It can feel challenging to chase up payment of invoices when the economy has been down, but it is important to keep cash flowing into your business so you can cover expenses and meet your obligations to others. As with all dealings in more difficult times, some empathy and a lot of open communication can go a long way.
The following tips are useful to keep in mind when asking for payment.
Communication – Connecting with your customers is important. Try to make it personal to their situation rather than a one-size-fits-all email. Connecting on a more personal level shows you value them and are conscious of the impacts that the current situation may be having on them. The empathy you show now will also be remembered when the economy recovers. Be proactive – early communication will help you stay on top of cash flow and will also alert you if you need to account for late payments.
Offer flexible payment options – for customers who can’t pay in full, consider breaking invoices into multiple payments with payment terms moved to a longer timeframe. Set up a credit card facility to give customers other options for payment. After all, the easier you can make it for them to pay you, the quicker you will get paid. If you don’t have payment services set up in your accounting software, we can help you do this. Offering a discount for early payment might provide the incentive, for customers who can settle, to pay your invoice before others.
Total Outstanding – Make sure you keep track of how much customers are in arrears. While you can continue to allow credit, you want to make sure you’re not creating too much risk. Allowing continual extensions to payment while also letting more to be added to their total amount outstanding can create a cashflow crunch. Get in touch if you want help to better track your cash flow.
With the 2023/24 financial year now wound up, it’s time to think about submitting your tax return and making sure you have the cash reserves put aside to pay the company’s tax bill.
This short guide to getting your small business tax in order gives you the lowdown on which end-of-financial-year (EOFY) taxes you’re liable for and what returns must be submitted.
We’ve also got some guidance on making EOFY less of a pain next time around.
What EOFY taxes must my business pay?
The taxes you pay and the returns you must submit will be defined by the type of trading business you are. To give you a broad idea, these are the main categories you’re likely to fall into as a small or medium-sized business:
Sole traders – if you’re set up as sole trader, you’ll need to lodge one individual tax return that covers both your business income and your personal income. Once submitted, the Australian Taxation Office (ATO) will work out how much tax you’re liable to pay and when it’s due.
Companies – if you’ve been incorporated as a company, you must lodge a company tax return and pay tax on the company’s income. If you’re a director in the company, you’ll still need to lodge your own individual tax return as well.
Partnerships – if you’re a partner in a partnership, the business will have its own tax file number (TFN) but won’t pay income tax on the profit it earns. Each partner must report their share of the partnership income in their own tax return. Your partnership must also lodge a separate partnership return under its own TFN.Trusts – a trust has its own TFN and must lodge a trust income tax return.
Gathering all the necessary information and documents for your tax return can be a pain. But with a little pre-planning and investment in the latest accounting and bookkeeping technology, you can make the whole process much less of a headache.
Here are five sensible ways to make your EOFY tax easier:
Keep good records and invest in an automated bookkeeping platform, like Dext.
Use a document management system to easily locate every invoice and receipt.
Use cloud accounting and the built-in tax templates in platforms like Xero and MYOB.
Plan for your annual tax costs and put cash away so you can cover your tax expenses.Work closely with your accountant to create the most efficient accounting procedures.
Talk to us about improving your tax processes
If your EOFY tax was a mess this time around, it’s never too early to start planning for next year and getting your records, documents and accounts in order.
We can work with you to set up the most effective accounting systems, with clear processes, great record-keeping and easy access to all your documents.
For centuries, accounting was all about reviewing historic information – but that only told you about the past, not what was going to happen in the future.
If you’re only looking back at past periods and historic numbers, this limits the insights you can achieve for your business. With a backward-looking ideology, it becomes difficult to plan, run through different scenarios or understand the path of the business going forwards.
Forecasting changes this. With the right data analysis and forecasting tools, you can project sales, cash, revenue and profits into the future – and get in control of your business.
A forward-looking view of your business journey
Forecasting switches the focus of your financial management. By moving to a forward-looking view of your business journey, you can see further down the road – and that helps to spot any opportunities and avoid common business pitfalls.
Forecasting adds value by:
Highlighting the data patterns – a forecasting tool takes your historic data and projects it forward in time. This helps you and your advisers spot patterns, trends, gaps and opportunities, revealing the true ‘story’ behind your business accounts. For example, forecasting may reveal a predicted seasonal slump in the next quarter, allowing you to plan ahead and proactively take action to minimise negative impacts.
Giving you a future view of your business – instinctively, business owners will look back at prior periods to assess performance. There’s value to reviewing your historic actuals, of course, but using forecasting helps you to look forward, rather than just backwards. Forecasting is the satnav, showing you the road ahead, rather than the rear-view mirror showing you the road you’ve already travelled.
Helping you scenario-plan – with a financial model of your key drivers, combined with accurate forecasting, you can quick answer your burning ‘What if…?’ questions. Forecasting lets you run different scenarios, with different drivers, to see how business decisions may pan out over time. If option B performs better than option A, that’s invaluable information when defining your next strategic move.
Making informed, evidence-based decisions – having ‘the full picture’ of combined historic numbers, forecasts and longer-term projections aides your business decision-making. Forecasting gives you solid evidence on which to base your strategy, and helps to red flag any threats that are looming on the horizon – giving you the best possible information to keep your executive team informed and on the ball.
A deeper relationship with your accountant – forecasting also helps us to get a far more granular view of your business. This helps to spot potential areas of performance improvement, and to give you the best possible strategic advice, all backed up by solid, empirical data and management information.
Talk to us about the benefits of forecasting
If you want to get in control of the destiny and results of your company, come and talk to us. Forecasting helps you highlight your future threats and opportunities – and create a proactive strategy to improve the performance of your business.
We provide you a summary of all the enacted legislation that comes into effect from 1 July 2024, these changes vary to apply to individuals, businesses, welfare recipients among others.
Stage 3 tax cuts
After being enacted with amendments by the Labor government, the stage 3 tax cuts came into effect from 1 July 2024 giving each Australian individual a tax relief.
The tax cuts mean you get to take home more of your salary every payday as less of it will be given to the ATO, effectively giving you a pay rise.
Increased paid parental leave
Under the Federal government’s changes to paid parental leave program to boost gender equality, eligible parents of babies born after 1 July 2024 will get access to an extra two weeks of publicly funded leave, going up to a total of 22 from 20 weeks.
Another two weeks will be added annually at the start of the 2025–26 and 202627 income years.
Increased superannuation guarantee
The superannuation guarantee will increase on 1 July 2024 from 11 to 11.5%, putting more money into the super accounts of full-time, part-time and casual workers.
Like paid parental leave, it will also increase again on 1 July 2025 to 12%.
Energy bill relief
A key measure announced in the 2024 Federal budget was $300 in energy bill relief for every household in the 2024–25 financial year.
This will be in the form of quarterly $75 rebates that will automatically be applied to your energy bills.
Welfare payments
Welfare payments recipients using the following 5 schemes are set to go up from 1 July 2024:
Family Tax Benefit (Parts A and B)
The Multiple Birth Allowance
Newborn Supplement
Stillborn Baby Payment and
Essential Medical Equipment Payment
Contact us
Please feel free to contact our office, should you need more information on these changes or discuss how these changes may apply to you or your business.
When you’re operating and managing a small business, you have a finite pot of cash to work with. Because of this, it’s incredibly important to manage your cash well and to have clear budgets and spending limits for every area of your business operations.
Let’s take a look at why budgeting is such a vital part of your financial management, and what you can do to keep your company on budget and in a positive cashflow position.
4 ways to stay in control of your business budgeting
It’s impossible to run a successful business without having a tight rein over your expenditure.
Sales may be bringing in healthy revenues, but the income and profits you’re generating can quickly be eaten up if you’re overspending on operational costs, marketing campaigns, staff payroll or investments in new hardware and software.
We’ve highlighted four ways to put good, solid budgeting at the heart of your financial process:
1. Embrace the power of budgeting
A well-crafted business budget gives you the foundations to become a financially healthy and successful business that’s in control of its spending.
You don’t have to use a complicated budgeting app; a simple breakdown of income and expenses in an Excel spreadsheet can be a great starting point.
To get started:
Track your projected sales, so you understand your future revenue numbers and have a solid projection for your income over the course of the year, or budget period.
Calculate your costs, including fixed costs like rent and utilities, and variable costs like inventory and marketing. This gives you an understanding of your total expenditure. Don’t forget to factor in business taxes and contingency funds to cover emergencies.
Set clear budgets for the coming period’s spending, based on the total income you’ve predicted and the total fixed and variable costs you’ve estimated. Always leave some wriggle room to account for inflation and changing costs.
Regularly review your budget, so the document is always evolving. Reviewing and updating your budget helps you stay on track, identify areas for cost-cutting, and make informed decisions about resource allocation. Remember, a budget is a living document, so adapt it as your business evolves.
2. Track your budgets, income and spending
Setting the budget isn’t the end of the process. It’s important to track all income and expenses and to update your budget in line with the current health of your business finances.
Using the latest cloud accounting software can work wonders. These cloud tools help you record your incoming and outgoing transactions in real time, so you can work with the most up-to-date numbers and financial data when reviewing and reworking your budget.
To improve your tracking:
Use codes to categorise your expenses – the Chart of Accounts in your accounting software makes it easy to categorise each expense as it’s incurred. It’s then easy as ABC to review your financial reports and to analyse your spending patterns.
Review your spending – check your spending against each code and see where budgets are on track, or where there’s overspending that’s threatening your budget. Are there subscriptions you can cancel? Or could you renegotiate rates with your vendors?
Plan for seasonal trends and patterns – tracking your income and expenditure helps you to spot, predict and plan for the financial ups and down you’ll experience over the year. The more you understand your cashflow, the better equipped you are to stay on budget, make solid strategic financial decisions and avoid unexpected shortfalls.
3. Separate your personal and business finances
It’s tempting to think of the money in the business as ‘your money’. But it’s crucial to have a clear divide between the company’s money and your own money, as an owner and director.
Here’s why that separation is important:
Open a dedicated business bank account – all the cash you generate, supplier bills you pay and transactions you carry out will be logged through this account. This keeps your own cash and your business cash entirely separate.
Track your business expenses – by having separate business and personal bank accounts, you can easily track your business expenses and manage your budgets. There’s no confusion around personal expenses that could potentially muddy the water.
Consider getting a business debit card – a business card helps you to pay for business-related costs directly from your business bank account. This helps you to track your expenses and keep a closer eye on your budget.
4. Forecast for the future: don’t just track the past
Basing your budget and financial strategy on historic data is a great foundation stone. But you can also use this data to project the data forwards in time and create useful forecasts.
For example, you can:
Get clear cashflow forecasts – based on your historical sales trends and projected expenses, you can quickly estimate your future cashflow. Having this view of your future cash position is extremely helpful when setting out your budget for the period.
Plan out your budgets and cash management – with forecasts at your fingertips, you can plan for seasonal fluctuations, identify potential funding needs and make informed decisions about the short, medium and long-term strategy of the business.
Be ahead of the curve – with solid budgets, forecasts and a great overview of your finances, you can be more in control as a business owner. Whatever the market throws at you, you’re better prepared, agile and ready to respond.
Talk to us about getting on top of your budgeting
Financial management can be overwhelming, especially if you’re new to running a business. But don’t be afraid to seek help from a qualified accounting professional.
As your adviser, we can:
Streamline your record-keeping, bookkeeping and financial reporting.
Give guidance on budgeting, forecasting and financial management.
Ensure your cashflow and budgets are always looking positive and healthy.
Let’s sit down and talk about getting your budgets and financial management in order.
Before you start, it’s essential to understand what expenses you can and can’t claim. This means you’ll keep the right receipts and track the right expenses. Figuring out what’s what can be a little confusing as everyone has a different working set up and what you can claim for can vary between industries and occupations. Talk to us about your business expenses from the beginning. This will also help you plan for any bigger work-related purchases that you may need to make.
Get a system sorted
You’ll thank yourself later for setting up a good system now. Getting your expenses recorded and your invoices collated means you’ll be able to spend more time doing the important stuff in your business. It’s not just about saving time – keeping on top of your cash means you’re more likely to succeed. Do your research and choose a system that will work for you. Consider choosing a software platform which allows you to record your time spent on projects, it’ll make sending those invoices that much easier!
Stash that cash
When you’re running your own business or working for yourself, it’s important to always keep your tax obligations top of mind. Make sure you have money set aside in a separate account or consider entering into voluntary instalments.
One way to budget and keep on top of your business tax is to pay yourself a wage. Keeping your accounts separate also prevents you from thinking of all your business income as spending cash! Remember to also put aside a little extra to cover your holidays and any quiet periods.
We can help make this process easier, so talk to us about setting up systems that take the headaches out of your finances.
