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It is tax time again, and for some companies this means receiving a healthy tax refund from the Australian Tax Office. A cash injection can be a real boost and there’s always a temptation to go and spend the money on some well deserved personal retail therapy!
But OAMPS Financial Management, a Wesfarmers Company, advises business owners to take advantage of the situation by reinvesting the money back into their financial future. One of the easiest ways to do this is to examine the risk management issues that the organisation faces and plan accordingly.
There are a range of products on the market that can mitigate the risks a business may face. These protect future income streams and the sustainability of the business. In response to these challenges, OAMPS are seeing business owners taking an increased interest in Key Person insurance.
An example of what an individual may be worth to a company:
The head designer of a fashion company who has a strong retail presence and innovative ideas, but less influence on sales, earning a salary of $200,000 per annum, could cost as much as $4.5 million for the company to replace. (Simply go to www.oamps.com.au/keypersoncalc to check the value of your key people).
“Purchasing Key Person insurance may not sound as much fun as rushing out and buying a plasma TV for the office, but it will pay off in the long term,” says Brian Jones, Head of OAMPS Financial Management.
Key Person Insurance is an insurance policy that recognises the value and contribution of the key people in your organisation. Key person insurance assists by minimising the impact of losing a key person. It works by providing the business with funds to cover the costs associated with their loss.
In the unfortunate event of either the death or serious disablement of a key person/s, the proceeds of the policy may be used to replace the individual’s contribution to the business, and/or reduce debts. It protects the business against the financial hardship that can follow when business intelligence is lost and the costs of training and replacing human resources.
Mr Jones says, “The questions you need to ask are whether the remaining partners could work with the partner’s nominated beneficiaries, or have the funds to purchase the deceased’s interests in the business. Another issue to take into account is whether the value of the business would stay the same without that person”.
The OAMPS Financial Management online Key Person calculator has been developed to provide a rough guide on what your business’ key people should be covered for. It is based around the key criteria of skills, a person’s profile within the organisation and their relationship with clients. Simply go to www.oamps.com.au/keypersoncalc
For more information contact your local OAMPS branch on 1800 240 432.