern. Many business owners and directors are concerned about using a service provider to store data outside corporate firewalls. There is some legitimacy to these concerns and it is important that service providers are able to provide evidence of their security.

Major cloud suppliers such as Amazon and IBM have understood the importance of data security and have gone to significant lengths to ensure the integrity and reliability of the data storage houses that they are using.

In reality, there are significant issues with on-site data storage, such as irregular back-up procedures, the safe management of any back-ups and the correct retrieval of back-up data should it be necessary.

Other issues to consider include:— Data ownership - does the data that an

organisation creates, uses and stores within the cloud belong to that organisation?

Cloud computing allows users to increase capacity or add capabilities without investing in new infrastructure or licensing new software.

— Data access - can an organisation’s data be viewed or used for unknown purposes without its prior consent? Also, what rights do you have to access the data or services in the event of contract termination or missed payments?

— Sovereign security – Are the server farms located overseas? If so, how stable is the country in which they reside?

It is important that business owners understand the data ownership and access concerns with any cloud accounting program being used.

Choosing a service providerAustralia’s most popular accounting software providers, MYOB and QuickBooks have brought cloud-based products to the market in addition to their standard off-the-shelf packages. A third significant provider in Australia is Xero which only offer cloud based accounting software packages.

It is envisaged that over the next decade other accounting software providers will release cloud-based products and it is expected that this form of accounting software will grow in familiarity, popularity and usage.

Moving your financial data to the cloud demands a high level of trust between you and the provider and it’s important to ensure that the specific needs of your business are met.

In evaluating a service provider, you should look at the following:

— Integration – How well does it integrate with your other IT systems and is this important to your business?

— Transition – How will the transition from your current software to the new program take place? Will there be any significant downtime to your business?

— Scalability – Is the package scalable? Many businesses will find that a smaller user-friendly package may be more appropriate when starting out; but may need to increase the level of services used as the business grows and reporting requirements become more complex.

— Access to technical expertise – What level of support is available? Thanks to automation tools and self-service web portals, the cloud is largely a do-it-yourself effort. When your financial data is in question, however, it is important to ensure that support is available when required.

— Future strategy – Does the provider have cohesive strategy for evolving and incorporating new features. Will these incur additional costs?

— Ongoing costs – Are the rates advertised guaranteed? If so, for how long?

— Security – Your service provider should be able to provide evidence of the steps taken to protect the security of your data.

William Buck is a licensed distributor for some of the major cloud accounting suppliers. Our experts can assist you in the selection, design, implementation and ongoing management of a cloud accounting solution.

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11 — Board talkKey issues affecting corporate boards, family boards and the boards of not for profits

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Dealing with Change – the Bank of SydneyThe true value of a corporate board is tested most in times of transition. A strong board will have the ability to not only set the long-term vision of an enterprise, but guide it through any periods of change and uncertainty that achieving its vision may precipitate.

For the Bank of Sydney (formerly known as the Beirut Hellenic Bank), a change of name signalled a far deeper change within the organisation. The bank’s non-executive Chairman, Nick Pappas, explains:

“The change of name is part of a broader strategic plan to launch the bank into a new era of growth. For our bank, having been acquired by the Bank of Beirut Group in late 2010, the name, Beirut Hellenic Bank, was always a transitional one for us.

Sydney is widely recognised as not only the financial capital of Australia, but also its multicultural capital. While we haven’t lost sight of our tremendous heritage as a financial institution, our new name represents our current standing as a truly multicultural Australian bank. And presenting a local face equips us well to grow in what is already a very competitive industry.”

The change in name coincides with the appointment of a new Chief Executive Officer, (CEO). The Bank of Sydney has brought in Westpac’s former regional general manager for Sydney’s inner-west, Julie Elliot to lead its growth strategy.

Managing the transition from one CEO to another can be a testing period for any organisation. Some boards are simply too passive in this process, allowing the CEO to pass the baton while hoping for the best. For Mr Pappas, this was not an option:

“During the interregnum, I adopted a more hands on role; ensuring that the bank continued to run smoothly and that the channels of communication between our board and the parent company were kept open. In many ways, my role briefly became more akin to an executive chairman. This is not unusual in such instances.”

Such a shift required little adjustment for Mr Pappas who describes the role of a non-executive chairman of a foreign-owned subsidiary as one that is “dual faceted.” It requires him to both “look down” when overseeing the local enterprise and “look up” when reporting to the parent company. This adds yet another dimension to the traditional reporting lines of a board chair.

Whether Mr Pappas’ experience is indicative of a shift in the duties of a Non-Executive Chairman or not, it is evident that managing change in an organisation requires mindful and attentive hands-on leadership from the board.

Be Informed Winter 2013

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Transcript of Be Informed Winter 2013