There are many decisions that starting a new business entails and one of which is whether you register for GST. There are businesses that automatically register for GST, but some businesses are not aware that registration is optional. However, for businesses with annual turnover of $75,000 or more, GST registration will be mandatory. For turnover less than this, GST registration will be optional. The option to register will depend on cash flow and administrative implications of your decision.
The cash flow implications if you decide to not register for GST would mean selling prices will be effectively 10% cheaper than the registered competitors for a turnover below the $75,000 threshold. You can also charge the same price as your competitor to enjoy a healthier profit margin. You also have to keep in mind that there are businesses that may not be sure about buying from those that have not registered for GST because of deeming their credibility questionable. This will also affect your sales. Some businesses prefer to purchase from businesses that have registered for GST as a way of claiming the GST back.
You also have to take the administrative requirements into consideration because GST registration means additional administration work. You will also have to report to the ATO on a quarterly basis. There are two distinct roles you need to remember once you have registered your business: the running of the business and acting as a tax collector for the ATO.
You will need an Australian Business Number (ABN) when registering for GST and it can be done in three ways: online via Business Portal, by phone and through your registered BAS agent or tax agent. You will be notified in writing of your registration details once you complete the registration process. It will also include the date your registration is effective.
When you decide to close or sell your business, you need to cancel your registration within 21 days. Cancellation of GST registration is also necessary if your business structure changes. An example of this is when you change your business from partnership to a company.
YOu may also cancel your GST registration if your GST turnover is below the compulsory registration threshold, unless you:
> are an Australian resident who serves as an agent for a non-resident that is required to be registered or registered for GST;
>are a taxi driver;
>represent an individual who is registered or bankrupt;
>are a business that is in liquidation or is registered for GST
These days, businesses have been more open to welcoming changes in workplace environment. More and more business owners have realised the potential of a mobile workforce to increase productivity by bringing innovation into your workplace. If you used to dread repetitive tasks because they are slowing you down, you need to adopt new and intelligent technology to change your business operations. There are three techniques you can employ so you can improve the overall performance of your business.
More often than not, business owners find themselves filing receipts and invoices to comply with the ATO. While this is the best practice to follow, the task may take long to carry out. You will need to file and manage receipts and invoices regularly to make sure that the essential documents are still intact. When filing receipts, use cloud-based programs so you will no longer have problems retrieving files when you need them. When you use bookkeeping software or cloud-based applications in filing your receipts, it will be easy for your people to access information from any device at any time.
One reason that can delay the pace of your business operations is when essential information is not available to your employees. When they have to go from one person to another just to get the information they need, the task can be really time-consuming. Instead of finishing the report in a day, you can end up dealing with it for days. This is why you need to improve the accessibility of your information so it will be much easier for your employees to coordinate with others in case you want to generate financial reports. When you integrate technology with your business, it will be much easier for your employees to collaborate. They can also access documents from their own mobile device. You can also increase productivity when your employees find it easy and convenient to access all the necessary information they need.
It is necessary to enhance your bookkeeping system if you are struggling with your accounts payable processing. When you lose sight of your cash flow, BAS payments to the ATO may also suffer. Real-time bookkeeping must be encouraged, which can be done with the help of bookkeeping software. The software will help you determine the suppliers you need to pay and vice versa. Week payment schedule will not be forgotten if you have a streamlined business process. You can even pay off each bill before the due date.
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Bookkeeping is often avoided because of the responsibilities that it entails, but in the long run, business owners consider bookkeeping a necessity. Everyday, business owners are plagued with too many worries, most of which is due to the issues with their finances left unchecked. When you intend to expand your business, its financial aspect is the first thing you need to check. Is it effectively managed? Do you have enough cash to grow your business? These questions are going to be relevant because they will provide you an insight on the direction you are going to take.
1.Not reporting sales tax. It is a common effort in bookkeeping to neglect sales tax, but this oversight can create a serious problem in the long run because it is a common reason for penalties and fines. If you have incorrect data entry, your business can suffer from a higher total sales amount. Make sure you have accurate sales tax. Discuss these important details with your bookkeeper if you see any discrepancies in the financial statement.
2. Poor communication. Another reason your business suffers is when you and your bookkeeper do not have strong communications. It is necessary that you keep your bookkeeper integrated and involved with your business activities. This way, your bookkeeper will be able to create financial statements that reflect your business’ true operational needs. Discuss the means of communication which both of you can be comfortable with.
3. Inaccurately tracking expenses and income. A bookkeeper should have the knowledge of formal bookkeeping practices. If the person you hired knows nothing about these tasks, you will have difficulty identifying the category that your income and expenses fall under. When you have accurate records on a monthly basis, you are not only encouraging proper filing system but also ensure consistent and clean records.
4. Poor record keeping. Receipts and other important documents must be kept because they are going to play an important role to your business. When accurate records are maintained, there is an assurance that you are saving time and money on your income taxes. You will have proper documentation if your business will be audited by ATO. You will also have accurate records to present and prevent a possibility of tax penalty. The records must be checked on a regular basis to ensure that there are no irregularities. A bookkeeper should consistently provide a report that a business owner can check and interpret.
5. Mishandling petty cash. One of the reasons business owners have problems with keeping track of expenses is due to bad petty cash management. You can prevent losing track of your petty cash if you set up a system, which will allow you to track the cash. You can also buy a petty cash lock box, which you can use for keeping receipts.
When it comes to running your business successfully, you need to incorporate good bookkeeping practices, which should be completed regularly. These practices are going to help you identify and fix problems before they take a toll on your business. When these practices are followed on a regular basis, they become a habit and soon you will notice that your tasks are getting easier as you master these practices. The last thing that business owners want to do is worry about their bookkeeping practices. For those who have just started a small business, bookkeeping seems like a new concept and it may take time before you get a grasp of the bookkeeping practices. However, when you know why good bookkeeping practices must be followed, you will make it a point to incorporate them in your business.
• Monitor the failure and success of your business regularly. Without following good bookkeeping practices, you can always make yourself believe that your business is still doing well. However, you will realise the importance of bookkeeping when you discover that your business is not doing good. Bookkeeping allows you to obtain timely and accurate information. You will know if your sales are increasing faster or if the expenses are too high based on your sales level. You will also have an idea if your expenditures do not appear as expected.
• Make sound financial decisions. A bookkeeper can give you recommendations based on what they see on the financial report. Before a decision can be made, evaluating the financial consequences must be kept in mind. You will never know the financial impact of a course of action that a bookkeeper provides if you do not have a financial report. A financial report tells you where your business is headed. Is it time to hire another salesperson? Do you have a profitable product line?
• Bookkeeping procedures are put in place. Before you obtain bank financing, a banker needs to see your financial statements including the cash flow budget, balance sheet and income statement. These statements can create an impact on your requested loan. You will also have to prepare your bookkeeping documents and procedures so the bank can verify if you are running your business in a professional manner.
• Prepare an accurate tax return. Every business is required to file an income tax return and make timely payments of income taxes. Good records are essential in preparing your tax return and it also allows you to provide accurate information. When you have poor records, your business will have the tendency to overpay or underpay taxes. Good recordkeeping can help prevent chaos in bookkeeping.
• Obtain other sources of capital. If your business is expanding, you need a partner that can help you with expansion. A prospective business partner wants to take a look at the status of your business and being familiar with the financial picture is one way for them to gauge if you make a good business partner. Suppliers and creditors will also require your financial records because they can use them as basis for identifying your credibility as a borrower. These sources of capital are less likely to put their trust in you if you have poor financial records.
The financial aspect of your business should be taken seriously because mishandling your finances can impact your business. Financial management includes accounting, bookkeeping, raising capital and cash flow management. Even if you are a small business owner, you need to make sure that your daily operations are monitored closely because one wrong move can make your business suffer. Although it is not a requirement for business owners to spend years studying the ins and outs of bookkeeping and accounting, understanding where money goes can make a difference.
Careless spending. Avoid overlooking expenses because if there isn’t enough money to cover all of your business expenses, you will not be able to move forward. When you do not monitor your expenses, there is a tendency that it will pile up. When the time comes you need to make a payment for your bills, you lack financial resources to obtain cash from. Business expansion will not be impossible if you can deal with business expenses without worrying about falling behind your payment schedule.
Delayed payment of taxes. Taxes are essential to every business and it is important that you pay them in a timely manner. Since late payment of taxes can have a negative effect on your business, you need to create a financial plan in advance so you can keep track of your payment schedule and pay taxes.
Poor cashflow management. Managing your cashlow is also important and this should involve monitoring payment for insurance, phone, rent and many others. When you plan ahead, you will be able to know potential problems even before they arise. You should also be aware of cash flow gaps because they can also happen at some point.
Managing the financial aspect of your business is not an easy task especially when you need to take your financial obligations into consideration. Delayed payments are a sign that there is something wrong with your finances. You have to review or reassess your spending habits so you will know what could have gone wrong.
If you are struggling with your business finances due to mishandling your cashflow, it is time to identify the culprit behind because taking these problems for granted can have a negative effect on your business that is beyond repair. Your bookkeeper can help you put your business in proper perspective and help you maintain your cashflow so you can make timely payments and prevent your business from becoming a complete failure.
Do you perceive strong online presence to be a costly and time-consuming technique? Have you ever thought of the importance of strong online presence to your bookkeeping practice? As a business owner providing bookkeeping services, you need to make sure that you are sending the right messages so you can attract clients and generate leads online. Improve your online presence with these techniques:
Social channels are effective in improving your online presence because it provides prospective customers a time to connect and to know more about your company. However, when you use social media for connecting with your customers, you need to dedicate your time and effort to supply these channels with engaging and compelling content. If a visitor stumbles upon your company’s social media account and found nothing, the purpose of getting people to know your business will be defeated.
These social channels can help businesses promote services and share expertise. LinkedIn is one of the very effective channels capable of finding leads and networking with contacts on the same industry. It is also help to consider the social streams as this will help you determine where your efforts should be concentrating on.
When it comes to finding the right formula to communicate to your new and existing clients, irrelevant information becomes a roadblock that you need to remove if you want a steady flow of customers to come knocking on your door. Most of your social media posts should be focused on driving traffic to your website. These posts must be carefully crafted so you can present your business in the most effective way. Blog posts should be given importance because you can link through to them using social media accounts. As a result, your audience will keep on returning to your website and engage with your business. They can also share your content with their own networks.
Social media allows you to have a voice so you can communicate effectively with new and existing clients. Social media is an effective tool if you are going to take a strategic approach. Keeping your interactions meaningful and regular is one thing to ensure positive client engagement. You will need to create a basic quarterly plan so you will know when you should schedule them. It can either be weekly or twice a week. As much as possible, you should make it a habit to schedule posts ahead as something may come up that stops you from supplying channels with regular posts.
Since almost all businesses are going digital these days, taking advantage of social media channels to promote your business can make a difference. Regular interaction with your clients can take your business to the next level.
One thing that makes bookkeeping industry interesting is that anyone can become a potential customer. Every opportunity that knocks on your door is a good sign for your business. Once income starts coming in, the next thing to do is to push your profits to the next level. Due to the competitions in the bookkeeping industry, it is important that you concentrate on a specific niche that will define the nature of your bookkeeping business.
When you establish a niche, you are promoting yourself as an expert in a particular area of bookkeeping. Your niche may be focused around an industry, type of business owner or a location. The downside of allowing your business to be part of a crowded industry is that potential customers will have so many choices and sometimes, your business can get lost in these choices. However, if they have a specific niche to focus on, you will be able to define your areas of expertise and give them an option to get the bookkeeping business that fits their expectations and needs.
• When you consider creating a niche for your bookkeeping practice, you have more opportunities to determine an effective marketing approach that will work for your business. This marketing approach will give you the ability to have a unique selling point. As a result, you are targeting your customers and creating qualified leads.
• You will be able to stand out online when prospects are looking for a specific service. If you are going to settle with generic bookkeeping service, you are most likely to be lost in the crowd because you do not have any unique services to offer.
• Building a niche can also provide you attractive networking opportunities. This is also your time to build confidence in environments, which can generate referrals and better business. If you have done an impressive job on a specific area, you will become the go-to person when clients need help in a particular area of a bookkeeping service.
• If you want to make it big in the bookkeeping industry, finding your niche can open the door to additional business opportunities. Not only will you become more involved in business and financial management but you will also have more time to concentrate on an area that will improve your bookkeeping service.
The thought of finding your niche can be overwhelming and your starting point may be one of the reasons you are deterred from pushing your business to the next level. Start by reviewing your client database. If you see any trends in the type of customers you have, focus on a particular industry where you can establish your niche.
You should also identify the kind of networks or relationships you currently have that you can leverage. If you have a connection in a particular industry, you should also join associations related in this network so you can expand your network. You can also find your niche if you focus on a particular service that you consider profitable. If you have high-paying clients, find more like them.
When it comes to keeping businesses on their feet, accountants and bookkeepers have a significant contribution. Unfortunately, their services are deemed to be competitive instead of complimentary and this is the reason tension between these two camps build up. Why not offer the best of both worlds through collaboration?
When accountants and bookkeepers are working closely, essential information is fully reconciled. Business owners are also assured that the information is accurate. When incoming information is reconciled, it will be easy for accounting firms to focus on business-related issues such as cashflow, profit and business growth. There are several reasons for the gap between the accountant’s and bookkeeper’s work such as using the old accounting systems. When both camps see their roles as separate and there is lack of communication, there will be misunderstandings and friction.
Both parties must be aware of their roles in the business. Just because they have different roles to play does not mean they cannot work as a team. These days, accounting software can be used so bookkeepers and accountants can access the information at the same time. This makes collaboration and job tracking possible.
If there are problems that both parties may encounter, it is easy to track them once they access the same information through accounting software. The major roles of accountants include depreciation, company set up and ensuring that the best result is achieved at tax time. Bookkeepers are responsible for taking care of overflow work and bring up issues with the accountant before the year end.
Another benefit that a business owner can obtain when bookkeepers and accountants work together is efficiently generating leads through getting viable resources. When proactive approach is used, they can be a great team. With training and webinars, accountants and bookkeepers will have a clearer understanding of their roles.
• Learn new skills. If there are gaps in your bookkeeper’s and accountant’s skillset, learning new skills will bridge the gap. It is not just enough that you are familiar with your responsibilities because you will also need to keep up with the technology. Accountants and bookkeepers should build on their IT skills so they can utilize accounting software effectively.
• Consider complimentary services. Collaborative business relationships are effective in businesses because it helps the team offer referrals, share resources and give advice to make businesses grow. When there is a strong network, the business will also thrive.
• Get to know the latest accounting technology. The first step to using accounting software is learning about the add-ons and features. Bookkeepers and accountants need to attend training sessions and utilise online training tools.
Collaboration also means embracing changes. Although technology advancements have made the roles of each party much easier, this does not mean that business owners no longer need bookkeepers and accountants. It will be convenient for business owners to work with accountants and bookkeepers if they work harmoniously. Each one has a purpose and no role is greater than the other. When businesses have a strong network, the goals that will encourage growth will be achieved.
Business owners consider the profit and loss report important because it is one of the reports that can determine which direction the business is going. Numbers reflecting on these reports must be interpreted correctly and accurately as there should be no room for mistakes. The bookkeepers will be the one to make some recommendations based on the reports. When a business is losing or making money, a Profit and Loss Report will be a determining factor.
Unfortunately, not all business owners understand the importance of these reports until their business fails. Since interpreting numbers of the second nature of every bookkeeper, it is no longer surprising that they know how to read the profit and loss report.
However, not all business owners can interpret or read a profit and loss report. Some may assume that everything is going in the right direction, but when the report is interpreted, the business is losing money, which is not a good sign of progress. There are various areas of profit and loss report that need more than just a simple interpretation and seeing the numbers go up is not enough.
When the figure shown in the report is positive, it only means that the business is making a profit. A negative figure means that a business loses money. The net profit or net loss provides information of the total of income, less cost of goods sold or purchases less expenses.
The expenses provide the figures for business expenses including the cost of goods sold. The expenses also show the categories based on your industry. It also includes the operating expenses such as power, telephone, rent and many more.
The Income shows the total of invoices or sales, which you have invoiced over a certain period of time. The Income does not yet include the investment income because this only falls under a section referred to as ‘other income’. This category is found on the bottom of the report. The business’ income is also called ‘turnover’.
The Gross Profit refers to the incomes less purchases and the Cost of Goods Sold. It is important that a business owner understands the markup percentages and this is what the gross profit provides. The markup percentages are expressed as a percentage of income.
The Cost of and Goods Sold are the total of all the expenses that the business has incurred. The expenses are the ones that have contributed to the income of your business. The purchases refer to the inventory items that the company has sold and purchased. The items for sale such as the freight charges are the Cost of Goods Sold.
It is not only the bookkeeper that should be mindful of the figures on the profit and loss report because business owners must also understand these reports. When business owners know how to interpret these reports, it is easy to determine when and how changes can be made if something is not working with regard to the financial aspect of a business.