Sep 25, 2010
Are you paying too much tax?
By not keeping proper records, chances are that you are missing out on valuable tax deductions.
Fuel receipts are a common problem area as they are regularly lost. Unfortunately, no tax invoice means no valid tax deduction. Certain fuel cards can be used as tax invoices. That is, if you keep losing your receipts, the statement from your fuel supplier can be used to claim valid tax deductions.
Where is my money going?
All too often you may notice that your bank balance does not match your profit and loss report. Chances are that funds were used to pay for such things as – GST, PAYG, and Superannuation. All of these obligations need to be paid, however, they all don’t appear on you profit and loss statement which is possibly why your bank balance doesn’t match your profit and loss report.
It would be more suitable to have a separate bank account to manage your entire ATO and employee obligations. At the end of each pay run, place the PAYG and superannuation into a separate account. Also do the same for GST on a monthly basis and when it comes time to pay these obligations, your cash flow burden will now be not so painful.
Have I paid this bill twice?
In a rush to pay outstanding accounts, especially when suppliers have stopped credit, accounts may be over or double paid. Unfortunately, some supplier will not be honest and let you know about the discrepancy. By the time you come to reconcile your bank account and realize that a double payment (or more) has been made, retrieving the money back from the supplier may be an uphill battle.
They key is to reconcile your bank account as often as possible. Weekly would be ideal, but more fortnightly or monthly would be more practical. Either way, do not leave it too late as at times it’s difficult to remember what you had for breakfast let alone what occurred a month ago.
Do you look foolish?
All too often statements are sent out without your client’s payments being applied or the bank account being reconciled. Your call volumes then rise by clients stating that they have already paid their bill, and you are then left to explain why they received the statement in the first place.
If you are not sending out statements, then it’s time to consider doing so as they serve as a good reminder for outstanding accounts.
Have they paid us?
Regular reminder calls to your clients will prompt them to keep your account within your trading terms. Persistence is a winning tool in this area, as you essentially need to “train” your clients to pay on time. Don’t leave this to last as your cash flow will suffer as a result.
Are you overpaying your employees?
Are you aware if you should be paying superannuation on overtime payments, allowances, or annual leave? Should you be paying annual leave and sick leave to all employees, and for what types of pay? These are vital questions that you need to ask your tax advisor as you simply may be paying more than you need to.
What is it costing you to run your business?
How much does it cost you to operate your business on an hourly
or daily rate? What mark up are you making in certain products
and/or services? If you don’t have the answers to these
questions, how do you know if you are making a profit?
Keeping your accounts in order will allow you to see exactly where
you are spending your money. Some further work could really show
where your money is made and where it’s lost. Don’t use your
‘gut feeling’ on this one; apply your reasoning with some proper
figures.
How much does an ATO audit cost?
ATO audits are extremely costly on your time and resources. Have your paperwork organised in a manner that if an audit was to occur today, that you could easily prove all of your expenses.
For further information please contact David Femia from Femia and
Associates on 9316 4500, or visit www.femia-accountants.com.au