Articles

Driven by the heart, measured with the head

Published in AB+F Magazine
Small business owners are not only a critical contributor to the Australian economy, but also to the charitable sector. Despite the challenging times, some are looking beyond the bottom-line by establishing altruistic goals for their business. But each cause should be evaluated using a commercial approach.

Donations to charitable causes are a common element on the accounts of many small and medium enterprises (SMEs), and despite tough trading conditions, the demand for their contributions only continues to grow.

There are many small business owners who are not satisfied with just writing a cheque for a major charity and walking away. Some look for an outcome that can be measured and observed.

Angus Robinson, managing partner of the start-up ecotourism business Leisure Solutions, is also a director of the Foundation for National Parks and Wildlife. But that’s not where his strong connection with the environment ends.

“When I retired from my full-time job as chief executive of an industry association, I decided to start up my own business in tourism development,” he said. He established a guideline that a donation would be made to the Foundation whenever anyone bought an ecotourism package from his company.

Then Robinson went one better. “My wife and I decided to make a commitment of $5,000 per year to the Foundation for a research project that it had an interest in.

“This year we made a donation of $6,500 to a project for endangered species in Tasmania, the eastern quoll, which is extinct on the mainland,” said Robinson.

“If you spoke to my accountant, he’d say ‘why did you spend that money? You can’t afford it.’ However, it’s not something we ran past our accountant. It was something we think we should be doing.

“It shows some leadership in the industry, and demonstrates our commitment to the concept and would encourage other small operators in the tourism industry to think about investing in wildlife research projects as part of their business operations.”

And it is looking like this strategy has worked. As a result of a presentation by the Foundation, where his donation was mentioned, Robinson said that a major tourism company has approached the Foundation to discuss sponsoring other projects.

This tale comes as no surprise to Andrew Graham, national head of business solutions at RSM Bird Cameron – which is strongly focused on the SME sector.

“What we also see, at the grass roots SME level, is that they support many worthy causes,” he said.

“The SME sector certainly surprises me with their capacity for giving, but it’s both in terms of hard cash, in the form of donations towards good causes, and it’s also in terms of the provision of services on a pro bono basis or the giving of products in kind.”

However, as Graham also points out, all businesses, whether they are large companies or SMEs, have a limit to what they can give away.

“When things get tight in the economy, the first thing that gets cut is discretionary expenditure. That’s not only the [SME owner’s] private expenses, like holidays, cars and trips away, but also their capacity to give to worthy causes. That’s notwithstanding what I see in our client base, which is that the small business market is very generous in what it gives.”

For a start, noted Graham, there has been a tradition developing to provide pro-bono support of organisations such as chambers of commerce. That might be the local accountant providing tax or accounting services; or lawyer providing legal services. They may also leverage their skills to obtain fundraising from other organisations and the wider industry.

A major purchase – where the business owner knows exactly where the money raised is going – is not unusual, especially in communities where there is a critical need for a particular type of medical equipment or service. 

“We’ve seen people buy heart monitoring equipment for local hospitals, pooling together services to be able to do that; we’ve also seen businesses refurbish palliative care wards in terms of direct cash donations. As a result of that [the individual businesses] have had naming rights on rooms,” said Graham.

“What we’ve also noticed is the absolute increase in worthy causes that are putting their hands up and asking for assistance – in terms of direct financial assistance, or support in kind. What we’re seeing is that [our SME clients] are having to spread donations among many causes, whereas in the past they’ve had one or two favourite gift recipients that they donated to. It might have been the Australian Red Cross or the Salvation Army. But now what we’re seeing is a lot of private citizens or groups asking for support.

Most times, said Graham the business owner is not looking for a tax deduction. “They just go ahead, as their motivation is for going into the community rather than maximising tax deductions,” said Graham.

One thing to note though is that donations don’t attract GST, and there is the chance that with the best of intentions, an SME owner could find themselves paying out GST for services that have been donated. This showed the importance of first checking with their financial adviser as to the potential for any tax deductibility or unintended liability.

“There are very strict rules around gift recipients to be tax deductible, and many of these [grassroots] organisations aren’t registered with the tax office, so quite often, especially with pro bono work, we’ll disclose that in the notes to the accounts so that it’s an acknowledgement and recognition, so that if anybody picked up their financial statements, they can see their good citizenship, in terms of contribution towards the community,” he said.

Donations should also be made with accountability in mind, according to Richard Reese, BankLink’s general manager of operations.

“BankLink supports a number of NGOs including children’s charities, sports foundations and churches by supplying our services pro bono. These organisations have similar accounting needs to SMEs and therefore benefit from The BankLink Service. Many of our accounting practice clients tell us that having easy access to financial information, tracking spending and producing financial reports through The BankLink Service are crucial elements when it comes to managing charitable accounts. And, this in turn, helps ensure the charity’s future sustainability by being able to clearly demonstrate their accountability.”

With reports of yet more tough economic times ahead, it seems apparent that the demand for donations from the SME sector will only continue to grow.

For more business and financial news, visit the AB+F Magazine website.

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