Many businesses are switched on to the benefits of rewarding their own customers with loyalty programs. But are they switched onto using the very same cards to reduce the costs of consumables and expenses or to gain discounts on major purchases?
Utilising these deals and asking for deals where there is no such program can make a significant contribution to profitability.
This article by: Claire Heaney first appeared in the Courier Mail (News Corp Australia Network) on December 08, 2013 5:00PM
THRILLING PRICES: Mary Martin bookshop owner and bulk-buyer Margaret Brookes.
Picture: David Caird. Source: News Limited
MARGINS are tight, so cutting costs and getting an edge can separate successful businesses from the strugglers.
While many businesses are switched on to the benefits of rewarding their own customers with loyalty programs, such as coffee and gift cards, they need to assess what business-to-business programs they can tap into. Research in Canada found that small businesses were often members of up to 12 loyalty programs but only active in five.
Experts warn that it is important to know what you are signing up for and make sure you are exploiting the program to your benefit.
There are a range of programs that will give you discounts, points to be redeemed for goods and services, upgrades and free accommodation and flights.
Business coach John Downes, from the acorro Group, says many businesses buy their consumables through their credit card to reap the reward benefits. Downes says the importance of such incentive programs, whether they are business-to-business or business-to-customer, cannot be underestimated.
“A new customer takes nine times the effort to get than doing business with an existing customer,” he says.
“There is a big push to love your existing customers. Finding new customers is hard, expensive, slow and high risk.”
But Institute of Public Accountants senior tax adviser Tony Greco warns there can be some tax implications. Greco cites an Australian Taxation Office example of Pamela, a sole trader operating a paint and wallpaper business. There is a business relationship between Pamela and the paint wholesaler and it is this relationship that makes Pamela eligible to receive possible reward benefits such as free products, accommodation, flights and other non-cash benefits.
But in another instance, Greco says when Pamela redeems her points from a credit card provider for vouchers worth $2500 and uses them to buy clothing for her family, the value of the vouchers could be assessable by the ATO. Greco says “significant” may mean a number of things, including the points accumulated from a business relationship or business expenditure exceeding 250,000 points a year.
“The ATO hasn’t got time to do all sorts of compliance. They will turn a blind eye as long as people don’t go overboard.”
JUST REWARDS
- If you travel regularly, you need to join a loyalty program that operates in the destinations you are travelling to.
- If you entertain clients, there are programs designed to reward you for eating at various places.
- Consider airline loyalty programs that are linked to credit cards.
- If you are required to travel, pick a preferred accommodation and sign up for their loyalty rates that may provide corporate discounts or upgrades.
- Look at joining a bulk-buying group so you can get discounts.
DISCOUNTS BROUGHT TO BOOK
AS AN independent bookseller, Margaret Brookes was looking for an edge. About 15 years ago she heard about a Sydney-based book-buying group called the Leading Edge. Back then there were five members in the group. Today, about 250 independent booksellers around the country are members. Brookes, who runs the Mary Martin bookshop in Melbourne, says there are huge advantages to being part of a buying group.
“We do a catalogue every quarter that we all share the cost of,” she says.
Brookes says the group also has brought credit card and insurance savings to its members. She says most publishers in Australia now does business with Leading Edge, delivering discounts to shop owners trading in the low-margin industry.
The business, which has flourished because Brookes has included children’s books, niche products and staff development, is considered a leading example to independent bookshops.
