I AM back. A hilarious quip by cigar chomping Arnold Schwarzenegger in The Expendables 2 as he signals his return to Hollywood after serving two terms as the governor of California, one of the largest economies in the world.
Without any political or state administrative experience, he was famous for his continuous high-deficit budgets while governing California State. Popular budgets that kept his constituents happy and his seat safe.
So are you happy with the recent Budget 2013? If you are a low wage earner pulling in below RM3,000 a month, you should be. Lots of goodies dished out in the race to earn your votes with promises of more to come by both political groups. At least the national wealth is distributed to the needy mass and not leaked to the greedy few.
Billions of ringgit will be circulating in the economy by year end as the additional bonuses for the civil servants kick in, which is good news for our domestic consumption. Hopefully, this cash handouts from heaven is used wisely to reduce personal debt first and the balance spent in our domestic market. Which means we will be better insulated against the fast deteriorating external economies of other regions.
So how will the entrepreneurs and small and medium enterprises benefit from this budget?
Only certain industries will benefit from the tax breaks announced. I heard the travel agents are putting in additional mileage to get many Malaysians out of the country and get any kind of foreign tourist in.
Most working mothers do not have to fret if their maids run away as there will thousands of daycare and pre-schools sprouting up all over the country.
And if everybody insist on “kurang-kurang manis” on all their teh tarik and kopi tarik, Mr. Mamak will have no reason to increase the price of the cuppa.
Normally, the rich are not affected by most national budgets. Unless, of course, if you are French because their new government is planning to levy a 75% income tax rate on all citizens who make more than a million euros a year. This has caused an exodus of French investment bankers to work in London and I understand that they have started taking English language lessons.
For a lower 45% tax bracket, the elite French is willing to tolerate inferior language and inferior food. Just to show how national budgets and changes in tax rates can affect people’s lives.
If you are on your own, there are only two key business issues that you need to understand as you interpret the new budget and new tax proposals. How will it affect your sales and how will it affect your cashflow?
Whatever business you are in, your sales is determined by your customers’ ability to purchase, which means you have to follow the trail of money. New initiatives or projects by the Government means new opportunities.
Try to spot windfall sales potential. Like the group of car salesman plonking themselves into Felda settlements getting the going-to-be rich settlers to sign order forms for new cars way before the cash came in. Just follow the money, get there early and you will be fine.
As for cashflow, if you cannot afford to hire a chief financial officer, I suggest you get a good qualified tax adviser to help you understand how the changes in tax policies will affect your business.
If you know how to take advantage of the tax breaks and tax allowances, you will save a tremendous amount of cashflow by virtue of paying less tax legitimately.
You will learn to structure your business model according to the most tax-effective way of increasing your cashflow. Just remember, an efficient tax model is useless if it is not backed up by an equally efficient accounting system.
In short, entrepreneurs should focus equally on sales, finance and tax. To make a profit, you need to sell with a good gross margin and control your expenses. To make more after tax profits from the same sale, have proper tax planning.
If your paper profit is translated into cash in the bank, then your tax planning is in good order. If you have only paper profit and no cash to show, it is time to sit down with your accountants and tax advisors. Ask them to show you the money. Which should translate into a solid cashflow strategy.
For many chief executive officers and chief financial officers, the silly budget season is in full swing now. The board of directors are waiting anxiously as to what final numbers will be in the 2013 forecast. With such uncertainty in the domestic and world economy, the only thing certain in the forecast budget will be the half facts, half truths and brilliant guesswork.
Strangely enough, I have never bothered much with forecast budgets all my life. As long as my business model is well structured with an efficient tax plan, I only concentrate on bringing in the sales and viola! The cashflow appears.
Should a retired entrepreneur re-enter the business world? We will discuss this topic another day. Like good old Arnie, I would love to hold my favourite cigar in my hand and have the opportunity to tell my competitors … I’ll be back.