Qualified Bookkeeping

Could you be paying too much in PAYG instalments?

Administrator — Thu, 09 Jul 2009 16:21:29 +0000

In the current economic climate there has been a downward trend in earnings. The Tax Office is encouraging businesses to review their tax position to see if the PAYG instalments reflect your current financial position.
Some business and investment taxpayers that use the instalment rate method for PAYG instalments could end up paying more than the expected tax liability for the income year. If this is the case you are entitled to vary your PAYG instalment rate to ensure that the correct amount of tax is paid.
A business or investment taxpayer may wish to consider varying the instalment rate where there has been a substantial change in the proportion of the business and investment income that will be paid as tax. For example, if you expect to have much higher tax deductions for a similar level of business and investment income. Any overpaid instalments from previous quarters can then be applied to meet the current PAYG instalment.
However do your sums correctly as you may be liable to pay an incorrect variation general interest charge where the varied instalment rate is less than 85% of what should have been used. The ATO has said though that it will look favourably on a situation where the rate variation is considered to have been reasonable at the time it was made.

The Tax Office has announced new measures to help businesses

Administrator — Tue, 16 Jun 2009 14:35:05 +0000

10 June 2009

The Tax Office has announced new measures to help businesses with an annual turnover of less than $2 million that are struggling to manage their tax debts in the current economic climate.

In a speech to the Council of Small Business of Australia, Tax Commissioner Michael D’Ascenzo confirmed his commitment to helping small businesses by offering twelve month general interest charge (GIC) free payment arrangements and deferring the payment date for activity statements.

“While most small businesses are meeting their tax obligations, global conditions are having an impact, with over a quarter of small businesses carrying a tax debt,” Mr D’Ascenzo said.

“We’ve introduced the GIC free payment arrangements and deferred activity statement payment due dates to help those small businesses that are struggling to meet their tax obligations.

“These new measures will not disadvantage the majority of businesses that are meeting their tax obligations. We will continue to balance support for struggling businesses with our ongoing efforts to ensure a level playing field.

“We don’t want the GIC or temporary cash flow problems to be the deciding factors between a business surviving and being able to meet its tax and superannuation obligations or becoming insolvent.

“Businesses need to contact us as early as possible on 13 11 42 to discuss their circumstances so we can negotiate a sustainable interest free payment arrangement.

“The Tax Office is offering small businesses with temporary cash flow problems the opportunity to defer the payment date for their activity statement liabilities.

“Again businesses need to contact us as soon as possible to request an extension of up to two months in some cases.

Improve your cash flow

Administrator — Wed, 27 May 2009 02:28:43 +0000

Collecting receivables:
Many small businesses can improve their cash position simply by making certain that their billing, collections, and payables systems are operating as efficiently as possible. Small businesses do not have the luxury of large accounting and collection departments of big corporations so they often have their bookkeeping done by an external bookkeeper. More so if you are a home-based entrepreneur working solo! First, get your customers to pay you as soon as possible! To the extent possible, adopt the business practice of requiring up-front deposits when making sales. However, if the account payment is a receivable, then make sure that you actively manage its collection by billing promptly, aggressively following-up on overdue invoices (which can be handled in some cases by your bookkeeper), and quickly collecting on overdue accounts. You stand to lose revenues if your collection policies are not aggressive. The longer your customer’s balance remains unpaid, the less likely it is that you will receive full payment.

Tightening credit requirements:
If you think that you offer the best product or service relative to your competitor, you can obtain the best possible credit conditions. Be sure to tell your potential customers upfront your credit terms - before you provide your product or service. To improve your cash flow position, you can be more stringent in your credit and terms, requiring more customers to pay cash for their purchases. This will increase the cash on hand and reduce the bad-debt expense. However, there are trade-offs to tightening credit in the short and in the long run. Looser credit allows more customers the opportunity to purchase your products or services. Your bookkeeper should measure, however, any consequent increase in sales against a possible increase in bad-debt expenses. Another way is to get as much information from the client as you can in the form of “customer questionnaire.” The more information you have about the customer, the easier for your payment collection process in the event the person rescinds on the payment.

Taking out short-term loans:
Loans from various financial institutions are often necessary for covering short-term cash-flow problems. Revolving credit lines and equity loans are types of credit used in this situation.

Increasing your sales:
Increased sales would appear to increase cash flow. However, if large portions of your sales are made on credit, when sales increase, your accounts receivable increase, not your cash. Meanwhile, inventory is depleted and must be replaced. Because receivables usually will not be collected until 30 days after sales, a substantial increase in sales can quickly deplete your firm’s cash reserves.

Managing Your Payables:
A key strategy in cash flow management is to aim to bring cash into the company as quickly as possible, then hold onto your cash as long as possible by managing your payables. That means, quite simply, take as long as you’re allowed-without incurring late fees or interest charges-to pay your company’s bills. Remember that a bad credit history can stifle your business, so you need to protect yours. Know which vendor you need to pay first. Better yet, negotiate with some of your vendors to extend to your business liberal payment terms.

Investing Your Spare Cash:
If your cash flow has become stable and predictable, you can consider investing your excess cash and earning interest.

Why is cash flow management important?

Administrator — Wed, 27 May 2009 01:55:43 +0000

Cash flow is the lifeblood of small businesses. Cash comes from sales, collections of account receivables, and the sale of assets. On the other hand, cash flows out to meet all expenses and debt obligations of the business. The goal of good cash flow management is to have enough cash on hand when you need it. This is a simple concept, yet in practice, eludes even the biggest operations. So long as more money seems to be coming into the business than going out, many small business owners do not give cash management a second thought, and that leaves them vulnerable to all kinds of cash-flow dangers.

Learning good cash flow techniques ensures that the company always has enough cash to meet its legal obligations. Adequate cash helps obtain whatever funds are required from external sources at the right time, in the right form, and on the best possible terms. A shortage of cash flow could result in the loss of valuable trade discounts or, in extreme circumstances, financial embarrassment and bankruptcy.

Ensuring your bookkeeping is done regularly by an experienced bookkeeper will help you to get a clearer picture of your firm’s cash flow.

Small Business and General Business Tax Break

Administrator — Sun, 24 May 2009 04:07:27 +0000

The Small Business and General Business Tax Break will be expanded for small businesses. Small businesses can claim a bonus 50 per cent tax deduction for eligible assets costing more than $1,000 acquired from 13 December 2008 until 31 December 2009, and installed ready for use by 31 December 2010.

This is up from 30 per cent announced earlier this year and extends the period of eligibility by six months. To benefit from this Tax Break a small business must have a turnover of less than $2.0 million a year.

Whilst a good bookkeeper will be aware of these changes, claiming the deduction does not fall within the realm of normal bookkeeping. Your accountant is the person who will claim this for you.

Travel agents’ commission

Administrator — Sun, 24 May 2009 04:03:44 +0000

Where a travel agent receives a commission on travel that does not attract GST, then the commission is also GST-free. So when claiming commission for travel which includes both taxable and GST-free components the commission needs to be apportioned and GST charged only on that portion of the travel which is taxable. When your bookkeeper is completing your BAS statement they need to enter the GST-free commission in the Export Sales (G2) section.

Does this apply only to registered travel agents? No. You might be a conference organizer or someone who works through a registered travel agent and charges that agent a commission.

So if you are in the travel industry, it is a good idea to check that your bookkeeper is keeping track of which sales are taxable and which are GST-free.

For more information please see: http://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/13384.htm

Why do I need a bookkeeper?

Administrator — Sun, 24 May 2009 03:48:09 +0000

Many new business owners think it’s not going to take much of their time because they don’t have many transactions at first, so they’ll do their own bookkeeping to save the cost. In many cases one of two things happens … they end up with a shoebox full of receipts at the end of the year that they still don’t have time to do anything with or they don’t have the time to properly learn the program they’ve chosen to use, and run into problems.

Using a professional bookkeeper saves you time, money and avoids many problems.

* No need to purchase the hardware and software required, install them or deal with the upgrades to either
* Regular backups are done for you
* Office space provided for a bookkeeper can now be used directly by your business
* Your time is spent taking care of your business
* You have current, high quality books giving you an accurate financial picture so you can make better business decisions
* You have professional reports to provide the information needed by tax specialists, accountants and financial institutions