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Cashflow Tips – Making a profit but have no cash – Why?

Cashflow Tips – Making a profit but have no cash – Why?

Cashflow Tips – Making a profit but have no cash – Why?

Do you find you are making a profit but have no cash and wonder why?

This may be because a company report can show they are making a profit but have no cash because profit is an accounting record using revenues and expenses, (accrual accounting) which are different from the company’s cash receipts and cash disbursements (cash accounting). In other words, there is a difference between revenues (invoiced sales) and receipts (actual cash receipt of payment of invoices (banked)). There is also a difference between expenses (purchase orders still to pay) and expenditures (actual payment of purchases, and overhead expenses).
Examples

As an example a new company that sells $10,000 to its clients in a month and the clients are given 30 days to pay. The company will have $10,000 of revenues in its first month, but the cash will not be received until the second month. If the company’s expenses are $7,000 in the first month, the company will report a profit of $3,000 but will not have received any cash from its clients. It may not have been paid, and it may not have paid it’s expenses either.
Another company might report a profit of $60,000 in its first year, but during its first year it uses $65,000 of cash to acquire equipment that will be put into service at the beginning of the second year. This company will have a profit, but will not have the cash.
Other times cash is paid out, but the profits are not reduced at the time of the payment, because they don’t pay for expenses but pay loans, payroll PAYG or super or for stock – they go to the Balance Sheet and include prepayments of insurance, payments to increase the inventory of merchandise on hand, and payments to reduce liabilities.

Keep in mind that Profit does not equal cash: it is as simple as that! Profit is the accounting record of what is left after you have made sales and raised all expenses. Of course, remember there is tax on the profit as well. The remaining amount is then reinvested back into the business or distributed the owners.

Cash is what the business needs to operate every day and can come from 5 different main sources — profit, selling assets, contributing your own personal funds, bank loans or new investor money.

Cash and Timing

The key to remember is that you don’t spend profit in our business — you spend cash, and it is all in the timing.

There are 2 timing situations to be aware of –

Firstly as the old saying goes, you have to spend money to make money. To make a profit, you first need to purchase goods or services to sell, so you will need cash before the sale is made. By selling your product or service at a higher price than what it cost, you make a profit.  The point is you need the cash before you get the profit, or get credit and pay the supplier later!

Secondly (that catches most businesses) is providing credit to customers. The longer the customer takes to pay, the longer you have to wait for the cash, and in the meantime you have wages, rent, stock and other expenses to pay. This is where the trouble begins and often ends.

Focus on what matters – Cashflow

You need to focus on not only profit but also what drives your cashflow. If you have regular loan repayments, rent and other expenses that have to be made on time, then you will need enough cash to cover these while you wait for your customers to pay. Keeping track of your accounts receivable and following up on late payments will definitely help your cashflow. The other thing to remember is if you can get credit from your suppliers, this may mean that you don’t have to pay for stock until you have sold it — again making a big difference to your cash flow.

The business needs to be profitable to stay in business. Be careful of sacrificing profits to generate cash. Offering discounts to pay early will definitely help your cash position but will reduce your profit.

The best management is to make sure you have enough cash buffer to cover ongoing expenses. Having a finance facility (overdraft, credit card) can help that will tide you over during a cash flow shortage, but this will cost in the form of fees and interest, which again, will reduce your profit.

Remember profit does not equal cash!

See more help at Cashflow Tips

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MYOB – How to set up and generate a Taxable Payments Annual Report (TPAR) – and when due?

MYOB - How to set up and generate a Taxable Payments Annual Report (TPAR) – and when due?

MYOB – How to set up and generate a Taxable Payments Annual Report (TPAR) – and when due?

If you are a business in the building and construction industries, you may be wondering how to generate in MYOB a Taxable Payments Annual Report (TPAR) – and when is the due date?

Here we look at what the 1. Australian Tax Office (ATO) requires and how to 2. the steps to set up and generate a Taxable Payments Annual Report from MYOB Account Right software.

1. ATO Requirements

From the ATO website latest page 19 June 2015 –

Taxable payments reporting – building and construction industry

Recent updates

In March 2015 we updated:

When to report The due date for lodging the Taxable payments annual report is by 28 August each year.

Overview

Businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year.

You need to report these payments to us on the Taxable payments annual report.

To make it easier to complete the annual report, you may need to check the way you currently record your contractor payment information.

Background

Taxable payments reporting for businesses in the building and construction industry aims to improve compliance with tax obligations by those contractors who are currently not doing the right thing.

The information reported about payments made to contractors is used in our data matching program to detect contractors who have not:

·                     lodged tax returns, or

·                     included all their income on tax returns that have been lodged.

2. MYOB – The steps to set up and generate the report are –

How to track reportable payments in AccountRight

Once you select the contractor payments option in the Preferences window (Setup > Preferences > Reports & Forms tab), you can start marking transactions as reportable. You can mark:

  • Spend Money payments made to suppliers as reportable. You can also set up a supplier so that any payments for them are automatically included in reporting.
  • Bills and Orders recorded for suppliers. Payments received against these transactions will be included in the report.

You can then generate a report that will help you complete the ATO forms, or create a report file you can lodge electronically.

Lodging your report electronically

You can lodge your report electronically, using the ATO’s Business Portal. If you haven’t already set up access to the Business Portal, you should do this before the end of the financial year so you’ll be ready to lodge the report when it’s due. See the ATO website for more information.

Set the reporting preference

  1. Go to the Setup menu > Preferences. The Preferences window appears.
  2. Click the Reports & Forms tab and select the preference, I Report Taxable Payments Made to Contractors.
  3. Click OK.
    Whenever you record a Spend Money or purchase transaction, the Reportable Payment option will appear in the transaction window. Select this option to mark the transaction as being a reportable payment.
  4. Set up suppliers to report
  5. Go to the Card File command centre and click Cards List. The Cards List window appears.
  6. Click the Supplier tab.
  7. Click the zoom arrow of the card you want to set up. The Card Information window appears.
  8. Click the Buying Details tab.
  9. Select Report Taxable Payments. In the message that appears, choose whether to report any existing transactions for the supplier for the current financial year. Note that you can later remove payments from reporting.
  10. Click OK. The Cards List window reappears. Whenever the card is selected in a Spend Money or purchase transaction, the transaction is marked as reportable by default. 

To report taxable payments

  1. Go to the Purchases command centre and click Report Taxable Payments. The Taxable Payments Assistant opens.
  2. Click Next. The Company Information window appears.
  3. Enter any company information that doesn’t appear by default.
  4. Click Next. The Review window appears.
    In this window, you can click Review Your Transactions to:
    a.     Review all transactions marked as reportable.
    b.     Change the reporting status of transactions.
  5. Click Next. The Create window appears.
  6. Click View Taxable Payments Report. The Taxable Payments Annual Report (Detail) report appears. You can use the report to help you complete your ATO forms, or to keep for your records.
  7. If you’re lodging the Taxable Payments Annual Report file:
    a.  Click Create Taxable Payments File. The Save As window appears..
    b.  Select the location to store the file and click Save.
  8. Click Finish to close the assistant.

Need help? Not sure? Call for FREE 30min advice / Strategy session today!

                Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!


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Reckon/Quickbooks – How to set up and generate a Taxable Payments Annual Report (TPAR) – and when due?

Reckon/Quickbooks – How to set up and generate a Taxable Payments Annual Report (TPAR) – and when due?

Reckon/Quickbooks – How to set up and generate a Taxable Payments Annual Report (TPAR) – and when due?

If you are a business in the building and construction industries, you may be wondering how to generate a Taxable Payments Annual Report (TPAR) – and when is the due date?

Here we look at what the 1 Australian Tax Office (ATO) requires and how to 2 The steps to set up and generate a Taxable Payments Annual Report from Reckon/Quickbooks software.

1. ATO Requirements

From the ATO website latest page 19 June 2015 –

Taxable payments reporting – building and construction industry

Recent updates

In March 2015 we updated:

When to reportThe due date for lodging the Taxable payments annual report is by 28 August each year.

Overview

Businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year.

You need to report these payments to us on the Taxable payments annual report.

To make it easier to complete the annual report, you may need to check the way you currently record your contractor payment information.

Background

Taxable payments reporting for businesses in the building and construction industry aims to improve compliance with tax obligations by those contractors who are currently not doing the right thing.

The information reported about payments made to contractors is used in our data matching program to detect contractors who have not:

  • Lodged tax returns, or
  • Included all their income on tax returns that have been lodged.

2. Reckon/Quickbooks – The steps to set up and generate the report are –

  1 Enable the Taxable Payment Reporting option in the preference to be able to open the report.

  1. Go to the Edit menu, choose Preferences.
  2. Choose the Tax item and go to the Company Preferences tab.
  3. In the Taxable Payment Report section, click to select the Enable the Taxable Payment Reporting option.
  4. Click OK.

  2 Enable a supplier (sub-contractor) to become reportable on the Taxable Payment report

  1. Go to the Suppliers menu and choose Supplier Centre.
  2. On the Suppliers tab, double click the supplier’s name to open the supplier’s profile.
  3. Click to select the “Include in Taxable Payments electronic report” option.
  4. Click OK.

  3. How do I create this report to have what I need to write on the ATO form?

  1. Go to the Suppliers menu, click Tax Activities, click Process Taxable Payments. The Process Taxable Payments annual report window opens.
  2. Click the Tax Year drop-down to select the tax year you are reporting on.
  3. If applicable, click the Withholding Liability Account drop-down to select the account you use to track withholding tax.
  4. Click the (tick) column to select the selected suppliers that you want to appear in the selected tax year’s report.
  5. Click the supplier to view the transactions for each supplier that are included in the report. The Supplier Taxable Payments Details – <supplier name> window opens.
  6. You can review each transaction and click to deselect if you don’t want it included.
  7. Click OK.
  8. Click Save to save the changes (if you have made them) in the Process Taxable Payments annual report window.
  9. Click Export to save the report to your disk. The Select Location for Tax Payment Report File window opens. Enter a file name for the report, we recommend using the date in the file name. The default location for the file is \\ProgramData\Intuit\ReckonAccounts 2013\<level> 2013\<Company Name>\Export Files\Tax Payment Reports. For Reckon Accounts Hosted users, the default location is “Q:\ “
  10. Click Save. You will receive a message that the file has been successfully written. If you have electronic key, you can upload the file to your ATO portal
  11. Note: If you make any changes to the data whilst the Taxable Payments Annual Report Window is open, the report needs to be closed and reopened for it to refresh.

4. How do you Amend the TPAR report if incorrect?

If you require to submit an amended report to the ATO, select the Generate Taxable Payments as ‘Amended’ option in the Process Taxable Payments annual report window.

Select the supplier that has been amended from the list and click Create Report.

Get a FREE 30 min answer to your query, and FREE ongoing email or phone support – No-one offers as much! Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right! Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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MYOB ESSENTIALS – Tips when setting up Employee – Why is there too much PAYG tax when claiming Tax Free Threshold?

If you are wondering why there is too much PAYG tax being raised when the employee is claiming Tax Free Threshold, eg tax is raised on $200 (and there should NOT be any) and there is an extra box to tick.

As you are setting up each employee, most will nominate, and you will tick “Tax Free Threshold claimed”.

What does Tax Free Threshold mean? The first $18,000 there is NO Tax on wages and salaries in Australia currently. But if an employee works at 2 jobs – they can only (should!!!) claim the tax free threshold at ONE employer – usually the one where the most time is worked.

In MYOB Essentials if the option 8 on the Tax Tab is ticked WITHOUT option 7, tax will start generating when it shouldn’t!

Here is how to set it up – tick 7 + 8 –

Essentials - Tax Set Up

Useful links – (from our Useful Business Links page above) –

ATO Tax Tables – PDF’s

For the latest tax tables to download the PDF and keep a copy, or use the Tax Withheld Calculator online, all from here.

Australian Payroll Tax and Super Calculator

See all you need in one table! – weekly, fortnightly, monthly – enter the Annual Gross wage/salary

(or take the weekly gross x 52 to get annual)

Need help? Not sure? Call for FREE 30min advice / strategy session today! 0407 361 596 Aust

***BEFORE you BUY – Ask us for a competitive software price BELOW retail – No obligation!

You also get FREE 30 min to assist in setting up your company in the software, and FREE ongoing email or phone support – no-one offers as much!

Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Business Finance 101 – Excuses we use to not Improve the coming year with easy financial budget planning

Excuses we use to not Improve the coming year with easy financial budget planning

Excuses we use to not Improve the coming year with easy financial budget planning

Do you find you fall into any of these excuses to NOT improve the coming year? Eve Blackall covers 4 common excuses and offers 5 easy financial budget planning steps –

  • “I don’t know exactly what is going to happen next so how can I plan?”it doesn’t matter; put down what you would LIKE to happen – the benefit is a very clear way for you to establish your measures of success for the year to come.
  • “But my plans may change during the year!”never mind; you can adjust your budget to reflect new goals or challenges – the benefit is you can also clearly see the impact and outcomes of these changes and when, where and how to make management decisions to stay on track.
  • “What if I get it totally wrong to start with?”all the better; the benefit is you will learn more about your business is actually doing, instead of acting on what you assumed your business was doing.
  • “I don’t want to look foolish!”go right ahead and keep your initial budgeting drafts private; if only for a while. Eventually you will want to follow best practice and create your budget and plans involving your team, and maybe even your customers and suppliers. Start by building your confidence and skills first and keep it close to your chest if you like (just make sure you still peek at it often), then no-one but you will can judge how well you are going.

Eve also has simplified the 5 key steps to make business budgeting easier –

STEP 1 – Gather your Budgeting Calculating Ingredients

STEP 2 – Write down your Future Plans

STEP 3 – Sort out your Future Plans into Budget Headings

STEP 4 – Apply the dollars to your Budget Headings

STEP 5 – Do a Profitability Check

It doesn’t have to be complicated, or maths-ey! Even if you only write down 5 lines – one for income and four lines of expenses – you are starting a budget you can work with… All you need to do after that is to check your progress towards the goals (preferably weekly) but monthly will do, you will probably surprise yourself with the improved business and profits that result from just keeping your eyes on the prize!

See the full article

Need help? Not sure? Call for FREE 30min Advice / Strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email info@accountkeepingplus.com.au

or call 0407 361 596 Australia