CEO Message June

The New World We Live In

After completing many business tax meetings across Australia, we have found our clients facing new kinds of challenges which have only existed in these recent years.

And with new challenges comes the need to formulate new considerations and tactics to overcome them.

I thought I’d outline the main challenges businesses are facing during these times and how to best address them.

Inflationary pressures due to increased material costs

This is a particular challenge for any of our clients who have ended-up in fixed-term contracts, particularly in the building industry where quotes are provided 3-6 months before the work is to be completed. We have seen situations where material costs have gone up 15-20%, but clients have been locked into a fixed-price contract without recourse to increase prices where unforeseen changes have occurred.

Particularly in the next 6-12 months, our advice is to ensure that your quotes for work are only valid for 13 days and to ensure that clauses are inserted allowing cost increases beyond the original quote in material areas. In some situations, it may be beneficial to quote on a cost-plus margin basis to allow additional costs to be factored into the job once in process.

Wage pressures

Many of our clients are reporting higher levels of wage pressure than before and the temptation is to succumb to these excessive wage pressures.

I would encourage you to work with your employees on a long-term thinking basis. I have seen incidents before where the 12-months after a wage pressure occurs, employees are inevitably let go because the increase pressures have caused business profits to fall, and hence the need to reduce costs.

Long-term pipelines of work

With the above pressures of material and wage costs, it may be prudent in the next 12-months to pivot from developing long-term pipelines of work to having shorter-term projects. This minimises these inflationary pressures on your business. As economists are predicting inflation will continue for the next 12-months, make sure that you allow a 10-15% contingency in your quotes and communicate with your clients the need for price increases which may actually occur on a 6-month basis in the 2022-23 years.

It is critical to think in the long-term for your business and look at the underlying cost structures which have built up over the years. There may be a number of ways to pivot your strategy in the short-term and significantly reduce costs by outsourcing work and employing contractors in cases where there are spikes in work to be performed.

Tax time

Who can believe that it’s almost time to complete the 2022 tax returns? A few points I’d like to highlight this tax time are:

• If you think that you’ll be retaining a refund, you may want to collate information for the upcoming tax year.
• If you haven’t completed a tax variation in the past, now may be a great time to consider doing so. Particularly if you have a few properties, completing a tax variation will allow you to get less tax taken out of your pay.

Whether you’re struggling financially in your business or personal life, or simply need some assistance this tax time, WSC Group are always ready to help you.

Contact us on 1300 365 125 or email us at [email protected].