Cashflow Tips – Improving Cashflow – 5 things to attend to when cash is low

Cashflow Tips – Improve Cashflow – Invoice Promptly!

There are many areas of your business can have an effect on how much cash is available. Here are 5 things to attend to when cash is low. Additionally, controlling your expenses and increasing your sales, you can improve your cash flow.

1. Review stock levels

Holding too much stock will tie up cash and increase storage and insurance costs. Practicing good stock control is to keep stock at efficient levels to service customers, but not sit for months waiting to sell.

2. Manage customer and supplier accounts

Follow up those overdue debtor accounts who owe you money. Managing debtors by having good credit policies and enforcing them, will keep your cash coming in.

You may also be able to negotiate longer payment terms with your creditors/suppliers. If you can get payment from your customers before you pay your suppliers, you will have zero out of pocket expense – easier said, but sometimes can happen.

3. Review banking products

Using the appropriate banking transaction products can have the money in your pocket sooner. Consider a mobile EFTPOS device, or investigate services to take payments over the phone or online.

4. Increase sales income

Review your pricing (time to increase?), use an new advertising campaign or improve your customer service and sell add-ons (would you like Fries with that?) to see if you can increase profits. You may also want to consider other ways to growing your business, such as complimentary products or services.

5. Reduce overheads

Think about reducing staff overtime hours and controlling overheads. Make your business more environmentally friendly may reduce costs such as power and water bills and minimise wastage. Remember to clearly communicate your policies on these items to your staff.

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!

MYOB Essentials – Why is tax calculating/appearing when only $300 earned by an employee for a week?

MYOB Essentials – Why is tax calculating/appearing when only $300 earned by an employee for a week?

Client called – I thought with the tax-free threshold of $18,000 which is $346.15 week gross, has NO tax up to that amount? Is that correct? I can’t work out why tax is appearing when only $300 was earned by an employee for a week? I have ticked ‘Tax Free Threshold is being claimed” – but tax still calculates!

Answer – It is easy to miss, but along with Q8 Tax Free Threshold is claimed, you also need to tick Q7 Australian Resident for Tax purposes – so in MOST cases – tick Q7 & Q8!

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

Business Tax Tips – Hire Purchase and how GST applies

Hire Purchase and how GST applies

Businesses can acquire assets such as equipment by entering into hire purchase or leasing agreements to pay for and use goods over a period of time rather than paying the full cost up front. Then they need to know how GST applies. Here is some information from the ATO website to assist, including links for further information –

How does hire purchase work?

Under a hire purchase agreement, you:

• Purchase goods through instalment payments
• Use the goods while paying for them
• Do not own the goods until you have paid the final instalment.

Do you pay GST on hire purchases?

For a hire purchase agreement entered into before 1 July 2012

Where the supply of goods to you under a hire purchase agreement is a taxable supply, the price you pay for the goods includes GST. If you use the goods in your business, you may be able to claim a GST credit for any GST included in the purchase price of the goods.

• Special rules apply if you use the hire purchased goods to make input taxed supplies, including financial supplies. Refer to Financial services – questions and answers.

If the supplier:

• Separately identifies and discloses the interest charge to you, you do not have to pay GST on the interest as it is for a financial supply
• Does not separately identify and disclose the interest charge to you, you must pay GST on the total amount payable under the contract.

The interest charge is ‘disclosed’ to you if the supplier tells you any of the following in the hire purchase agreement:

• The dollar amount of the credit charge
• The interest rate
• The formula or formulas used to work out the credit charge amount
• Any other information enough to work out the credit charge amount.

For a hire purchase agreement entered into on or after 1 July 2012

All components of the supply made under a hire purchase agreement entered into on or after 1 July 2012 are taxable regardless of whether the credit component is separately disclosed. Any associated fees and charges, such as late payment fees incurred under the terms of the hire purchase arrangement, will also be subject to GST.

A change to an existing hire purchase agreement entered into before 1 July 2012 that does not result in a new agreement is not affected by the new rules. That is, the supply of a separately disclosed credit component will continue to be an input taxed financial supply.

Hire purchase agreement not treated as a progressive or periodic supply

Do not treat a hire purchase agreement as a sale or purchase you make on a progressive or periodic basis. Treat a hire purchase agreement as a stand-alone sale or purchase in a tax period – so, the same rules apply as they would for any sale and purchase of goods under an ordinary sale agreement.

How do you claim GST credits on hire purchases?

If you account for GST on a non-cash (accruals) basis

You can claim the full GST credit on your hire purchase agreement in the tax periods when either:

• You make your first payment
• If before making your first payment, a tax invoice is issued to you.

If you account for GST on a cash basis

For hire purchase agreements entered into before 1 July 2012 you may claim one-eleventh of the principal component of each instalment in the period you pay it. If the supplier provides regular accounts or statements that show the principal and interest components for each instalment, you must use that information to work out GST credits in the relevant tax period. If you do not know the principal component for each instalment, you need to take reasonable steps to find out from the supplier.

For hire purchase agreements entered into on or after 1 July 2012, you may claim input tax credits upfront instead of waiting until each instalment is paid, in the same way as you would if you accounted for GST on a non cash basis. As mentioned above, all components of the supply made under a hire purchase agreement entered into on or after 1 July 2012 will be subject to GST. You may claim one-eleventh of all components, including the credit component and any associated fees and charges which have been subject to GST under the agreement.

See some working examples further down the page at the ATO site HERE

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