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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.

Employee Payment Summaries are due soon – for the last time!

Employee Payment Summaries are due soon - for the last time!

The end of the payroll year will be here sooner than you think! We can help make the process easier by reviewing and validating your payroll figures prior to issuing payment summaries by July 14.

Once you start reporting under Single Touch Payroll, you will no longer be required to issue a Payment Summary. Your final payment summary to employees is due 14th July. After this date your employees can access their income statement through the ATO via myGov.

You’ll have two weeks from the end of the payroll year to issue your payment summary so it’s worthwhile preparing now to make the process easy.

Here’s what you will need:

Payroll Ch​​​​ecklist

  • Make sure you have all the necessary details for all employees, both current and any who have terminated throughout the year. The essential information is full name, date of birth, address, tax file number, and an email address if you are sending payment summaries electronically.
  • Review any terminated employees. Is the correct termination date recorded in your software? Are there any Employment Termination Payments (ETPs)?
  • Review allowances paid to employees and check which ones are required to be reported separately.
  • Review salary sacrifice payments to superannuation for Reportable Employer Superannuation Contributions (RESC) amounts.
  • Check any Reportable Fringe Benefit Tax (RFBT) amounts that should be included.
  • Do you plan to email payment summaries to employees? If so, advise employees of your intention to provide electronic versions and make sure the email address is secure and private. The electronic version must be non-editable and preferably generated directly from your payroll software.

Verify Your Payroll Numbers

It’s important to verify payroll figures before issuing payment summaries, in order to minimise the chance of errors and having to re-issue at a later date.

Once the payroll year is finalised at 30 June, you can then focus on analysing the payroll amounts for each employee and cross-checking against the numbers in your profit and loss accounts.

The end of the payroll year will be here sooner than you think! We can help make the process easier by reviewing and validating your payroll figures prior to issuing payment summaries.

Remember, this is the last year you will need to issue payment summaries. 

From 1 July, all employers must report to the ATO using Single Touch Payroll (STP).

Do you need more information about STP? We can help you set up your payroll ready for STP reporting.

Casual Workers

Employing casual workers

Employing casual workers

Having access to a casual workforce can be a great way for your business to manage busy periods while keeping ongoing costs low. Before you jump at the opportunity, it is important to understand the rules.

With the increasing casualisation of the workforce in Australia, there is a large and accessible pool of eager workers. Many students and those re-entering the workforce are looking to fill a gap in their employment or gain valuable experience.

If you want to attract strong candidates to roles in the future, gaining a good reputation for treating your casual workers properly can set you up for success in the future. The right casual employee may even become an invaluable part of your business and be a great fit for a permanent role.

What is a casual employee?

The Fairwork Ombudsman defines a casual employee as an employee who

…does not have a firm commitment in advance from an employer about how long they will be employed for, or the days (or hours) they will work.

This also means that they are not obligated to commit to all work on offer from the employer.

How is a casual employee different from a part-time employee?

Unlike casual employees, your part-time and full-time employees have fixed contracts or guarantees of ongoing employment. This means they can expect to work regular hours. They also have entitlements, such as leave and must give or receive notice to end the employment.

Casual employees have no guaranteed hours of work. They usually work irregular hours, don’t get annual leave and can end employment without notice.

What are the employers’ responsibilities?

  • To ensure employees are paid the correct rate. This may include an additional casual loading that replaces leave entitlements
  • To pay superannuation if required. You can find out more about your obligations here.
  • To follow the Fairwork Ombudsman guidelines if you make any changes to the terms of the employment. Examples would be requiring an employee to work for fixed hours or a fixed term
  • Recognise that employees can ask for flexible work arrangements and paid parental leave after 12 months of ongoing employment.

Contact us to find out how we can help you set up the right structure for casual employees and look after your payroll needs.

Is your small business ready for Single Touch Payroll?

Is your small business ready for Single Touch Payroll?

For employers with 19 or fewer employees, single touch payroll (STP) legislation will be coming into effect on the 1st of July 2019. Are you ready? Because it’s important to start preparing now.

You need to know what Single Touch Payroll is, what the changes mean for your business and who it affects. And more importantly, you need to know what to do to prepare, so that you will be compliant.

What is Single Touch Payroll?

For employers with 20 or more employees, you will already be familiar with STP, but if you are unaware, STP is the mechanism for sending tax and super information to the ATO directly from your payroll or accounting software every time you pay your employees. The legislation was passed in February this year to extend this to employers with 19 or fewer employees.

How to prepare your small business for STP and ensure compliance

Most popular payroll software companies will have the correct facilities ready to go, such as Xero and MYOB. We will have spoken to many of our clients already about STP, however, if you are unsure, talk to us.

There are a few things to be aware of you as you get ready to use STP reporting.

  1. Check your software – you may need a software update or additional step added to your process
  2. Ensure you have factored STP into your payroll process
  3. Ensure your payroll compliance is up-to-date generally, including employee benefit, wage and super entitlements and maintaining accurate records

The first year of using STP reporting is a transition year and there will be assistance from the ATO. That means penalties for errors will not generally apply.

If you don’t think you will be ready by the 1st of July, you can apply for a deferral through the ATO. The ATO gives a list of possible reasons for deferring, including lack of internet coverage, or if further development of software is needed.

If you haven't already done so, talk to us about doing your preparation now to ensure you are ready by the 1st of July.

Home Office

Do you have a home office?

Do you have a home office?

If you have a home office for your business, you should be able to claim some of the costs involved in maintaining, owning and using your home.

It’s important to be aware of what you can and can’t claim, and the record-keeping involved in making a claim.

How does it work?

In order to claim, the space you use must be used primarily for your business.

This doesn’t mean setting up at the kitchen table from time to time, it means having a dedicated space that you work from.

If you are selling online and storing stock, you may also be using other spaces in your house for storage or stock maintenance. Or, if you are making or creating products, you may be using other areas like your kitchen or workshop.

Costs that you might be able to claim include:

  • home office equipment
  • repairs to the home office or work-related furniture and equipment
  • cleaning expenses
  • any other day-to-day running expenses for your home office.

You may also be able to claim the costs of some trips in your car if these are from your home office to other locations where you are carrying out business.

The ATO has developed a calculator tool, to help you better understand what you might be able to claim. View the tool here.

Keeping track of your costs

Make sure you keep a record of all your expenses. It’s important to keep your personal and business expenses separate. Consider using online accounting software so the paperwork is kept in good order.

We can help you review your home office expenses to make sure these are included when you claim.

Talk to us, we can help.

All you need to know about single touch payroll

Single touch payroll regulations may require you to make some changes. Automation or outsourcing will make compliance less of a time burden for your business. We can help.

Single touch payroll (STP) is a new regulation that changes when and how small businesses report payroll activity to the Australian Tax Office (ATO). Businesses used to report this information to the ATO once a year. Now, they need to send a report after each payday. And those reports must be submitted digitally, using a very specific format.

Changes to when you report payroll

Small businesses used to finalise their payroll records at the end of the financial year and produce:

  • a payment summary annual report for the ATO, stating how much the business had paid in salary or wages, the PAYG withheld, and some superannuation contributions they’d made
  • a payment summary for each employee, stating what each employee received in wages or salary, the payroll taxes collected from their pay, and some superannuation contributions made on their behalf.

No more payment summary annual reports

Because you’ll be updating the ATO on a pay-by-pay basis, you won’t need to prepare a payment summary annual report anymore. You’ll just let the ATO know when you’ve made your last pay run of the financial year for your employees.

Payment summaries won’t need to be sent to employees anymore, so employers won’t be required to produce them. The ATO will use single touch payroll reports as the sole record of salary/wages paid, taxes collected, and superannuation contributed.

Your employees will be able to see the information that would normally be on their payment summary by logging on to myGov.

You’ll need to report payroll online

There’ll be no more paper forms for reporting your payroll activity to the ATO. You’ll need to submit the information online, using a specific format known as SBR (Standard Business Reporting). Depending on how you do payroll now, you may need to change software or find a service provider who can produce compliant reports for you.

When is the single touch payroll deadline?

Small businesses with fewer than 20 employees don’t have a confirmed deadline for switching to single touch payroll. However, small business advisors expect it to be compulsory from 1 July 2019. Businesses with more than 20 employees switched to single touch payroll on 1 July 2018.

Your options for switching to single touch payroll

To be ready for the switch, you’ll need to make sure you can submit compliant reports every payday.

Here’s what it means:

  • If you use online payroll software, it should be able to handle the job. Just make sure it produces ATO-compliant reports.
  • If you use desktop payroll software, you’ll need to find a service that can upload your payroll reports, convert them into the ATO’s required format and submit them on your behalf.
  • If you use spreadsheets or pen and paper, you’ll need to find a service to convert the data into a compliant digital report format and submit it on your behalf.

We can answer your questions about single touch payroll. Book an appointment now.

The low down on GST and your small business

Is your small business registered for GST? You might not be entirely confident of your projected earnings, so it’s fine to hold off until you’re sure you’ll hit the threshold. But it’s important to monitor your profit closely so that you don’t pay extra. #smallbiz #taxtalk

When you set up a new small business, you’ll have the option to register for GST. Here’s what you need to know about this responsibility.

The first thing you should do is decide whether you’ll register for GST immediately or wait until you hit the earning threshold of $75,000. When you start a new business, you might not be entirely confident of your projected earnings, so it’s fine to hold off until you’re sure you’ll hit the threshold. Once you do reach $75,000, you have 21 days to register.

Understanding your GST turnover

The $75,000 turnover figure represents your gross business income - not your profit. There are some exclusions, like sales outside of Australia, and any sales that are not for payment, meaning they aren’t taxable.

It’s important to monitor your profit closely because if you fail to register, you may have to pay GST on any sales since the date you were supposed to register. And because you won’t have included any GST in those sale prices, you could lose money. Additionally, there could be interest or penalties imposed.

Once you’re registered

When you’ve hit the threshold and you’re registered for GST, you’ll add the 10% amount to the price of your product or services. Don’t make the mistake of considering this money as part of your profit. You’re merely collecting it to pay to the ATO. It’s really important to establish good business accounting practices to make sure that you’re keeping this money separate.

We make dealing with GST simple - so you can focus on running your business. Make a time to talk to us about GST for your business.

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