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Smart Tips That Business Owners Can Benefit From

Smart Tips That Business Owners Can Benefit From

Do you know the difference that keeping a financial system for your business makes? One of its major advantages is to help entrepreneurs avoid costly mistakes caused by just overlooking a single financial activity. Your business expenses must not be taken lightly if you don’t want to put it at great risk. A financial system should not be considered trivial because aside from being a time-saver, it can also help you develop a habit of ensuring timely payments.

Processes and systems play a crucial role in your business especially when you have so many tasks to attend to. It is easy to be off the track when you have some other things in mind. However, if you know how to handle your business’ financial aspect wisely, a steady flow of money will continue and you are less likely to face a major problem with the Australian Taxation Office.

Five bookkeeping tips entrepreneurs should consider:

1. Keep your invoices.

Pros: You make timely payments and prevent hurting your cash flow, which happens when you fail to pay the bills on time.

Process: Appoint someone for this bookkeeping task and make sure they know the process for issuing a second invoice, following up on the process through a phone call and checking if your business has incurred any penalties or extra fees for late payments. Once you send the invoice, make sure you have not fallen behind your payment schedule. The invoice does not give you a guarantee that penalties and other extra fees will not be imposed.

2. Put a portion of your money for paying taxes.

Pros: You encourage timely filing of tax returns and avoid penalties for late payments.

Process: Mark your calendar so you will know when your payment due date approaches. Make sure you set aside money so the payment will be settled on or before the due date.

3. Make sure deposits are recorded correctly.

Pros: You prevent out of the pocket business expenses especially when it comes to paying taxes.

Process: You can keep track of your financial activities with the use of a system. It can be a notebook or more advanced bookkeeping software. Regardless of the methods you use, make sure it does not defeat the purpose of keeping a correct record of your deposits. See to it that the deposits are only intended for your income. Depositing your personal savings, loans and revenue from sales into one bank account may cause costly errors in the end as you might confuse your deposits as part of your income.

4. Monitor expenses.

Pros: You are well-aware of your financial activity and it is easy for you to track legitimate expenses.

Process: Business expenses must be monitored closely and make sure you categorize your expenses. If you have just gone on a business trip, don’t forget to write down all of your expenses including lunches, air fare and other business events.

5. Create a plan for major expenses.

Pros: It helps you analyze your budget for future business plans and avoid overspending.

Process: For business improvements to be materialized, see to it that you plan ahead so you will know how much you are going to spend on it. Some business owners end up taking out a loan because of the failure to plan their major expenses. Even businesses have their ups and downs but you can still do something about it by keeping your company financially secure even when major improvements have to be done.

6 Reasons You Should Not Create Any Room For Bad Bookkeeping

6 Reasons You Should Not Create Any Room For Bad Bookkeeping

Managing your business takes skills that only a few businessmen could master. Perhaps, you have already been venturing into a type of business where you need to be keen on your finances. Without a doubt, bookkeeping is the heart and soul of your business. It is not just a task you need to complete so you can fulfil your tax obligations. In fact, keeping an eye on your financial records can save you from being dragged into a potential lawsuit. Some businessmen can be so careless that they pay little attention to the business' important aspect. 

If you have already developed the habit of putting all of your business' financial records in one chequebook, being confused will never come as a surprise. It can be a huge problem in the end, but if you see to it that your business transactions are properly sorted and recorded, you can easily track if something in your business process is not right. 

Reasons To Master Your Business' Bookkeeping Skills:

Provides better records. 

When you consider separate banking and ensure that the money intended for your business is not spent for your personal expenses, you will begin to notice that your bookkeeping procedures have also improved in the long run. As a result, you will be able to provide better records, which can create a positive impact on your tax return. 

Creates corporate veil.

If you intend to form a new corporation, one of the best practices you need to follow, especially when managing a small business is to create a separate chequebook.  This practice helps you identify that bookkeeping is your business's distinct entity and you avoid confusing your business funds for your personal funds. 

3 Fraud Prevention Techniques Every Business Should Employ

Many businesses are losing money because of fraudulent activities. While simply looking at the reports will not easily allow you to spot any fraud, prevention and detection are still essential to reducing loss. There are various types of fraud that can take place in the workplace. They are broken down into three categories: financial statement fraud, asset misappropriation and corruption. Financial statement fraud refers to schemes which involve intentionally omitting or misstating information in the financial reports. It is either the bookkeeper hides liabilities or inflates assets. Asset misappropriation is the type of scheme in which an employee exploits the company's resources. Corruption refers to extortion, bribery and even conflict of interest. In corruption, employees use their influence when doing business transactions only they can benefit from.

1.Inconsistent Financial Report

If you see omissions or misstatement of financial information, this is a sign that something is wrong with your financial statement. While mistakes can be committed every once in a while, committing errors deliberately becomes a fraudulent activity as it is done on purpose. It is important that you review your financial statement regularly so you will know if your bookkeeper is tweaking any essential information on your report.

2. Incorrect Bookkeeping Procedures

Correct payroll guidelines and procedures must be observed. If they are resistant to change and insist on keeping old procedures, the financial and payroll records from previous years must be investigated for any incorrect or misleading information.

3. Misfiled Paperwork

It can be frustrating when you cannot find any essential business records such as deposit slips, payroll records and supplier correspondence. These records should be kept as they are going to be necessary for keeping track of your financial transactions. If they mysteriously disappear, you know that your bookkeeping has got some explaining to do. 

Fraud Prevention

It is important for every business owner to create a reimbursement and expenses policy. For instance, billing your credit cards directly to your company must not avoided. bill them to the employee instead. It is also important to prepare an expense report for each employee and all receipts must be turned in for any business-related transactions. You should also set a daily limit as this will help you control the amount of cash employees spend. This policy imposes stricter rules that will enable you to monitor expenses effectively.  

Aside from the reimbursement and expense policy, you should also review financial records. These records should be complete, if any of the records are missing, you should ask your bookkeeper or the person in charge for explanation. Checks and balances must also be strictly implemented.                                  

Does Your Business Face These Payroll Challenges?

Your employees are also the lifeblood of your business because they are the ones dealing with existing and potential clients. As a business owner, it is important that you are well-versed with the details of your employees' payroll. That said, they need to get a fair amount for the service they have rendered. There can be numerous problems associated with payroll. This is why no employers can afford to make mistakes because it is the employees' money that is at stake.

1. Payment Summaries

It is necessary for employers to tax employees correctly as they may end up getting more or less than what is due to them. Once payments are not set up correctly, it will reflect on the annual Payment Summaries. The sad part of this oversight is that the ATO will be one to benefit from the money that is supposed to be awarded to employees.

2. Employee's Tax

Since calculating employee's tax can be time-consuming, using small business bookkeeping software is a good idea. However, there are taxes that require manual calculation such as the unusual payments. These unusual payments include bonuses, terminations and commissions. Since they are calculated manually, the details need to be reviewed to avoid undertaxing or overtaxing employees.

3. Default Superannuation Fund

Employers must provide a choice of superannuation to employees. However, there can be cases when the worker does not select a fund and the choice will be left to the employer. The default fund is selected for making a payment and it is the employer who selects the default fund.

4. Record Keeping and Pay Slips

When it comes to keeping receipts, businesses are recommended to file them for a maximum period of 7 years. The essential records that should be filed include leave records, hours worked super contribution, pay records, payment details and many more. These records should be treated with confidentiality as they contain employee information. The employees should also have access to their pay slips within one working day of pay day. If the employee is on leave, the employer should include specific information.

5. Superannuation Obligations

Superannuation is specifically designed for ordinary time earnings. Superannuation can also be applied bonuses, allowances and loadings. Contractors who are sole traders should make a payment of superannuation based on the working arrangement's nature.

There are business owners who consider a worker as a contractor but this does not necessarily exemptt them from paying superannuation. The online contractor tool will be able to help you determine if the worker needs to pay the superannuation. You should also be aware of late payments because the ATO implements stricter rules for delayed superannuation payments. Even the director can be held liable for the company's late payment.

Lodge Your Tax Return Online

Tax returns can be lodged with a tax agent, but there is an easier and safer way to lodge your tax return.

Benefits of lodging your tax return online:

  • myTax allows you to lodge at your convenience as it is available 24/7
  • the information from your bank, employer and government agencies will be pre-filled by late August so the process will be quicker and easier for you
  • you are assured that your information is protected as myTax uses online banking encryption
  • your refund is available within 2 weeks
  • all individuals including sole traders can lodge their own tax return

MyTax is web-based so you do not have to download anything. Using any device-computer, tablet or smartphone, you can lodge your tax return online.

MyTax features and upgrades in 2016 include:

>new online tools that record depreciation and capital gains
>ability to amend or lodge prior year returns
>fully integrated tools and calculators
>myDeductions data automatically loads into your return except sole traders
>helpful messages that will guide you through lodgment

Pre-filling information

The information that you lodge is partially complete by automatically loading the current year information from organisations that report to the ATO including banks, employers and government agencies and the data from your account activity and previous tax returns. Once the information is ready, all you have to do is to review them to know if you need to update incorrect details or add missing details.

More often than not, pre-filling information is available within a couple of days after it has been reported to the ATO. The information is available by early August. If you want to check the availability of pre-fill information for your health funds, investment income and government payments, you simply check the website of myTax.

The information that can be pre-filled

Some of the information that can be pre-filled include your salary, wages, dividends from your shares, interest credited to you by the bank, private health insurance information and more.

The information will greatly depend on when the information was received from your employer and other organisations once you lodge your return. According to the law, it is necessary for organisations to report your information by August 14 for details of payment summaries and October 31 for information about your investments. It is also ideal for organisations to send the information much earlier. You have the option to check the information to pre-fill by starting your online return.

It is also important to resolve any discrepancies with the organisation that provided your data before you lodge your return. The ATO checks the information that organisations have provided and matches them with the information you report on your tax return.

All You Need To Know About GST Registration

If you are a business owner, you need to keep a few things in mind when its to registering for GST. For instance, GST registration will not be required if:

1. business turnover drops below the compulsory threshold
2. a change in business structure
3. closing or selling business

More often than not, it will be wise to cancel your GST registration as it can save you time and effort because this involves automatically cancelling some other registrations at the same time including:

> wine equalisation tax (WET)
> fuel tax credits (FTC)
> luxury car tax (LCT)

It is also interesting to note that you need to finalise all of your tax obligations before you consider cancelling your GST registration.

GST Registration

Secure an Australian Business Number (ABN) before you proceed with GST registration. There are three ways you can register for GST: by phone, through your registered BAS agent or tax agent and online via Business Portal. Once you have successfully register for GST, you will be notified in writing on your details including the date your registration is effective.

You are required to register for GST if:

> you wish to claim fuel tax credits for your enterprise or business;
> your business or enterprise has a GST turnover of $75,000 or more
> you provide limousine or taxi travel for passengers in exchange for a fare as part of your business, regardless of your GST turnover-the rules apply to both owner drivers and if you rent or lease a taxi;
> your non-profit organisation has a GST turnover of $150,000 per year or more

Registration is option for business or enterprise that does not fit into any of the above categories. For business or enterprise that wish to register, it must stay registered for at least 12 months.

When do you need to register for GST?

You can either register for GST when you first register your business or at a later time. You will also need to register for GST if you have just started a new business and expect it to reach the GST turnover threshold or more during the first year of operation.

You need to check each month whether or not you have reached the threshold or exceeded it if you have not yet registered for GST. Registration must be done within 21 days if your turnover has already exceeded the relevant threshold.

You will only have to register for GST one even if you have more than one business to operate. You will be required to pay GST on the sales you have made since the date you were required to register. The payment will also include interest and penalties.

Mistakes That Can Endanger Your Business

A bookkeeper may be deemed unnecessary for small business but shouldering penalties and interest due to late payments will make you realise the importance of bookkeeping in your business. Making mistakes is inevitable and a fledgling company needs to keep records of every transaction to prevent problems from becoming serious especially when it is about taxes. The ATO can chase you due to expenses you have not indicated on your financial report.  While there are many mistakes you can commit as a small business owner, these mistakes are the ones you are most likely to commit.

Not Keeping A Record Of Expenses

Every transaction must be recorded so you can easily identify all the expenses you have incurred. Failing to record business-related expenses can spell trouble when it comes to paying your taxes. Avoid mixing personal with business expenses because this will give you a hard time figuring out which expenses are considered valid. Make sure reports are accurate so you will know if your business is still heading in the right direction. Once you know the expenses you incurred, it will be easy for you to make an adjustment. You will also know if it is time to grow your business.

Falling Behind Payment Schedules

Do you develop a habit of making a payment as you file your tax return? This is one mistake that business owners often commit and this can lead to penalties and interest. Make sure you pay your taxes on time and be mindful of the due date. You can trigger an audit from the ATO when you always fall behind your payment schedule. Late payments must be taken seriously because it can hurt your business and affect its growth.

Not Keeping Receipts

Entertainment and travel expenses that are business-related are hard to justify if you do not have any tangible evidence to present. During the audit, you will need to present documents and receipts to indicate that these expenses are indeed valid. Receipts must be given importance if you are running a business and if you need to indicate the business purpose of the transaction, make sure you keep a journal so it will no longer be a problem recalling when and how you incurred such expenses.

These mistakes can wreak havoc on your business if you do not have a bookkeeper to prepare accurate business report for you. Even if you have a small business, a bookkeeper can still help you in more ways than one because when the ATO makes an audit, you will not worry because your business is on the right track.

Why Hire A Bookkeeping Service?

Small business owners often consider hiring a bookkeeper costly, but they realise the importance of a bookkeeping service when the business’ financial aspect is in chaos. A savvy business owner will consider hiring a bookkeeper to focus on other front-end activities. While this may not seem practical at first, a business owner will find a bookkeeper useful when everything is placed in proper financial perspective.

Benefits of hiring a bookkeeping service

•    It saves time.
When it comes to data entry, accuracy is important because the financial statement will serve as a basis for bookkeepers to know the direction the business is heading. If figures are not clear, you will have trouble ensuring that your records are accurate and clean. It is important that you keep records of the book. When a bookkeeping service is available to take care of these tasks, not only will business owners prioritise front-end activities such as maintaining a positive company image, generating sales and strengthening relationships with vendors there is also a greater peace of mind knowing records are in good hands.

•    Professional help is provided.
Relying your bookkeeping tasks on professionals will give you an assurance that important tasks are well taken care of. As a result, you will no longer have to worry about filing tax returns because you are confident that your records have been handled by a qualified bookkeeper. You can also be sure that you obtain a certain level of professionalism and expertise.

•    It saves money.
Every cent counts for a small business owner. Unlike established companies, cash flow is limited for a small business. One of the ways that small business owners do to save money is to cut corners even if the financial aspect of the business is greatly affected. However, when you cut labor costs, you may also be compromising on the quality of your daily task. If you have a full-time bookkeeper, you will no longer have to think about bookkeeping since there is a qualified individual who can efficiently do the job.

•    More focus on the task at hand.
Although many businesses tend to multi-task, there are still some drawbacks in multitasking that small business owners need to take into consideration. Since the business owners cannot give 100% of their attention to the client, financial and administrative matters are often overlooked. When professionals take care of bookkeeping tasks, financial matters are handled efficiently. Small business owners no longer have to worry about missing out on important details of bookkeeping.

•    Things get done professionally.
DIY bookkeeping may not give you the best results you are looking for. Although your intention is to save money for your expansion, you may not be able to achieve this goal if there are irregularities in your financial activity. A bookkeeper will see to it that things are done correctly.