Bookkeeping Archives - Page 5 of 7 - First Class Accounts Ovens and Murray and Busy01 Consulting

Category Archives for "Bookkeeping"

Getting on top of your invoicing

Getting on top of your invoicing

One way to help your small business succeed is to get on top of your invoicing.

This means sending them in a timely manner, making sure they have all the essential information included and chasing them up when you need to!

When you’re running a small business or working for yourself as a contractor, getting paid relies on sending your invoice. And because getting paid, and on time, is essential to staying afloat, it’s important to make sure that you’ve got all the important information included.

Setting up your invoices correctly will ensure you get paid quicker.

One of the important aspects of invoicing is making sure your invoices are sent in a timely manner. Ideally you will be invoicing immediately a services is completed or a product ordered. At a minimum you should provide an invoice within 28 days.

Also, for high ticket items, consider asking for a deposit.  If your service is ongoing or extended over a period of time then look at implementing progress invoices. This will help your cash flow. 

What to include in your invoice

Your invoice needs to contain the following:

  • 1
    The words ‘tax invoice’, ideally as a heading.
  • 2
    Your business or trading name.
  • 3
    Your contact details- these aren’t technically required for invoices for under $1000, but it’s a good idea to include them in case the recipient needs to get in touch.
  • 4
    Your ABN or ACN.
  • 5
    The date you’re issuing the invoice.
  • 6
    An itemised list of what you’re invoicing for, including the price for each item or service. Make sure that you clearly indicate whether GST is included in the total price.

If you are using accounting software simply fill in the templates or you can see some examples of invoices on the ATO website.

A well set out invoice will make it easier for your clients and customers to pay you. Accounting software will make the job easier by providing the format for your business and increasing your efficiency.

Talk to us about your invoicing to ensure you make it easy for people to pay you.

Creating a watertight accounts receivable process

Creating a watertight accounts receivable process

In business, it doesn’t get much more important than making sure your customers pay you.

And accounts receivable is all about getting paid for the work you do – in business.

It’s not exciting, but it’s important.

The accounts receivable process covers every part of your payment lifecycle. From finding customers to communicating expectations to billing correctly to following up on late invoices.

Building an accounts receivable process

So, how do you to build an effective accounts receivable process in your business?

The right customers

First, you need to work with the right customers and clients.

Before taking on customers, make sure you run credit checks. It’s also important to have them sign written terms, including billing timeframes and late payment penalties.

If you are comfortable doing so, you can also ask clients to sign a personal guarantee. This gives you the option of suing for an unpaid debt.

Effective invoicing

It’s vital that you always send invoices straight after the work is completed. This gets the payment ball rolling.

Make it as easy as possible for your customers and clients to pay you. You can do this by offering options like debit, credit or direct debit to.

Dependent on the apps you and your customers use, you may be able to set up to send e-invoices directly to your customer’s accounting or finance software.

Following up

Make sure you keep a close eye on your invoices. Make frequent and regular checks that payment has been made.

Have a process to follow up if an unpaid invoice is past its due date. This can be an automated process using cloud accounting software to send email reminders and statements. If that is unsuccessful included phone calls and consider debt collectors in your process.

Reviewing

For any customers that regularly pay their invoices late, consider changing their terms. Perhaps split your invoices and ask them to pay half upfront. Or suggest another payment method.

If there is not change to their late payments after changing their terms, you might consider letting them go.

Consistency is key

At the end of the day, having a watertight accounts receivable process is all about consistency.

Follow your process every time.

  • Select the right customers
  • Have clear policies and prompt billing
  • Ensure thorough follow-ups and reviews

Automating your process as much as possible ensures consistency. And being consistent in your process reduces the risk of unpaid bills and rogue customers.

If you’re ready to create an effective payment process talk to us about how we can help.

Single Touch Payroll Reporting for Closely Held Payees Mandatory from July

Single Touch Payroll Reporting for Closely Held Payees Mandatory from July

Closely held payees must be reported via Single Touch Payroll from July 2021. Now is the time to get organised.

Does your business make payments to closely held payees? If so, you will need to start reporting these payments via Single Touch Payroll (STP) from July 2021.

Closely held payees include family members, directors or shareholders of a company and beneficiaries of a trust.

If you’re already reporting employees via STP, then it will be easy to include the extra payees from July.

If your business only pays closely held payees then you may not have signed up for Single Touch Payroll. If not, now is the time to establish a reporting solution.

Typically, closely held payees are paid amounts on the advice of the tax agent, and often these amounts are not calculated until they do your tax return. In this situation, the business can report estimated amounts via STP.

Three Ways to Report Payments to Closely Held Payees

Report actual payments on or before the date of payment if you lodge your own STP reports through your ATO business portal.

Report actual payments quarterly when the activity statement is due. This option is available if you have a BAS or tax agent lodge on your behalf and they already have the ATO quarterly reporting concession in place.

Report a reasonable estimate quarterly. Estimates should be based on amounts equal to or greater than 25% of the previous year’s payments.

If you’re reporting quarterly estimates, it’s important not to underestimate amounts to be paid, as the business may later be liable for superannuation guarantee late charge and penalties.

Small employers have until the individual’s tax return due date to submit the STP finalisation declaration. (For all other payees, the finalisation is due by the usual date of 14 July).

If you’d like help with Single Touch Payroll reporting for your closely held payees, talk to us about planning ahead for lodgement and calculating estimates. We’ll help organise your systems so you’re prepared for STP reporting obligations,

JobMaker scheme – key points

JobMaker Scheme - Key Points

The JobMaker hiring credit scheme is now open for registration.

Here’s a summary of some of the key points around the JobMaker scheme.

If you are considering applying for JobMaker, please take into consideration the administration of JobMaker can be quite complex, so we don't recommend attempting to manage this on your own. Talk to us about how we can assist.

For background, JobMaker was announced by the government in the October 2020 federal budget, and will operate until 6 October 2021.

Key points:

  • Key to the hiring credit scheme is that employers must have added additional employees and also have increased their payroll during the relevant JobMaker period, as compared to a baseline date.
  • The hiring credit is backdated to 7 October 2020 (applying to new employees from that date) and will provide eligible employers with the following payments for up to 12 months for new jobs created from that date.
  • Eligible employees must work an average of at least 20 hours per week over a JobMaker period for the employer to qualify for the payment in respect of that employee. They must have commenced employment between 7 October 2020 and 6 October 2021, were aged between 16 and 35 years at the time they commenced employment, and worked an average of 20 hours a week for each whole week the individual was employed by the qualifying employer during the JobMaker period.
  • The JobMaker payments for up to 12 months for new jobs created are:
    a) $200 a week for hiring a worker aged 16 to 29 on at least 20 hours a week during the JobMaker period and
    b) $100 a week for those aged 30 to 35 on at least 20 hours a week during the JobMaker period.
  • Employer eligibility criteria are broad. Some employers are specifically excluded. These include:
    • employers who are claiming JobKeeper
    • entities in liquidation or who have entered bankruptcy
    • commonwealth, state, and local government agencies (and entities wholly owned by these agencies)
    • employers subject to the major bank levy, and
    • sovereign entities (except those who are resident Australian entities owned by a sovereign entity).
  • Entitlement to a hiring credit payment is assessed in relation to three-month periods known as “JobMaker periods”. These periods are relevant for the purposes of the additionality criteria (refer first point).
  • Claims can only be made during the claim period. No exemptions or extensions are available. There are strict dates by which claims for a period must be reported by. The credit is paid every 3 months in arrears to employers.

As mentioned at the start, this is a summary of some of the key points around JobMaker. There are many other requirements and a thorough understanding of those requirements are needed to ensure your JobMaker administration is correct. 

Talk to us if you need support in applying for or administering JobMaker.

Saving time and money with a bookkeeper

Saving time and money with a bookkeeper

Turning a profit will be high on your list of goals as a business owner. And if you want to generate the best margins, that means keeping an eye on the money that’s going out of the business, as well as what’s coming in.

So, how can your bookkeeper help with this?

The days where your bookkeeper just did the bookkeeping, compiled your accounts and filed your BAS are well and truly over. Modern bookkeeping firms are far more interested in helping you with your financial performance, your business strategy and offering flexible value-add services that put you in better control of your finances.

If you partner with the right bookkeeper, we can actually save you money – in both the short, medium and long-term. And that’s good news for the growth of your business.

Key ways your bookkeeper can save you time and enhance your financial health

The less expenditure you have as a company, the bigger your profit margin. It sounds incredibly simple, doesn’t it?

The smaller your costs, the larger your profit. But if you’re not fully in control of your financial management, it’s very difficult to know WHERE you’re spending money, and WHY you’re not achieving your profit targets.

This is where working with a bookkeeper adds a huge amount of value. Your bookkeeper helps put you back in the driving seat of your finances. And that’s never been more needed than in the current economic climate.

So, what specific things can your bookkeeper do and what will the impact be on the future of your business?

Cashflow management and advice

‘Cash is King’ may be a cliche, but it’s true. Unless you can balance the cash inflows and outflows from your business, you’ll never have the liquid cash to pay your bills, cover your payroll costs or cover your operational expenses. We’ll show you where money is going out, and coming in, so you achieve the ideal positive cashflow position.

Cost control and spend management

To improve your cashflow, you need to reduce your cash outflows. An important way to do this is to focus on cost control and spend management, reducing your expenditure, removing unnecessary costs and negotiating better deals with your suppliers. The more you cut costs back, the better your cashflow will be and the easier it will be to thrive, grow and become more profitable.

Forecasting and financial modelling

When we understand the key financial drivers in your business, we can build you a full financial model. This allows us to change the variables, run different scenarios and forecast the various future paths of your business. Being able to project these numbers forward gives you a clearer view of the path ahead. And that’s invaluable in the challenging economic times that we all face at present.

Better management reporting and information

Your decision-making stands or falls on the information you have available to you. We provide detailed management accounts, breakdowns of key metrics and forecasts of your cashflow, spending, aged debt and revenue – all of which helps you to save money, make sound decisions and keep the revenues flowing into your business.

There are a number of Apps that create efficiencies with cashflow management and forecasting to help you save time and money, and have a life.

Rather than spending your life working in your business and trying to do everything yourself, you'll be saving time and money with a bookkeeper. We’ll help you optimise the most profitable parts of the business and increase your overall return on investment.

Let’s talk about how we can work together to support your ongoing business profitability.

cash flow vs profitability

Cash flow vs profitability

Cash flow vs profitability.

We all know that understanding cash flow is vital to the success of your business.

And having cash reserves is important to make sure you are never left short at crucial times, such as when wages are due, and when tax and loan repayments needs to be paid. Or, as 2020 has shown us, if the unexpected occurs.

That’s why it’s important to be able to forecast your business’ cashflow.

An accurate cash flow forecast should take into account your business’ current performance across revenue, operating costs, payment habits of both, financing commitments etc.

It should also include what you know about future trends and seasonality.

Cash flow vs Profitability - What’s the difference?

Having positive cash flow is different to being profitable.

Positive cash flow means your revenue comes in on time to pay your expenses and keep you from running out of cash.

Profitability means your revenue is greater than all the expenses required to keep your business generating that revenue.

Basically, timing is the difference between the two.

An example

If you sell $1,000 of goods every month and spend $500 in a month, you will make +$500 profit.

But if you’ve paid your suppliers for the $500 expenditure within the month and fail to collect the cash from the sale of goods within the month you would have -$500 in negative cash flow.

Why it's important to understand the difference between cash flow and profitability

Unfortunately, many businesses fail due to poor customer payment collections, and not understanding the difference between profitability and positive cash flow. 

It’s important not to rely on a profit showing in the Profit and Loss statement, as it is more reflective of positive cash flow than actual profit.

When relying on your bank balance and the P&L to indicate your business performance, you are at huge risk of forgetting all of the items you are responsible for “below the fold” on the Balance Sheet.

Often, the biggest, lumpiest cash out flows that you are responsible for appear there: GST, payroll taxes, loan repayments etc.

This is why it’s important to implement forecasting in your business. A great option to implement forecasting is Futrli. 

Talk to us about how we can help you forecast your business cashflow and profitability.

Coming out stronger

Coming out stronger

Coming Out Stronger

What does the future look like?

2020 and the COVID-19 pandemic has brought significant challenges for many people, including business owners.

While we are starting to see an easing of restrictions and a return to (Covid) normal the impact of these challenges cannot be underestimated.

While we cannot be sure of what’s ahead, it’s important to be looking forward and planning for your future.
If you're a small business owner, you can become more resilient and in control by applying these few strategies.

Coming Out Stronger Strategies

  • If you have been receiving JobKeeper 1.0, forecast your eligibility for JobKeeper 2.0 and 3.0
  • Prepare and maintain a cashflow forecast with and without JobKeeper
  • Know the key dates where Government support changes, reduces, or ceases
  • Prepare a breakeven analysis for various scenarios
  • Regain perspective by booking a meeting with your bookkeeper 
  • Set a regular review meeting to review and interpret your monthly numbers and key indicators
  • Do a check of your first quarter profits and do a forecast of your future profits to work out if any 2021 tax needs to be set aside
  • Document your future plans for your business - immediate exit, gradual exit, continuation, diversifying
  • If you haven’t already done it, get your 2020 Income tax done or scheduled for completion as soon as possible
  • Review your systems and processes to see where improved efficiencies can be made, especially through the introduction of apps that can reduce paperwork (and the time involved) considerably

If you are seeking advice on business Apps, we specialise in understanding the different options for different industries and businesses. We provide you with insights and guidance on what Apps would best suit your business.

Or, if you're interested in any of these measures contact us to discuss how we can help you become more strategic, resilient, and in control.

demystifying your balance sheet

Demystifying your balance sheet

What story does your Balance Sheet tell?

Do you understand the story your Balance Sheet tells about your business? 

It’s important you understand the components of your Balance Sheet and the key ratios that measure the health of your business.

1. It measures the net worth of your business.

Your Balance Sheet is made up of all of your assets and liabilities; your net worth is your total assets less total liabilities.

Current assets are assets which are expected to be converted into cash within 12 months; current liabilities are expected to be paid within 12 months

Non-current assets aren’t expected to be converted into cash in the short-term; non-current liabilities are long-term liabilities which aren’t expected to be paid within 12 months

Your net worth is the owners’ interest in the business. In other words, if your business was to be wound up this is how much you’d be left with as the owner of the business.

2. It tells you if your business is solvent.

Solvency is the acid test for survival. If your business is insolvent, without immediate action to remedy this, it’s unlikely to survive for long. There are two components to solvency:

Current ratio greater than 1 (current assets / current liabilities)

Positive net assets (total assets - total liabilities)

If your business is insolvent, you’ll struggle to pay bills on time and you may be personally at risk. It’s imperative you seek help immediately if your business is insolvent.

3. It allows you track the strength of your business.

By comparing your Balance Sheet to previous periods, you can track whether your net worth is increasing or decreasing.

The stronger your Balance Sheet, the easier it will be for your business to survive a downturn.

For example, if your retained earnings are diminishing over time, it’s clear that you need to take action to strengthen your Balance Sheet to ensure you’ll receive value upon the wind up or sale of your business.

4. You can calculate key ratios.

Key ratios not only allow you to compare your results year on year or to industry benchmarks, they also highlight areas for improvement.

For example, calculating your debtor days may show that it takes on average 35 days for customers to pay you. If your payment terms are within 7 days of invoice, it’s clear that your debtor processes need to be strengthened.

Perhaps you calculate how long it takes inventory to sell and see it’s taking twice as long to sell this year than it did last year. Or, maybe a specific product is taking a lot longer to sell than others, which may indicate you should discontinue it. Key ratios calculated using your Balance Sheet can tell a us a multitude of things.

As a business owner you should be able to read your Balance Sheet and understand what it's telling you. 

If you need help demystifying your Balance Sheet and identifying key areas for improvement, get in touch now!

why data matters

Why data matters

Why data matters!

With cloud accounting software, such as Xero, simplifying much of the bookkeeping process, you now have greater accuracy over business numbers with less effort and time.

Yet, there is still one point of weakness.

Your data.

Data is often still manually entered. And if your data has errors, is missing information or is out-of-date, your results will reflect that.

Remember the saying “garbage in, garbage out”.

And that’s not a good thing when it comes to your business. Especially when it comes to forecasting.
When making decisions about the future of your business, getting the full picture is essential. And that means you need clean and accurate data.

When you have accurate forecasts, you can say goodbye to surprises and take better control of your business.
Businesses who consistently make errors with their data and base decisions upon incomplete data often end up in a cash flow crises. And more often than not, realise they’re about to run out of cash when it's too late to respond.

There is a direct line between accurate, up-to-date data and making better decisions for your business.

One way to improve your data accuracy is by automating as many points in your bookkeeping process as possible. 

Using apps that integrate with Xero, such as ReceiptBank and Futrli, makes it easier to get the right information you need to make the best decisions for your business.

Using Receipt Bank makes it easy to photograph snap your receipts with your phone and extract the information your accounting system needs.

No longer do you have to file away physical copies as your information and a copy of the receipt is stored in the cloud.

Receipt Bank then “talks” to your accounting software, for example Xero, and uploads your receipts.

Your information is available in your accounts system ready to be reconciled by your bookkeeper. And then Futrli uses that information to report in, predominantly, graphic form. And most importantly, provide the ability to set budgets and forecast. 

Talk to us about how Receiptbank, Futrli, and Xero can help make better business decisions.

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