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Cashflow Tips – 5 tips for better business cashflow

Cashflow Tips – 5 tips for better business cashflow

Cashflow Tips – 5 tips for better business cashflow

One of the things many business find a burden is that cashflow can easily get out of hand and several studies suggest that financial miss-management is one major contributor to business failure. Here are 5 tips to help get cashflow under control – remember it is an on-going monitoring that keeps you on top – measure and tweak, measure and tweak…!

1.  Look at who owes you – WEEKLY – check your debtors/accounts receivable report every week – get onto those tardy payers – send Statements every Fortnight! A month is too big a gap and easy to slip the mind…

2.  Plan for highs and lows 
Be aware of possible lean cashflow patches coming up and plan for them!. Avoid major purchases from your business’ working capital unless you are sure you have cash to cover it. A cashflow budget will help you see this – eg when revenue is down on forecast you expected (eg the average monthly required, or based on same time last year, or certain % growth if that is the current trend).

3. Have finance products working to your benefit
Overdrafts, premium funding, lease facilities and cashflow funding products can all be excellent tools to help boost a business’ cash. Even the business credit card can be a good way to ease the squeeze as long as you are sure the debt can be paid before interest kicks in, which is the best way to handle credit cards!

4. Avoid penalties
Keep on top of taxes and compliance to save the cost of fines… and the stress!

5. Keep your hands out of the till.
Make cash drawings for personal purposes as minimal and follow conservative cashflow forecasts. Take a weekly wage for yourself so it’s easier for the bookkeeper/accountant, and gives stability to regular expenses and drawings so you can PLAN better!

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

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 Tax Tips – Capital Gains Tax Concessions for SME – Don’t get caught out

Business Tax Tips – Capital Gains Tax Concessions for SME – Don’t get caught out

Business Tax Tips – Capital Gains Tax Concessions for SME – Don’t get caught out

Terry Hayes, writing at Smart Company, warns that many SME businesses can get caught out by not knowing the Capital Gains Tax  Concession rules. He has a link to another article with details, but in this one he writes…

…A fundamental threshold is the necessity to meet what is known as the maximum net asset value test (MNAV) in order to qualify for the concessions. Under that test, the value of all the CGT assets of the taxpayer, entities “connected with” the taxpayer, the taxpayer’s “affiliates” and entities “connected with” the taxpayer’s affiliates must not exceed $6 million. Such assets would include a debt owed to the taxpayer.

A recent case before the Administrative Appeals Tribunal (AAT) highlighted the importance of passing that threshold test and what is required to do so. It is one of the most fundamental issues that a taxpayer will confront when seeking to obtain the benefit of the small business concessions.

The AAT confirmed the Tax Commissioner’s view that a taxpayer failed the MNAV for the purpose of qualifying for the CGT small business concession because of a $500,000 capital gain he made in relation to the sale of his finance broking business.

The taxpayer argued that a debt of $1.1 million owed to a related entity had a nil value and should not be taken into account for the purpose of the MNAV test as it was “statute-barred” from recovery. However, the AAT found otherwise on the basis that the debt had been legally acknowledged as recoverable and legally in existence at the relevant time.

The taxpayer was a beneficiary (and trustee) of a family trust that held units in a unit trust which operated a finance broking business. The business was sold in the 2008 income year for a capital gain of $500,000 to which the taxpayer was entitled.

The issue in this case was whether the capital gain could be reduced or disregarded under the tax law, if the taxpayer and his related entities satisfied the maximum net asset value test. In particular, just before the sale of the finance broking business, did the sum of the net value of the assets of the applicant and his related entities exceed $6 million?

The taxpayer argued that, in determining whether the MNAV test was satisfied, a loan of $1.1 million made to him by the family trust prior to 1998 had a nil value and was not to be taken into account as it was “statute-barred” from recovery. In particular, he claimed that the family trust could no longer sue for the debt because of the six-year statute of limitation – where it had not sought repayment of the debt because it may have been used to repay a debt of another entity in the group that had become insolvent.

However, the AAT found that the fact that the taxpayer signed the balance sheets of the family trust for the 2003 to 2008 income years (in his capacity as trustee) was sufficient acknowledgment in writing that the debt was still legally in existence as an asset of the family trust in the year in question and it had a market value equal to its face value in the balance sheet records. The inclusion of the $1.1 million debt meant the taxpayer failed the MNAV and therefore could not reduce his $500,000 capital gain under the small business concessions.

The AAT also noted that the trustee of a trust has the authority to sign off on such balance sheet records as an agent of the trust (which the AAT found was equivalent to the situation where directors of a company sign balance sheets of the company in pursuance of their duty as directors).

That the CGT small business concessions continue to catch out taxpayers, for varying reasons, is some cause for concern. While it may be true that ignorance of the law is no excuse, the complexity surrounding these concessions still confounds many. May be its time they were simplified. No doubt the government’s Tax White Paper reform process will look at them.

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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Business Finance 101 – What does it mean Profit is not Cash? Does that explain where is my profit when there is no money in the bank?

Business Finance 101 – What does it mean Profit is not Cash? Does that explain where is my profit when there is no money in the bank?

What does it mean Profit is not Cash? Does that explain where is my profit when there is no money in the bank?

Are you showing a profit in your business, but wonder where is your profit, when there is no money in the bank? And what does it mean when accountants say “Profit is not Cash?”

If you have cash sales, profit will usually correlate closely. But if you invoice clients for goods and services, the timing of when customers pay has an effect on the cash the business actually has. Not everyone pays on time, but if they did you would have regular cash flow, and only be delayed by the initial terms at the beginning eg 7 days, 30 days. Regular payments will mean regular flow of money to cover your expenses.

What if clients are late paying? Then the debtors on your balance sheet will grow (that is where the invoice “waits” for payment) until the client pays.

As an example, in our previous post explaining Profit and Loss, see HERE we gave an example of Profit and Loss resulting in $15,000 profit.

bus-profit-loss-diagram

But what if you were only paid half of the sales at the end of the period (which is more close to reality – eg most pay the next month or two…)

Sales (invoices)                                   $100,000

But only paid (actual cash)                $50,000

Which goes to bank (in assets)

Net Left                                                    $50,000

Which sits in debtors/receivables (in assets)

NotePROFIT would be same in accounting terms,

but CASH Profit would be -$35,000 (negative!)

That is, what this is – if you still had paid all your bills, you would still have to find $35,000 to pay them – see here

 Business Cash Profit

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 – Assets and the CAP Tax Code for Capital (asset) Purchases

At Top of screen click Company Name

JPG1

Click GST Settings – and Ensure you have the following (if business is GST Registered) – or set as required

JPG2

Click Save at bottom

Create Motor Vehicle Purchase > Banking > Spend Money

JPG3

And Save

Looking at Reports > GST detailed report,  the different Tax Code parts should be itemised

JPG4

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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Business Tax Tips – 10 EOFY (End of Financial Year) tips to prepare for 30 June

Business Tax Tips – 10 EOFY (End of Financial Year) tips to prepare for 30 June

10 EOFY (End of Financial Year) tips to prepare for 30 June

Time to plan for a good finish for EOFY and here are 10 tips to get started and prepare for 30 June.

1. Consider the ideal timing for asset sales

If you are thinking of selling a profitable asset this financial year, but are likely to earn a lower income in the next year 2015-16, it may be worth postponing the sale until after 30 June; however, if you expect an income windfall or higher salary from 1 July, it may be worth bringing the sale forward. As always, your decisions depend on your expectations for future asset prices, so don’t postpone a sale for tax purposes if you are expecting your investment to fall in value!

2. Get more from your salary or bonus

If you are expecting a pre-30 June bonus, you may be able to sacrifice your pre-tax salary or bonus into super rather than receive it as cash. As with the deductible contributions, this could reduce tax on your salary or bonus by up to 34%, and will allow you to take advantage of the contribution caps that apply in this financial year. Once your money is invested in super, tax on earnings is capped at 15%, which may compare favourably to investments held in your own name.

3. Pre-pay investment loan interest 

If you have (or are considering establishing) a geared investment portfolio, you can pre-pay 12 months’ interest on your investment loan and claim the cost as a tax deduction in the current financial year. This can assist to manage cashflow more efficiently, and potentially reduce your income tax liability this financial year.

4. Pre-pay income protection premiums 

If you are employed or self-employed, income protection insurance provides peace of mind about the security of your income in the event you are unable to work due to illness or injury. Premiums for this insurance are generally tax deductible; prepaying your annual premium prior to 30 June will allow you to claim a full year of cover in advance as a tax deduction.

5. Get a super top up from the Government

If you earn less than $49,4881 pa, of which at least 10% is from employment or a business, and make a personal after-tax super contribution, you could qualify for a Government co-contribution of up to $500. 

6. Boost your partner’s super and reduce your tax

If you have a spouse who earns less than $13,8001 pa, consider making an after-tax super contribution on their behalf, and you could receive a tax offset of up to $540. 

7. Use super to manage Capital Gains Tax

If you make a capital gain on the sale of an asset this financial year and earn less than 10% of your income from eligible employment, you may be able to claim a tax deduction for a contribution to superannuation, which could reduce or offset your capital gain. You will need to be eligible to contribute to superannuation (which means you are under the age of 65, or under 75 and meeting the work test), and be comfortable having your contribution preserved in super until you meet a condition of release (eg retirement).

8. Make tax deductible super contributions

If you earn less than 10% of your income from eligible employment (eg you are self-employed or not employed), you are generally able to claim a tax deduction for personal contributions to superannuation. As with super, you will need to be eligible to contribute to superannuation (which means you are under the age of 65, or under 75 and meeting the work test), and be comfortable having your contribution preserved in super until you meet a condition of release (eg retirement). If you claim a deduction for it, the contribution you make will be taxed at 15% in your super fund, so your tax saving will be the difference between your marginal rate and 15% – which could be up to 34%.

9. Review your portfolio

Review your portfolio and consider a strategic re-allocation of your investments. Consider portfolio allocations – is your portfolio heavily over- or underweight in specific industry sectors or stocks? Are you continuing to carry stocks that have exceeded your price targets or continue to under-perform – this may be an opportunity to re-balance. If you have an SMSF, now is the time to ensure your fund is invested in line with your documented investment strategy – your auditor will be confirming this after 1 July.

10. Offset capital gains with capital losses 

Generally, if you have incurred capital losses on your investments, you are able to offset these capital losses against any capital gains you have made. You can also use losses you have carried forward from previous years. Remember, income losses can only be offset against income; capital losses can only be offset against capital gains.

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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Business Tips – How Mistakes can turn to Profits

Business Tips – How Mistakes can turn to Profits

Business Tips – How Mistakes can turn to Profits

You’ve botched up on a job or following up a client who is now upset – and you don’t know whether to admit your mistake/klutz, service or forgetfulness. There are solutions when you know how mistakes can turn to profits – here are some tips –

Warren Harmer at Flying Solo writes 

I’d been getting a lot of telemarketers calling the business line, trying to convince me to buy everything from shares to advertising, or to extract donations for a variety of causes. So when I received a call from, (I hate to admit), an Indian chap who kicked things off with “the reason for my call today” I went in automatic not-interested mode and immediately asked “are you trying to sell me something?”

His response caught me off guard: “No I’m looking for help with a business plan”, then our call was cut off.

Feeling embarrassed, I stewed for the next hour, trying to justify why I need not admit my ill-judgement and call back. The self-talk was quite convincing, but I overcame it, swallowed my pride, called back and apologised.

The customer was very appreciative that I had called back and the conversation quickly moved on to his project. At a project meeting a few days later, he said he had no intention of calling me back, but when I made that call and apologised he said to himself “I gotta go with this guy”.

Ian Mills at Magic Dust web design, shares his observations 

So from my own experience and from the common stories I hear from being involved with over 4000 small business clients, I have compiled what I see as the five biggest mistakes people make when running a small business.

1. Underestimating the Amount of Effort InvolvedOne of the biggest frustrations I have in business is how simple and quick it is to have an idea, but how long and how much effort it takes for that idea to actually manifest itself as a living reality. In business,things seldom go exactly to plan, they take longer than expected and almost always require more resources to complete than originally planned. Being aware of this and cooperating with it allows you to plan more effectively and alleviate a lot of surprises and stress. Also when you’re running a small business you are responsible for everything so anything that hasn’t been delegated will always end up on your plate – this can accumulate to be a huge amount of “stuff.” So be realistic, be prepared, keep things as simple as possible and try to delegate or out-source aspects of your business as soon as you can.

2. Not Having a PlanUnless it’s part of an investment pitch I personally don’t think you don’t need a lengthy and highly detailed business plan, but you still must have a plan. Without one you’ll be making reactive decisions without perspective. So you need a focus, strategy and game plan to use as a guide and reference point. Use your plan to pull you out of the endless barrage of daily tasks, remember where you are going, course correct and prioritize if need be, and then get back into it. Have business goals at three months, six months, one year, two years and five years. Keep your plan simple and realistic so it can be easily revised as the needs goals of your business change.

3. Failing to be AgileJust because you have a plan doesn’t mean everything will go to plan. It is important to have a clear focus but it is equally important to be flexible. You need to be very mindful of what is and isn’t working. Quite often the business you start will not be the business that you end up with. It will morph and change. Keep your eyes open for the opportunities and the possible threats. Be willing to shift your focus into what is working. Holding on too tight to your original ideas or plans of how things “should” go and fighting for that plan may not be your best path for success. Be flexible and go where the money is, not where you want it to be. Among the advantages of being small is that you can adapt quickly. Be open to the feedback that you get from staff, customers and competitors, and be willing to course correct.

4. Not Hiring HelpKnow what you are good at and not good at, and be realistic about how much time you have. It can be easier to identify what we are good at but it can take real honesty and vulnerability to look at yourself and assess your own weaknesses. From my experience the greatest momentum I have had in my business was when I let go of what I wasn’t great at and hired people who are great. When running a small business there is a tendency to want to do everything yourself.  It seems logical to save money and keep control, but both of these motivations can be very limiting. When you are in touch and attuned to the reality of what you are good at and bad at you will be placing yourself and the business in the best possible context for success. Do what you do well and look to hire, or out source, in those areas that you are weak.

5. Not Keeping Your Bookkeeping in OrderIf you think this point sounds boring or unimportant you need to pay attention. Without accurate bookkeeping you are flying blind. Imagine driving a car and suddenly closing your eyes — it can be that dangerous. Whether or not you’re a numbers person, you need to make sure your bookkeeping and finances are kept in order, and then pay attention to the figures. Ultimately the success or failure of your business is measured by your financial records. The more accurate your records are the more informed you will be to make intelligent decisions about the business and to course correct when needed — whether that’s avoiding trouble or capitalizing on what’s working. You may have heard that “what you do after you fail determines your ultimate success,” so try and make your failures as small as you can.

Expect to make mistakes, but plan to succeed. Be focused but stay flexible. Be creative but be open to the experience of others.

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