Business Finances

Buy now, Pay later - definition

Buy now, pay later means that you pay by instalments over time, instead of paying the full amount upfront. This means that you buy the product and delay the payments Your purchase is usually paid off over a number of weeks. 

Buy now, Pay later - What to look out for

• You do not overspend

• Check the fees - these can add up

• Signing up for many services at the same time - this can be hard to manage 

• How it might affect a loan application

• Late repayments can appear on your credit report

• Layby can be cheaper

Buy now, Pay later - tips to manage

• Set a limit - and stick to it!

• Use one service at a time

• Budget for your payments

• Link to your debit card

Credit cards - Types

• Store Card - Myer, David Jones

• Personal Loan - given by financial institutions

• Credit cards - given by financial institutions

Credit cards - what to consider

• Read the contract

• Know the interest rates

• Don’t only pay the minimum balance - try to pay all of the money owed by the due date as this will stop you for incurring interest

• Have a low credit card limit

• Only buy what you can afford to pay back

• Avoid impulse buying - you still have to pay it back one day!

Credit/file record

A credit file/record is a record of the credit history of an individual. It lists defaults a person has had in paying their debts.

Investment - Risk and return

When investing money, there is a trade off between how risky the investment is (chance that the money will be lost) and how much money that investment will earn (the return on investment)

Risk and return rule

low risk = low returns e.g. bank deposits, term deposits

high risk = high returns e.g. property, shares

Taxation - Personal Income Tax

As Australians we enjoy access to a good health system, quality education and a variety of community facilities (eg parks and playgrounds) that are supported through tax collections.

GST

Goods and Services Tax (GST) is a 10% tax that is added to most goods and services you buy in Australia.

Government tax use

The Australian Taxation Office (ATO) collects these taxes for the Australian Government to provide services including:

• Health care

• Education

• Defence

• Roads and railways

• Payments for welfare, disaster relief and pensions

TFN

• There is some admin to do before you become part of the income tx system - it is not automatic.

• You have to register for a Tax File Number

• This is yours forever

• Most employers will require you to provide this information before you even show up for work

Progressive Tax system

A progressive tax system is a structure where tax rates increase as an individual's taxable income rises

Superannuation

Superannuation is a compulsory system of placing a minimum percentage of your income into a fund to support your financial needs in retirement. The minimum percentage is 12%.

Who qualifies for Super?

• Most people access their superannuation money when they turn 60

• Every worker 18 years or older

Advantages of super

For us - we have more money when to retire so hopefully, we can retain the lifestyle to which we became accustomed as workers.

For government - more people fund their own retirement so there is less pressure on government to come up with enough money to pay the old age pension to everyone

For the economy - super funds have invested around $2 trillion in assets in Australia like roads, ports, airports, utilities like gas, electricity, internet networks, hospitals, office buildings.

Retail vs industry funds

• Industry super - any profit they make is kept  in the business; so the fees they charge people are usually lower

• Retail super - most profit they make is given to their owners; so they normally charge higher fees

Assets

A present economic resource controlled by the business that has the potential to produce economic benefits.

Current vs Non current assets

• Current – a present economic resource that is controlled by the business that is expected to be sold, consumed or turned into cash within the next 12 months. Current assets examples: bank; accounts receivable and inventory

• Non Current - a present economic resource that is controlled by the business that is expected to be used by the business for a number of years and is not held for the purpose of resale

Liabilities

A present financial obligation of the business to transfer an economic resource

Current vs non current liabilities

• Current Liabilities – current financial obligations that is expected to be settled (repaid in full) within the next 12 months EG – Accounts Payable, Wages Owing, GST Payable, short term loan

• Non Current Liabilities – current financial obligations that is not expected to be settled within the next 12 months. These are long term financial obligations. EG – mortgage; loan

Owners equity

• Owner's equity is the owner's claim on the business's assets. 

• It is calculated by deducting total liabilities from total assets (OE = A – L)

Revenue

The money a business brings in from its normal business activities, such as selling products or services, over a specified period of time. eg Cash fees, credit fees

Expense

Any cost that contributes to the day to day running/operation of the business. EG wages, rent, advertising, insurance

Cash budget

An accounting report  that predicts future cash flows and determines increase or decrease in cash position, helping to plan for the future.

Balance sheet

An accounting report that shows financial positions of a business at a specific point in time which helps to assist in decision making.

Income statement

An accounting report that compares revenues and expenses that occur in a period in order to determine profit