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23 Ways to Help You Improve Poor Cash Flow

Positive cash flow is crucial for any business’s financial success. If your cash flow is in a poor condition, your company is in a major trouble. There are a lot of tips and methods on how to improve poor cash flow, and most of them hold good advice in them but are usually incomplete. So, here is our ultimate list of 23 ways you can improve the cash flow of your company from all the aspects. As a business owner, you should know that cash is king. One of the top 4 reasons small businesses fail is due to a lethargic or negative cash flow. Below are a few stats to prove it. 20% of businesses fail in the first year.   Of all the small businesses that started in 2013 (1-19 employees), only 63.4% survived 3 years later. 43.7% report “inadequate cash flow” as the reason for failure.    33.9% report trading losses which affect cash flow. A lot of advice on cash flow tend to focus on one issue: managing the timing of goods and payment. When you receive money from your customers, When you pay your suppliers, and How long you keep stock on the floor before you sell it. However, after successfully working with SMEs for nearly a decade, I believe that it is a lot more than just timing. Sure, it does have a profound impact but it’s not the only factor affecting your company’s finances. Cash flow leakages can happen to any business, even those who don’t hold any stock, whose customers pay in advance or on time, and whose biggest “supplier” cost is their staff.   5 areas where you can improve cash flow I’ve outlined 5 main categories which make a difference to your business lifeline. Not every item in this list will apply to every business, so I encourage you to take what applies and not stress about the rest. Revenue/Income/Sales This is where it all starts. Without customers, sales or income, your cash flow is pretty much stuffed. In fact, you won’t have a business to show for. If your cash flow is poor, then you can use the strategy of increasing revenue or income to offset your troubles. 1. Think of add-ons to your suite of offerings. What can you sell or offer that customers need after buying their first product? Every product can have an add-on service such as maintenance. Every service can have an add-on product. What’s yours? Explore your “would you like fries with that?” value. 2. Using your skills and knowledge, you can offer or teach a Do-It-Yourself (DIY) model. A website designer client of mine, who specialises in SEO services, hosted 2 sold out SEO workshops teaching the basics of SEO and blogging. That was a great money spinner with very little cost to deliver. How can you apply the same model to your business? 3. Try switching to a model where you get recurrent sales, such as leasing instead of selling outright. What can you offer or sell monthly, quarterly or annually? This works for both products and services. 4. Offer packages at better payment terms. However, beware of getting into the habit of discounting. Make sure you know how much profit you make and that your discounts won’t make your business suffer. If you mark up your product by 25% - and make a 20% gross profit - discounting by 10% means you need to double the number of units you sell to maintain the same level of profit. 5. When was the last time you increased your prices? You should review prices from time to time. If this scares you, then do it one product, service, or group at a time. 6. Can you deliver your product or service in a shorter time frame while maintaining your price and value? If you are a service based business, try cutting labour hours. Remember, time is money! On the flip side, think of how you can improve efficiency to deliver the same product. Costs 7. Hunt down any financial leakages. The usual areas where you can reduce are phone, fuel, utilities, and office supplies. Review your sales and marketing costs. Are your advertising campaigns working? Are you tracking where your leads are coming from? Can you reduce that cost? 8. Look for any hidden costs associated with delivering your product/service which is draining your profit: freight, motor vehicle costs, bits & bobs. Can you charge your clients separately on a new line to recover these costs? Some accountants and lawyers charge a % disbursement cost to recover printing and stationery. 9. Get rid of products and services which are less or not profitable. These items drain your bank account and suck away your time. My clients have managed to cut offerings overnight and make more money and gain more time. 10. Review your team. You can convert staff to casual as full-time employees tend to cost more. You can also try outsourcing. Make sure you get HR advice in this area. 11. Contact your landlord to get a better deal. They may be open for negotiations as rent paid is better than no rent from a tenant that has closed thir shop. If that doesn’t work, do your best to get rid of that corner posh office. 12. Monitor your spending like a hawk. Never let go of the financial reins. This is your business’s lifeblood, so watch it carefully. Money owed to you 13. Make it easy for customers to pay you via your online accounting system or invest in a system that accepts credit/debit cards.  Always, and I mean always, be in control of how and when you get paid. (Beware of the new rules relating to excessive credit surcharges effective 1 September 2017). 14. For high-value sales, offer your customers or clients payment plans. Never, and I shall say it again, never deliver the complete service or product upfront under a payment plan if you don’t have control over when or how you get paid such as having their credit card details. It is best practice to make sure your costs are covered in the first month at least. If applicable, it is recommended that payment is recovered 50% (month 1), 30% (month 2) and 20% (month 3). 15. Set aside some time every week to review your debtors (accounts owing to you).  Follow up via phone, followed by text, email, and then post a statement as often as necessary to get the money in as fast as possible. We all know what happens with the squeaky wheel. 16. Invoice for your sales as soon as possible. The best option is invoicing on the same day of delivery or purchase. Billing in advance is even better. Make this a habit or part of your company policy. Money you owe   17. Contact a broker or your bank to review your financing options on all current debts. Can you refinance, restructure or consolidate to minimise monthly outgoings? 18. Check your debtor payment terms. Are they placing a strain on your cash flow? Would your business benefit from receiving 80% of issued invoice value within 24 hours by utilising a debtor finance facility? 19. What about your vehicles and equipment? Research and negotiate better refinancing options, which will reduce the strain on your cash flow. 20. DO NOT neglect your tax commitments or ATO debt. This is often the first point of neglect when businesses are struggling with cash flow. The ATO has more power than ever before and can negatively affect your credit rating. Your personal drawing or wage When cash flow gets a bit tight, business owners tend to take too long to review their personal spending habits, which were previously supported by good business profits and a healthy bank account. 21. Rigorously review your personal spending habits. Can you cut down on your personal salary, in the short term at least, to support a cash flow crunch in the business.  Nothing is forever. Besides, you may even find that you can adapt with a lower wage. 22. Be open and honest to your spouse or partner. Awareness, and not panic, will support the entrepreneurial spirit to think outside the box to improve profitability. 23. Contact your financial planner and review your personal insurances & super payments. Are you overpaying and can you find a better deal? Finally, remember to always seek professional advice regarding your finances. These ideas may work for some businesses but not for others, as they all depend on your circumstances, goals, and industry.

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3 Benefits to Setting Up Your Business Accounting Systems for Success

When I created the accounting firm Inspire CA, I wanted to make sure that the businesses we worked with really understood their numbers. Why? Because I believe the numbers are often an area of denial, or thrown in the "too-hard basket". But I also believe a few small steps can make a big difference in making the numbers easy to understand and (dare I say it) fun. Once there's good accounting system in a business, it's quite easy as a business owner to: Understand your numbers; Create consistent cash flow; and Receive insight into your numbers from your accountant. Before understanding the numbers, you must have great accounting systems. Accounting System Great accounting systems provide for great reporting. It gives you the ability to dive down into the numbers - something when working together with an accountant enables you to make sense of. Aside from allowing business owners to work with their advisers to create consistent and better cash flow, a great accounting system has a reporting process that provides insight into what the business can do to grow the bottom line and the bank account. Once a business has a clear handle on their basic numbers and reports such as their Revenue, Profit, Cash, Receivables and Payables, the focus can shift to optimising cash, and measuring other numbers that really matter to their business. But what is a great accounting system? The best accounting systems are supported by software. Not Excel. Not a handwritten cash book -- but software. Over the last five years, businesses have seen the introduction of cloud accounting software. Not only is having your numbers so easily accessible a great feat, but cloud accounting software has really empowered the business owner by integrating with other business software and apps. There are 5 core functions of an accounting system: Invoicing and Debtor Collection Tracking Purchases and Accounts Payable Running Payroll Bookkeeping and Bank Reconciliations Financial Reporting For this, we do definitely recommend a cloud accounting system. And there are plenty of options available to businesses too, such as Xero, Sassu, Quickbooks Online. And it is important to choose the one that best suits your business, not the one with the best marketing, and not the one that suits your accountant the best. Spend a bit of time researching the different options. Talk to users of different options for their feedback. And then make the jump. Cloud Gets all Your Systems Talking We recommend that your accounting system be the center of your business' systems. Cloud accounting software and other cloud business apps allow this to happen seamlessly. Why? It is because of the power of automation. You need to only enter your customers' details in once. Xero as an example does a very good job at integrating many other cloud apps that will enable your business to run smoothly. (I mention Xero, but it is important to note that Xero is not for every business, just that it does a sensational job at integrating with other apps.) So what other apps should you integrate with your accounting system? Here's a few to start with: Marketing tools like a CRM and email marketing software Sales tools like proposal software and engagement management Workflow, fulfillment and project management apps It just makes light work of a smooth running business, and when you update one system, it flows through to the rest. What's left for you to do to run your accounting system? If we review each of the five key functions of an accounting system, you've got a choice to make as the business owner: Automate Delegate; or Get it done. We've put together a basic table to outline what has to happen, and also what is best practice in our eyes of how it's done.   What has to happen? Best practice: Invoicing and Debtor Collection Generating and sending invoices and following up unpaid invoices after due date. Create invoices from your sales tools, and automate debtor follow up with a system like Debtor Daddy. Tracking Purchases and Accounts Payable Create bills in software and mark as paid once paid. Use a system like Receipt Bank to automate the data entry. Then use batch payments to create files which you can upload into your internet banking to pay all invoices in one hit. Running Payroll Employees enter timesheets if required, then payroll process to be carried out at each payroll interval. Employees enter their timesheets straight into software, then using pay templates, roll forward the pay run with ease and as much automation as possible. Bookkeeping and Bank Reconciliations Bank transactions are entered in and checked off against invoices and bills. Bank statement lines are automatically imported using bank feeds and then transactions are easily checked off against invoices or bills. Remaining transactions are "bulk coded" or reconciled to their respective accounts. Financial Reporting As a business owner, you must take responsibility for the financial performance of your business. Use the built in reporting with your accounting system. You can also connect your accounting package with other reporting software such as Fathom, Crunchboards or Spotlight Reporting. Once you do this, it's best to look to an adviser to work with you, providing insight into the numbers to grow your business If you have any more questions about your accounting systems, do leave a comment and I'd love to help out more.

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3 Common Tax Issues Worth Knowing

Over the past two months, whilst talking with clients, a number of tax-related issues surfaced that we thought would be good to discuss in this month’s newsletter.Business or Hobby If you run a business then the income is taxable and expenses are generally deductible while when you just have a hobby the income is not taxable nor are your expenses deductible. So is your activity a business or hobby? This is solely determined by the facts. Some of the characteristics of a business include:- Are your activities carried on in a commercially viable way? Do you have the purpose of making a profit as well as the prospect of making a profit, even if you make a loss in the short term? Are the activities repetitive and have regularity? Is your business similar to other businesses in your industry? Is your activity planned, organised and carried out businesslike? Do you maintain a separate business bank account? Do you maintain appropriate licenses and qualifications? Do you maintain business records and account books? If you can positively respond to these questions then you are likely to be running a business. Further information can be obtained from the Australian Taxation Office Website.Non Commercial Losses Ok you are running a business either as a sole trader or in a partnership and in the first couple of years you have generated losses.  Can they be used immediately?  In short, no. They will need to be deferred, i.e.; they will not be available to offset against income from other sources, unless you can satisfy one of the following tests.         1.   Your Income from other sources is less than $250K and you can meet one of the following four tests: Assessable Income from the business is greater than $20K; or It has generated a profit in 3 of the last 5 years including the current year; or The business uses real property  valued at least $500K continuously; or The business uses other assets valued at least $100k continuously. 2,    If you are an Artist or Primary producer and your other assessable income is less than $40K.Self Managed Super Funds (SMSF’s) and Property Investment It seems you can’t pick-up a paper or read an investment news website lately without seeing something about SMSF’s and their ability to invest in property, be it a cautionary tale or a positive promotion. This is because of changes to the Superannuation Industry (Supervision) Act 1993 (SIS) in 2007 now allow limited non- recourse borrowing by SMSF’s. Non-recourse borrowing is where the lender can only use the property being purchased as the security and cannot use other assets of the SMSF. On the cautionary side, be warned that there are quite of number of requirements that need to be followed strictly to ensure any investment and associated borrowing is compliant. Failure to follow these requirements can render your SMSF non- compliant and liable for severe penalties.For example:- The property must be purchased in the name of the security trustee. The trustee of the security trustee must be different to the trustee of the SMSF The full deposit must be paid by the superannuation fund out of its own funds. It is essential that any deposit is paid from the funds of the SMSF or from the borrowing by the SMSF and from no other source. The trust documents reflect the arrangement under which the security trustee purchases the property in its name with the funds being provided by the SMSF. The loan documentation must be non-recourse, that is, the lender can only seek recourse from the property in the event of a default. When the property is purchased as above in the name of the security trustee with the funds provided by the SMSF and with the assistance of a loan from the lender the property stands in the name of the security trustee although it is beneficially owned by the SMSF. The SMSF makes repayments to the lender under the mortgage.  Also the additional cost of establishing a compliant borrowing arrangement can be expensive. For example;       Establishing a Corporate Trustee  $700 - $1000       Establishing a Custodian Trust $1000 - $2000       Lenders Legal Fees $1500- $3500       Lenders loan application Fee $500 - $1500   On the positive side, providing an investment property meets your funds investment strategy criteria it can assist in balancing your portfolio and removing the daily shocks of share market movements.  Also, if maintained in the fund until the fund reaches the pension phase and the beneficiaries are over 60 then any gain on sale of the property is likely to be free of capital gains, This is provided the strategy is deemed not to have been an anti- avoidance measure, Should you require any assistance on this or other accounting and tax related matters please do not hesitate to contact us.Disclaimers: All of the above information is general in nature and each person’s personal circumstances need to be considered before embarking on any strategy. Please discuss with your accountants and or legal advisors. The writer has an SMSF which has recently acquired an investment property using limited recourse borrowing.

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5 Reasons You Should Apply for a Business Loan

Loans can be a saviour in times of needs. If you’re in Australia, then you might already be under a lot of debt since Aussie household debt is said to be the highest in the world. People are used to applying for loans to make their ends meet, which is why personal debt is pretty high in the country. However, the scenario is not very different in the business sector either as businesses also commonly apply for loans in Australia.   Many experts are trying to educate people about the side effects of loans, especially business loans, as failing to pay back loans can cause you to lose your entire business. While loans do have their own side effects, there is no denying the fact that they come with benefits as well. Business lending experts Unsecuredbusinessloans.com.au say, “You can draw down funds for any purpose, but it’s best to keep the balance to a minimum as interest is usually calculated daily. It’s ideal for covering short-term gaps in your cash flow”. The key lies in knowing when to apply for a loan. To help you in this regard, given below are five instances where it is acceptable and justified to apply for a business loan.   1. To Purchase More Inventory If your business has selling potential then you should make good use of it by buying more inventory to increase output. This is a good option because increased inventory means increased products, which would result in increased revenue due to a jump in sales. However, this will work only if you are able to sell all the extra units you produced. If you are sure of a jump in sales, then applying for a loan to buy more inventory can be a good option. However, be sure of the reliability of the numbers as at times the jump is only temporary due to seasonal changes and other such reasons. Moreover, make sure to pick a loan at a low-interest rate so that you do not have to pay a huge amount of your revenue in interest. Note: Loans to meet a big order can also be a good idea as it can help you make new customers and grow your business.   2. To Move to a Bigger Office If your business is growing then you would need to hire more people, for which you will need a bigger office space. For this, you will need money, especially if you intend to buy a new space, which is more expensive than moving to a rented office. Do some research to find what’s more economical for you (buying or renting). Both options come with their own benefits. Also, remember that you’ll have to buy more furniture and spend on other items as well when you move to a bigger office, hence a business loan can be a good option.   3. To Buy Equipment For Your Business Equipment financing is pretty common in the business world. In fact, there is a special type of loan just to buy equipment since no business can work without quality equipment. If your old equipment is dying out or if you need to buy new equipment to increase production then you must opt for a business loan. Equipment financing is a good option in this regard as the equipment will be paying for itself.   4. To Clear Your Pending Bills You can apply for a loan to get rid of your pending bills to avoid the surcharge. However, this works only if the interest amount is lower than the surcharge. Note: Do not apply for new debt to clear the old debt. That’s a trap.   5. To Build Credit History For The Future Banks often require a good credit history to approve loans. Applying for a loan just to improve your credit history can be a good idea, especially if you intend to apply for a big one in the future. However, do this only if you’re sure of being able to pay back the loan on time. Apply for loans, but carefully!  

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5 Steps to Successfully Implement Your Cashflow Plan

Having and implementing a good cashflow plan means that you’ll have a clear understanding of what money comes into your business and how much money goes out of it. A lot of entrepreneurs lose track or fail to maintain a cashflow management plan due to focusing on other aspects that may seem more appealing. But your business success heavily depends on the financial stability and well-being of your company. In order to successfully maintain your business and always have cash in your company, here are the top 5 steps to nail a cashflow plan.   It’s fair to say that cashflow and budget management typically rank low on most peoples’ priority lists, especially for time-poor business owners. But while it isn’t exactly the sexiest of business ownership activities, the extent to which you can effectively manage your incomings and outgoings is, without doubt, one of the biggest predictors of your company’s long-term success. The term ‘cashflow’ is used to describe the movement of money in and out of a business each month. Essentially, the objective of any business is to have more money coming in each month than is going out, the term used for this is ‘positive cash flow.’ In Australia, lack of cash, or working capital, is known to be the primary reason that SMEs go out of business. “Cash is king as we all know. It really is the life blood of your whole business. If you don’t have cash, you can’t buy stock, pay bills, hire staff – you need to be on top of your cashflow if you want to succeed in business,” says Paul Bevan, CEO at Boss Finance Australia. According to Xero’s recently launched Small Business Insights research which reviewed the aggregated data of more than 500,000 Australian small businesses, only 50.7 per cent had a positive cashflow as of June 2017. “Seasonal businesses are at greatest risk of negative cashflow because they will have significant fluctuations in business across the year,” Paul says. However, regardless of the industry, all business owners should have their own formal method of recording, tracking and forecasting incomings and outgoings each month. For anyone struggling with cashflow, implementing a formal plan can get you back on track, achieve a positive cashflow every month, and avoid financial stress. Proper cashflow management can also enable you to take better advantage of business opportunities as they come up. Sydney-based tradie recently reached out to Boss Finance Australia for help. “He had great turnover for the year, but due to the nature of his business and the ebbs and flows each month – paying invoices, paying suppliers, buying materials, paying wages etc. – he was always finding himself short on cash,” says Paul. “We were able to map out his cashflow month to month so he could see where upcoming shortfalls were likely to occur and prepare accordingly. The outcome for him was significant. His stress levels are reduced and the clear picture of his incomings and outgoings has given him the ability and confidence to take on larger jobs as they come up, whereas he would have previously been reluctant.” Here are 5 key steps to adopting a simple and successful cashflow plan for your business: 1. Use a smart template to build out your plan There are plenty of expensive software solutions out there that can manage your budgeting and forecasting for you. But for a simple cashflow plan, you can download simple Excel templates for free too. Alternatively, if you’re a spreadsheet whiz, you may choose to build your own! 2.  Identify where your revenue is coming from Once you have the right template, it’s time to get started creating your business cashflow picture. Start by reviewing your business revenue. Organise your income by breaking it down into two main streams:  Recurring income (product sales or services), and  One-offs (like a government grant, loan or asset sale). It’s important to know exactly where your money is coming from each month – and it might surprise you (or not!) to know that for most business owners, this is the first time they’re seeing the full picture since starting their business. 3.  Identify where your money is going Now it’s time to review your historical costs. Enter your monthly expenses into your Cashflow Plan. If you’re using the template referred to in Step 1, it offers you a list of standard outgoings including insurance, stock purchases, office supplies, loan repayments etc. The template will then automatically subtract your expenses from your income. 4.  Review Now that you’ve created a clear picture of your monthly income and expenses, it’s clear to see where your strongest and weakest months are, as well as the periods where your costs are highest. Now that you can see it clearly in front of you, it’s possible to plan ahead. If this is the first time you’ve undertaken this kind of analysis, we recommend you ask your accountant to provide you with some figures on comparable businesses in your industry so you can compare typical costs and revenues. Consider how your cashflow compares to your financial goals – are you on track, or do you need to think about a different approach? Are you in serious cashflow trouble? If you can see that more cash is leaving your business than is coming in each month, consider whether additional working capital via a loan or line of credit could help. Other factors to consider include an audit of your business activities to identify areas that are costing you more time and resources than they are worth. Most businesses have opportunities to cut down costs and increase revenue by removing redundant practices and focusing in on their areas of greatest profitability. 5.  Update and monitor regularly Make sure you stay on top of your budget by updating your plan on a monthly basis or as your circumstances change – SME is an ever-changing environment! The time you devote to implementing sustainable cashflow management practices into your business will pay dividends. Why not get started now!  

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5 Things You Must Do Before Applying for Finance

Given all the various finance options available and the complex matrix of requirements associated with getting approved, it would be a rather lengthy exercise going through every scenario. That said, it is worth having a basic checklist of the basics which will be required in almost all circumstances. 1. Register for GST There is a lot of discussion as to whether a small business should register for GST. If the business intends to borrow money now or in the future, it would be best to register for GST as soon as possible. For most small business financial providers -- this is a requirement. 2. Prepare & Confirm Company Details This may sound like stating the obvious, but it very important that the information you submit about you and your company can be correctly verified. Check and document the following: Company registered and trading addresses, phone numbers, email address, contact names, ABN number, and trading name. If owned by a trust, get a copy of the trust deed and document beneficiaries. Document director’s details as above and ensure they match current photo identification such as driver’s license. 3. Review Company & Directors Credit Report Any individual and or company can request a copy of the same credit report the financial institutions will be examining when assessing a credit application. It is strongly recommended you obtain a copy and review to ensure all details entered by third parties are correct. If you find any errors, you are entitled to dispute the entries with either the credit rating agency itself or the party which added the entry. It is in your interest to rectify or resolve any discrepancies prior to submitting an application for credit. Simply stating that a record is in dispute does not help. 4. Prepare the Financial Accounts For smaller amounts with some lenders, this may not be required. However, it is a good idea to have them ready. As a rule of thumb, you will need a full set of accounts for the previous financial year which have been audited or backed up with the signed corresponding tax return -- along with the year to date management accounts. It will help if year to date accounts are backed up with BAS statements. 5. Prepare Directors Asset & Liability Statement As directors personnel guarantees are a requirement for borrowing in the SME market, getting directors A&L declaration right is important. However I think it is best to understand why first. The misconception is that it’s all about demonstrating enough net assets to cover the debt in the event the business fails. There is some truth to that but not the real issue. Lenders want to see that the director is stable financially and therefore committed to the business. If after reviewing the company, they feel they may have to go after personnel assets at some stage they will not lend in the first place. That being said when preparing the statement ensure that all valuations on the assets side are realistic and title lies with the applicant and all liabilities are disclosed as this will all be scrutinized in the credit process.

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5 Things You Need for Your Company's Tax Return

Running your own business comes with a lot of perks as well as some difficulties you need to prepare for, among which are corporate tax and how to prepare for that tax return. You can't do it alone, so you'll definitely need to find a good accountant who'll be able to assist and guide you throughout the entire process. Whether you're using a cloud accounting software, or have experience preparing your own tax returns up to this day, once you get into the corporate world, tax return policies and subtleties become more complex. Trading through a company structure has many advantages such as asset protection and access to the corporate tax rate. However, operating through a company structure adds another layer of complexity to your tax affairs. If you have been preparing your own tax return up to this point, it is time to go speak to an accountant who knows company tax returns inside out and can help guide you through this process. More importantly, a good accountant will also help with you with tax planning and be a sounding board for all the general business issues you come across. When it comes to tax time, it is important that you are prepared. So here are the 5 things you need for your company’s tax return and how you can get ahead of the game using technology: 1. A reconciled accounting file Once you move to a company structure, spreadsheets with income and expenses are no longer going to cut it. You need an accounting package to keep track of everything and also give you an up-to-date understanding of where your business is at. These days there are a wide variety of different accounting software packages available. The most common ones we see for small to medium businesses (SMEs) are MYOB and Xero which are easy to use for business owners and bookkeepers. We are noticing a trend towards cloud based products, such as Xero, that simplify accounting and tax for SMEs, and allow for greater collaboration with advisors. Before your accountant gets to work on preparing the company’s tax return, it is important that your accounting file is reconciled up-to-date. This includes ensuring that the company’s bank accounts are reconciled, all customer and supplier invoices are entered and doing a sanity check of the balance sheet and profit & loss. This accounting file forms the basis for the preparation of financial statements, reporting of income and expenses in the company’s tax return and for a series of financial disclosures required on the tax return. The more accurate you can make your accounting file, the more efficient the tax return process will be. This allows your accountant to spend more time working with you on strategies to grow your business rather than getting bogged down in the detail of reconciling the company’s accounts. 2. Bank statements Historically the first question your accountant would always ask was, “Send us the 30 June bank statement for each account.” The advent of cloud accounting and bank transaction feeds directly into your accounting software have reduced the need for this. This functionality has been a gamer changer by improving accuracy and streamlining the process of recording bank transaction data. Many of our clients have reported considerable time savings by moving to systems with these capabilities. Arguably, if the bank feeds are working correctly, then there is no need to refer to the bank statements as all data should be present in your accounting file. Practically, your accountant will still probably ask for copies of bank statements to confirm that the bank accounts are reconciled correctly even where this functionality is in place. They may also request copies of financial documents for new loan facilities such as hire purchase or lease arrangements. Get ahead of the game and provide these upfront to expedite the tax return preparation process. 3. Ensure that you provide good descriptions on transactions Not every cost or expense is tax deductible upfront. Some expenses, such as fines and penalties, are specifically treated as non-deductible, meaning you never get a tax deduction for them. Other expenses, such as borrowing costs on new loans, are only deductible over a number of years. Legal expenses can sometimes be deductible, sometimes be non-deductible and sometimes be treated as a capital cost of the business. Accordingly, it is important that you provide detailed descriptions for each transaction so that your accountant can identify what the transaction relates to and what the correct tax and accounting treatment is for it. Some accounting software providers are taking this to the next level by allowing you to attach invoices or other documents to a transaction. The benefit of this is two-fold. Firstly, it means your accountant has all the information taxavailable when they look at a transaction. Secondly, the documents are stored in a convenient location meaning no more searching through emails or files to find a missing invoice. 4. Make sure all BAS lodgements are up-to-date Having your BAS lodgements up to date is important for many reasons. Firstly, the ATO requires you to lodge these statements on time and can issue fines for late lodgement. With improvements in accounting technology it is easier than ever to stay up-to-date with your reporting requirements. Secondly, these BASs provide a point of reference for your accountant when looking at GST, PAYG withholding and income tax liabilities. Your accountant will also look at wages reported on the BASs compared to your accounting and payroll records. 5. Details of any other businesses you are involved with For many years it did not matter whether you had multiple businesses in different entities, the tax rate was the same for all companies. In recent years Australia has moved to a two-tiered company tax rate with smaller businesses paying 27.5% and all other businesses paying 30% in a company structure. This requires you to combine (aggregate) the turnover for all related businesses to determine the appropriate tax rate. It is important that you make your accountant aware of any entity in which you hold a significant interest so they can assess which tax rate is applicable to your company. As you can see, there is a bit to think about when it comes to preparing your company’s tax return. Finding a good accountant and making use of technology are key to making this process as easy as possible for you. The less time you spend thinking about tax, the more you can spend on growing your business.

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5 Tips To Get Your Bookkeeping Right From Day One

For entrepreneurs, coming up with an idea and starting a new business can happen with a blink of an eye. The challenge comes when money starts heading out the door for expenses such as office rent, internet costs, paying employees or contractors, when revenue starts coming in the door and staying up to date and compliant with the ATO. A very small business may get away with living off spreadsheets or free online accounting tools to get you by but from my experience working with a number of start ups, there are some very clear differences between the businesses that fail and the ones that get past year one. Challenges that can occur from incorrect bookkeeping from day one! Not invoicing your customers correctly or on time leading to lost income and poor customer experience. Losing important receipts or not allocating then to the correct expense accounts, which could mean paying to much tax or not being able to justify the expense to the tax department. Incorrect preparation of your BAS. You will pay either too much or too little to the ATO. Both will result in you being out of pocket somewhere down the line. Wasted time being spent by yourself or an employee on record keeping, data entry mistakes and liaising with external groups like the ATO. Surely, your time is more valuable doing other things like selling your products or services. Unable to correctly reconcile business loan accounts. Very costly when you accountant needs to come in and determine what is right or wrong or worst case you are audited. Money down the drain when an external bookkeeper or accountant needs to fix up your mistakes, when it could have been down correctly the first time. 5 Tips To Help Get Your Bookkeeping Right From Day One If you are going to do it yourself, then educate yourself. Find a bookkeeping course or pay for some training from people who know what they are doing. Find the right online accounting software program. It can only cost as little as $29 per month to have a complete accounting package that can do all your invoicing, tracking expenses, attaching important files like receipts and BAS preparation. Set your chart of accounts up correctly. Have a chat with your accountant if you have one. You will be charge by your accountant at years end to make changes if you just go with what you think is best. Prepare your BAS correctly. This will save you time and money. Don’t take it for granted that your revenue and expenses have the right tax code associated with each transaction. If your accounting software allows it, run some detailed general ledger reports to make sure everything is in the right place before lodging with the ATO and setup matching rules when importing your bank transactions to save yourself time. Find time each month to actually sit and review your profit & loss reports, balance sheet, and cash flow. A great way to keep on top of how you are performing and it will also highlight issues in your bookkeeping that you can have someone fix straight away. If you have any other tips that would also help please feel free to leave a comment.

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