A new digital currency protocol called Stellar is taking the principle of “participatory democracy” and applying it to financial systems. Its new digital currency, also called the stellar, launched just over four months ago, and sits atop all types of currencies, including both digital and fiat. Stellar is administered by Stellar.org, a non-profit organisation, which has made the software behind the currency open source. It differs from other digital currencies in a number of ways. While bitcoin relies on the mining process for the development of new coins, stellars are produced by a fixed system, and unlike bitcoins, they will never run out. Stellar is giving away 95% of the currency for free from the outset, with 5% reserved for the organisation’s administrative costs. New coins will be added later at a rate of 1% per year. While new bitcoins go to bitcoin miners, Stellar.org executive director Joyce Kim says one of the most exciting things about Stellar is the way in which new stellars will be allocated to users. Kim spoke to Startup Smart ahead of her appearance at Above All Human in Melbourne next week. She explained that every week new stellars will be created, at a rate of 1% per year, and account holders will be able to vote for another account holder to receive new currency. Votes will be weighted by the amount of stellars an accountholder has. Each week the network will identify the top 50 voted for accounts and the weeks allocation of stellars will be then be distributed. Kim says this could result in users banding together to split the profits themselves, creating new types of companies that offer free services to users in exchange for votes, and to the world being able to distribute money to charities in times of need. “I have no idea what the division will be between those three models,” Kim says with a laugh. “I’m really excited to see what happens. It’s a large social experiment.” One of the advantages of digital currencies is the ability to transfer money quickly and cheaply across national borders. Bitcoin users do this by purchasing bitcoins in their local currency, transferring those bitcoins to another individual, who then sells that bitcoin for the currency they desire, or uses the bitcoins themselves to purchase goods and services. The Stellar protocol allows users to exchange any currency for another currency, in one transaction, as simple as sending an email. “What Stellar does for the whole world is it takes what would be a four layoff flight and turns it into a single connection,” Kim says. “You can literally do remittances on Stellar without touching digital currency.” That’s so long as a fixed market exists for that currency. Kim says there may not be such a market for some currencies. She gives the example of converting between the Kenyan Shilling and the Thai Baht. “That’s where digital currencies whether it be stellars or bitcoins or others sit in the middle and be that link between the two,” she says. Stellar is also looking to make the financial system more inclusive. Currently women are 20% less likely than men to have a formal financial account. A 2013 study suggested women account for just 5% of bitcoin holders. The organisation is running a number of programs to distribute stellars. One is a direct access program which educates people about how digital currency works and rewards them with stellars. “The fact that it’s that easy, you don’t have to be technical, you don’t have to be in finance, you can just somebody who has a bank account and comes and starts learning, I think that program will be hugely impactful,” she says. “This is based off a lot of financial inclusion research that shows financial access tools alone, actually don’t do a good job of creating financial inclusion. You have to pair access very closely with education.” It’s also running what it’s calling an Increased Access program, which will focus on emerging markets, and those which have “yet to cross the digital divide”. “The idea behind it is, the direct access program we have now, there’s x amount of people that are online, and then the next five years we expect that number to double in time,” Kim says. “So if we actually did all our digital programs today, then about half the world will be left behind. So we wanted to have a secondary access program that will take a little bit longer (to give away stellars), that will be directed to countries or into the communities that are not online today.” Stellar will also be giving away 19% of initial stellars to existing bitcoin owners. The organisation will take a snapshot of the bitcoin blockchain at a particular date. Then a claim website will be set up that will allow bitcoin holders to receive their pro-rate share of stellars by verifying they control their address from that blockchain snapshot. A user owning .001% of the bitcoins in the snapshots, would receive .001% of the stellars set aside for bitcoin holders. Bitcoin users will be able to start claiming through that program from early next year. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Perth and Melbourne-based payments startup Pin Payments has announced it is introducing a new API that will allow small businesses to automatically schedule their payments. Co-founder Grant Bissett told Private Media he noticed the Australian e-commerce services market was failing to progress as fast as it should technologically while working in web design a few years ago. “Pin Payments has been in the market for a year and a half. We built Australia’s first credit card payment system that doesn’t need a merchant account,” Bissett says. “The first version was a multi-currency payment API. Now, while there’s a whole category of companies doing that, but we were the first to do it in Australia.” Pin Payments is now adding to the service, announcing a beta trial of a programmable JSON API allowing business owners to transfer payments into any Australian bank account. Bissett says the API will be flexible enough to be implemented by a range of businesses. “So the payouts are like the payments you do with online banking, except we add a developer API to them. We feel it’s a basic capability the banks should be offering by now,” Bissett says. “We’re running a private beta where we’re allowing people to register their interest in a trial that will allow us to scale-up the service. We’ll be announcing general availability in the coming weeks.” According to Bissett, the service is designed with online marketplaces in mind. He says it will allow them to automate the process of transferring payments to third parties and subtracting their percentage cut. “The most common use case is with marketplace environment, where someone’s operating a website with many vendors. With the API, you can replace bookkeepers and manual processing of those payments with automation,” he says. “We’ll reveal exact pricing when we announce general availability. However, it will be a small fixed fee per transaction, rather than a variable or percentage fee.” Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Diamond Circle, a Brisbane-based startup that offers debit cards and cashless ATMs for bitcoin, is set to enter the UK and US, forgoing the local market which it claims is lagging. Diamond Circle uses near-field communication technology, like that found in credit cards capable of wave and pay, to allow distributors and merchants to accept bitcoins, and earn commission by accepting bitcoins on purchases, providing cash-out facilities and by selling bitcoin debit cards. Its ATMs are cashless, with users being able to purchase bitcoins using a credit card and sell bitcoins with the profits being placed into a user’s bank account through a direct deposit. Chairman Mike Oswald says Diamond Circle has appointed distribution partners in the UK. “We’re now negotiating bitcoin exchange banking arrangements with a confidential partner in North America,” Oswald says. “We’re moving pay wave to bit wave.” Oswald says not to expect an Australian rollout just yet. “Australia’s taking a wait-and-see approach and I think that’s reflected in the investment community here,’’ he says. Diamond Circle was founded a year ago and is in the process of raising its first round of funding. Oswald says the banking payment system is ripe for disruption. “I think it’s evolving very quickly,’’ he says. “The banking payment system technology for global funds transfer hasn’t changed much for 50 years. Point-to-point transfer of funds in this domain is as revolutionary as the internet was to publishing.” Recently, the company was named on Gartner’s Cool Vendors list for 2014. “It’s certainly a badge of recognition that an Australian company can stand up and be counted amongst the best in technology globally,’’ Oswald says. It’s an interesting time for Australian bitcoin startups with Melbourne-based bitcoin exchange system CoinJar recently launching CoinJar Stories, a series of interviews with ordinary Australians looking at how they’re using bitcoin in their everyday lives. CoinJar has over 22,000 individual and business customers and has processed over $30 million worth of transactions in the last 12 months. CoinJar growth strategist Sam Tate says the company wanted to get away from the complex discussion that often surrounds bitcoin. “We wanted to shift the focus from the tech side of bitcoin to the human side of bitcoin,’’ he says. “There was no resource for everyday people. We wanted to help overcome the uncertainty about what you hear about bitcoin in the news and in the media. “It’s pretty cool. When I first found out about bitcoin it was a curiosity I would enjoy online. Now I can literally by a coffee, buy lunch, buy dinner, buy a beer with bitcoin, and not all from the same place. “I think the idea will impact society, but the brand might not. “I’m pretty optimistic about its potential, but there’s the potential for it to go the way of AOL or something like that.” Australia’s first dedicated bitcoin fund the Future Capital Bitcoin Fund launched earlier this month, it will invest in companies that are leveraging services based on bitcoin and other crypto-currencies.
Many businesses shut over Christmas. But they still have to pay wages (plus leave loading) despite a lack of fresh customers, so it’s no wonder many businesses feel the squeeze in January. The start of the year is a busy time for debtor finance company Scottish Pacific, head of product development Wayne Smith tells SmartCompany. “Not every business suffers, but it is something we see a lot of,” he says. “Most businesses wait 30 or 45 days to be paid, and because they’ve been shut, they have no invoices to collect over this period,” he says. “That means a smaller amount of cash flowing into the bank account. And given it coincides with their needing to make a BAS statement and pay taxes to the ATO at the end of February, it can be a challenging period "It's not uncommon for successful businesses, experiencing high growth, to run up ATO debt because they didn’t have the real estate to help them secure traditional bank facilities and they simply weren’t aware of alternatives.” Smith has six ways SMEs can survive the period. 1. Speed up your collections cycle According to Dun & Bradstreet figures, SMEs are waiting more than 50 days to be paid. Bringing this figure down, even a small amount, can have a dramatic impact on cash flow, Smith says. “For example, a business turning over $10 million, reducing debtor days from 60 to 55 days achieves a cash inflow in excess of $135,000. “Often something as simple as improving paperwork (making sure invoices show all the relevant information required by the customer to make payment), sending timely reminders and putting in place a disciplined reminder call program) will help reduce debtor days.” SmartCompany has some further tips on how to get customers to pay on time here. 2. Large order? Take a deposit This limits your outlays on production costs, Smith says. 3. Look at working capital solutions Smith says 4500 Australian SMEs use debtor finance, which involves borrowing against the value of invoices. Such financing is typically issued with 24 hours of an invoice being received, and so can help smooth over any cash-flow troubles when they occur. “Debtor finance is for businesses that sell to other businesses on standard trade credit terms. It is particularly useful for labour intensive businesses where wages have to be met well ahead of payment receipts,” Smith says. Another potential solution is trade finance. This provides lending to bridge the gap between when a business pays its suppliers and when it gets paid by its customers. 4. Check your stock levels Careful stock management can be a good way to free up some cash. “Having too much stock on the floor means you may have unnecessarily depleted your cash reserves,” Smith says. “If you have stock that is in danger of becoming obsolete don’t be afraid to sell it off cheaply to turn it in to cash.” 5. Negotiate with your suppliers for longer payment terms Building good relationships with your suppliers makes this possible. 6. Consider offering discounts for early payment This can mean less money to your business in the long term, but if you need to ease the cash-flow squeeze, it is always an option.
Christmas can be a tough time for consumers when it comes to cash flow, but it can be equally difficult for businesses. As company’s shut down for the holiday period, invoices can get left unpaid, leaving companies chasing debt in the new year. As reported recently in SmartCompany, some businesses are taking nearly two months to pay their debts, putting SMEs into a troublesome cycle. Bibby Financial managing director Australia and New Zealand Mark Cleaver said with so many business people going on holidays, it is important to put systems in place to protect cash flow over Christmas and New Year. Here are his nine expert tips to get through this period with money still in the bank. 1. Get in line early at the fish market As you complete work, you’re entitled to charge clients, so invoice clients when work is done rather than wait until the end of the month to send invoice: Time is money, so act now and get paid sooner. You should also make your payment terms clear. Payment terms are usually set at 30 days; however, it’s perfectly legitimate to set your own terms at 14 days. You’ve done the work or delivered the goods, so you are entitled to payment. 2. Don’t wait until after Christmas to stuff your stocking Deal with late payers as soon as you become aware that an invoice is overdue. Any accounts receivables system should be structured so that late payers are identified as soon as possible. Remember, a sale isn’t a sale until the cash is in your bank account. So if there is a problem, pick up the phone and demand payment. An invoice is money due to you, not a donation. 3. Make sure your Christmas lights are working Investing in software can help you streamline your invoicing and receivables management as well as protect your cash flows. There are several excellent solutions available on the market that can automate the invoicing and receivables management functions, so investigate your options. Automation means you can redirect your staff to other functions within your business, such as sales or operations, helping to make you more profitable. 4. Christmas is a time of giving Over the holiday period, you might consider rewarding early or consistent payers with a small discount on their bill if it won’t harm your business. This is a great way to say thanks and show your appreciation to your loyal customers – and it might well bring in cash sooner than you expect. 5. Don’t hold on to old baubles If you’re hoarding stock that isn’t likely to sell over Christmas or the New Year and it’s got a use-by date, consider selling it at a discounted price to get it out. The November Westpac-Melbourne Institute Consumer Sentiment reveals consumers are planning to restrain their Christmas spending this year, with 35% of Australians recently saying they intend to spend less than last year, while 51% are planning to spend the same. This is sobering data so the time might be right for a sale. 6. Close up shop and head to the beach There’s no point keeping your business open and incurring costs if you aren’t busy over the Christmas period. Either maintaining a skeleton staff or shutting down over the holiday period can save running costs, as well as keep staff annual leave entitlements in check. 7. Cash in your invoices this Christmas Debtor finance can help companies alleviate difficulties with cash flow by quickly converting unpaid invoices into cash. Typically, a debtor finance company advances you up to 85% of what you're owed from customers within 24 hours of request. The remaining 15% balance, less a small fee, is paid to you when your customers pay their invoices. This allows SMEs to leverage one of the biggest assets on their balance sheet, accounts receivables, to create immediate cash flows and avoid the Christmas squeeze. 8. Get social this season Consider the Christmas period as an opportunity to review your business and marketing strategy. Consider dabbling in social media next year to increase engagement with your target audiences or listen to the conversations they are having about your business or sector on Twitter, Facebook or LinkedIn. Bibby’s recent Barometer, conducted in July, found that 75% of small businesses are using social media tools in their business operations. 9. Have a game of Christmas cricket Running a business can lead you through countless hurdles and challenges. Ensure you and your staff schedule in time to relax, have fun and partake in the festivities. Why not enjoy a friendly game of backyard cricket. This story first appeared on SmartCompany.
Financial advisors and accountant experts are calling for businesses to seize the opportunity presented by the new financial year to set goals and sort out their finances. Accounting software provider MYOB has released some steps for start-ups to take in the new financial year. Debra Anderson, the owner of leading MYOB consultancy company Legally BAS, spoke to StartupSmart about how to implement them. “This is the ideal time of year to write down your goals, whether they’re financial in a budgetary sense or if they’re a marketing goal or even just getting to have a holiday this year. Writing it down is a commitment, and the whole process helps us think about it and organise our business plans to include them,” Anderson says. Revisit your business plan with the market in mind Start-ups and small business should focus on a few written goals and overhauling the budget in their business plans. “The budget is your roadmap. You need to know where you want to get to, so your budget is the really important thing to show you what you’ve got to get there and where you’re going,” Anderson says. “You also need to take a look at what your competitors are doing now.” “Things have changed a lot, even in six months. The Australian dollar has dived and the interest rates are down. The landscape has changed and it changes quite quickly in the global market.” Anderson says many businesses make the mistake of believing the business plan should be set and stuck to for the year. “Work out what you need to change or look at, once you’ve got that top goal, you can work down. It might not be that you do it all today. You don’t need to execute the whole plan and have it all sorted. It’s a dynamic document. You can change it every week if you need to revisit it,” Anderson says. Work closely with an accountant or financial advisor throughout the year Anderson says the new financial year is the best time to invite your accountant out to visit your business. She believes this is key to developing a productive and insightful relationship. “It’s really important that your accountant actually comes out to your business so they can get a feel for the state of affairs,” Anderson says. According to Anderson, too many small businesses and start-ups underestimate how much their accountant needs to know. “Actually, make sure your accountant knows what you do, and how you do it. They’re not just there for tax returns, you should be able to use them as a trusted advisor. We don’t talk about money with friends, but that’s our job, the good bad and the ugly,” Anderson says. Streamline productivity and processes for a more efficient team and business The new financial year is the perfect time to re-evaluate your business relationships and suppliers, including your accountant and accounting system. “Streamlining is really important and you should make sure you’ve got some kind of system that is right for your business. That can be really simple, it could just be Excel if you’re running a really basic business or it could be something with more features,” Anderson says, adding that you shouldn’t choose a system simply because your accountant prefers working with it. According to Anderson, the most common financial management mistakes small business make are not separating their personal and business accounts, and not putting aside funds for upcoming regular payments. “Too many small businesses have one credit card for business and personal. Combining their personal and business accounts is a huge error,” Anderson says. “Get a business one so you can link it to the financial software, keep it clean and know where your money is going. It’ll streamline the process and if you’ve done it properly, it’ll do all the dirty work like data entry for you.” Given cashflow is a major issue for start-ups, Anderson says the easiest thing you can do to get on top of the issue today is separate your accounts or create a new one to start sorting funds appropriately. “Set up that second bank account; put some money aside for taxes and superannuation aside as you go. Run your GST reports monthly or weekly and put that money aside so you don’t get caught out paying it quarterly,” Anderson says.
With a new book, XERO for Dummies, out on the market, Heather Smith is a big believer in cloud accounting, especially for business owners who aren’t comfortable with their financial literacy. “Accounting is just like driving, you can’t do it without checking the dashboard. When you run your own business, you need to identify KPIs (key performance indicators) you should be monitoring, and cloud accounting helps you easily track your financial ones,” says Smith, who has 22 years’ experience as an accountant and certified advisor for Xero and MYOB, two of the major players in cloud accounting. She has been running her own business for eight years. Smith spoke to StartupSmart about her top five tips for start-ups setting up cloud accounting, and how they could get the most out of it. 1. Use it to save time and boost growth “I recommend start-ups, if you’re serious about going into business, get your financial side sorted out as quickly as possible so you have the time to know what’s going on financially, and be scalable,” Smith says. “If you’re doing cloud accounting right, it’ll free up your time to grow your business.” Smith says cloud accounting, and the opportunity to see at a glance your entire bank feeds, sales data and invoices, will allow start-up operators to strategically grow their business by automating systems. “There does seem to be a trend in business at the moment to move to subscription payment services and a cloud accounting system can do this without you even thinking about it. This creates a money funnel for your business,” she says. 2. Make the most of plug-ins and report features Smith says some of the plug-ins, such as the Timely time management plug-in and the debt-tracking options, can boost your cashflow very quickly. “Personally, I implemented a debtor tracking solution and I was able to improve my debtor days by 10 days, and that was massive,” Smith says, adding the executive reports with detailed KPIs create a goal system for start-ups who are working on their own. “You can monitor how many and what value of invoices you’re doing a month, or a week. This will enable you to stay focused on constantly pushing up the average value of the total invoices, rather than aiming for more invoices, which means more work and may not be the best way to grow your business.” 3. Getting expert help to set it up properly will be easier and ultimately cheaper “We have such an onerous tax system in Australia,” Smith says, noting that sitting down with your accountant or bookkeeper now to install a system will save you stress and time next financial year end. Smith says start-ups who set up a cloud accounting system as early as possible will avoid complicated and costly fixing later on. “This first stage is the hardest stage. But if you get help after a couple of months, to fix it up takes a lot longer and can be thousands of dollars.” 4. Overcoming data security concerns Smith says the data security concerns around cloud accounting are minimal, and there are significant data security benefits too. “Xero data is historical data not future data. Someone who gets in can’t access your bank account and extract money. So if you’re prepared to do online banking you should be set to do cloud accounting,” she says. Smith says business owners should be more worried about losing their financial data through computer crashes, or natural disasters, adding that she’s based in Brisbane and has seen too many businesses lose their records from flood or fires. “You need to have a secure back-up plan in place, so use a cloud-based option, backed up in real time in multiple services. I still suggest to people they make their own back-ups, but cloud will be far better.” 5. Take responsibility for the financial management of your business Smith says many small business owners may want to avoid the financial details of their business and outsource that work to an accountant. While that can work for a few years, Smith says this approach holds businesses back from reaching their full potential. “Don’t put on blinkers and say you don’t want to learn this stuff. If you are in business you need to know this stuff. But you can take the time you need to learn it slowly,” Smith says. “Richard Branson doesn’t do his own tax but he does understand the numbers. Don’t abdicate that responsibility.”
As promised in my previous blog, today I want to give you a bit of insight into barebones IT cloud infrastructure. Hopefully by the end of this article you’ll be able to decide whether or not the cloud is for you now, in 12 months’ time or never (at your own peril).
February tends to be the worst cashflow month for many SMEs. Mix the extra costs coming out of the holiday season, some downtime and the wind up for the new year and cash can be tight.
Sydney-based taxi booking app Ingogo has secured a fresh round of funds from a host of new, high-profile investors, with founder Hamish Petrie flagging plans for a national rollout.
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Online payments provider PayPal is attempting to carve a slice of the mobile payments market, launching a mobile device that enables merchants to accept payments via their smartphones.
Look at any company that is in financial trouble and you will probably see the Tax Office as one of the larger creditors.