The Australian Tax Office (ATO) only allows deductions for superannuation payments which are actually paid on or prior to the 30th of June. If you are looking at minimising your tax liability, it is recommended that businesses try and process their June quarter Superannuation payments prior to the cut off date – 30th of June. That said if your business has been running at a loss, year to date and Cash Flow is a concern then it is recommended that you consult your Tax Accountant about prior to the 30th of June to consider the best option for you.
No-one likes dealing in Bad Debts, and it’s definitely a case of “Prevention is better than cure”.
Cash Flow is important for any business and for Small Businesses in particular, it is often tight. Bad Debts push this even further.
The ATO published a story titled “Protect yourself from illegal phoenix activity. Do you know who you’re going into business with?”. In this article they discuss ways to reduce your exposure to bad debts. Helpful for developing new business relationships, but it wasn’t about day to day processes.
Manage the risk of Bad Debts
Even businesses that are “cash up front”, are still exposed to Bad Debt by broken promises and this risk is increased by offering any credit terms.
Managing your Accounts Receivable in a planned and structured manner can be instrumental. Many small business owners find it tough to discuss payment in person. Important discussions are often missed and any potential issues not managed.
Money is personal and often emotional.
Utilising a service such as Knight BPO to manage the collection of outstanding monies before they become a doubtful debt not only saves time, but stress as well!
At Knight BPO, we work with our clients to put together a structured Accounts Receivable process and execute that process.
Scenario: We have a client with a service-based business. Their standard credit terms are 14 days from service for most customers. The process that we work through for them looks like this:
Their Knight BPO Customer Service Team calls to check in at the completion of a service, check that all is OK and confirm receipt of the invoice. This is the first check point to make sure they’re happy and all is well.
We send a pre-written reminder email for debts that are 3 days overdue.
Should a debt reach a week overdue, a phone call by the client (made by the Knight BPO Accounts Receivable Team) to understand the issues causing the delay and work through a plan to resolve.
The plan is communicated to our client.
The plan is actioned by us.
If there are any issues with the new plan, we contact the client and manage each case individually.
Each and every business is unique and managing debtors is no different! The Account Receivable process is tailored to suit your business. You are involved in scripting the phone calls and emails to make sure they’re representative of your business.
The Knight BPO Accounts Receivable process takes away the stress from collecting money. It takes away some of the more painful tasks of running your business and gives you time to focus on more enjoyable tasks such as earning money – or counting it!
Did you know Long Service Leave is an entitlement for your casual workers in a similar way to permanent staff?
Casual labour provides the flexibility needed to help ease the burden of peaks and troughs experienced by businesses. There is a direct and instant relationship between revenue, the outputs required, and costs associated. Having a workforce that is reliable, experienced and knows your business is beneficial on many levels. The responsibilities of employers to its permanent workforce compared to its casual labour pool is different in the immediate liabilities, such as annual leave and sick leave. However, longer term employee rights, such as Long Service Leave accrue in the same manner.
Casual workers are entitled to Long Service Leave.
So how does a small business manage this? The entitlements of casual workers are the same as for their permanent colleagues. Rules for Long Service Leave differ depending on things like award, the structure of a business and where it operates. If you have employees who have been with you for 7 or more years, it’s important to know the rules that apply to your business.
A common entitlement structure provides employee entitlements of 8 2/3 weeks of Long Service Leave after 10 years. From 7 years, should the employee leave for any reason, entitlements are determined on a pro rata basis. This means if an employee leaves after 8 years, they’re entitled to nearly 7 weeks of Long Service Leave.
Records for Long Service Leave need to be kept for longer than taxation requirements.
Determining Long Service Leave for permanent employees is relatively simple, as it is calculated based on their current employment conditions. For casual workers, it’s more complicated. In order to determine the amount of Long Service Leave that a casual worker is due, you need to determine the average number of hours worked over the full term of their employment. If you’re not prepared, this means trudging through old records, finding the hours worked each week for the past 8+ years!
That’s longer than you’re required to keep your taxation records!
At Knight BPO, we keep track of all of our client’s employee information so that your business is compliant. We track employee leave entitlements so you know your liabilities.
Oh. I am not yet a Knight BPO client, but I need help!
There are a number of government agencies that can provide the information you need to know your liabilities. The Fair Work Ombudsman, and WA State Government both have helpful resources, or you can speak with your accounting services provider.
Knight BPO can review your historical records to prepare a report on historical staff entitlements. It’s all a part of the onboarding service that gives you comfort that your business is compliant, that you know your liabilities, and that you have all of the information needed at your fingertips to maintain great relationships with your employees!!
So you have made the decision to start your own business, and you have a product and or service that you believe there is a market for it. Well that’s great but how do you get yourself up and running. What are the most basic steps you have to start with? This is a very basic introduction to you. The below information is about starting a business in Australia specifically.
What type of Business Structure?
There are a number of structures that you can choose from when starting or expanding your business.
The four main business structures commonly used by small businesses are:
Sole trader: an individual trading on their own
Partnership: an association of people or entities running a business together, but not as a company
Trust: an entity that holds property or income for the benefit of others
Company: a legal entity separate from its shareholders.
Each Business structure has it’s Pro’s and Con’s get in touch with us to discuss in more detail
What’s in a Name?
So you have chosen a business structure, the next step is to choose a business name and is it going to be available? The next step is to do an Australian Securities and Investment Commission (ASIC) Search to see if the name is available. It is not uncommon for someone else to have thought about that business name. The availability of an appropriate business name is vital. Of course once this has been resolved the next step is to see if you have the required website Domain available.
ABC or an ABN and what about GST
For doing business in Australia it is a requirement to have an Australian Business Number ABN (Most cases). An ABN helps the requisite authorities to identify a business easily (Australian Tax Office, Department of State Revenue etc). Not to mention it is a requirement by law to display your ABN on any invoice issued by your business. When doing this it is decision time. As Australia has a Goods and Services Tax regime (GST) 10% currently. You have to charge GST on any form of sale whether for products or for services (if your yearly sales are going to exceed $75,000), unless your product and or service is exempt. Now you can decide to report GST on an Accrual basis or Cash Basis.
Cash or Accrual what should I do?
An Accrual method of reporting is when a business has provided the Goods and or services to the client and has raised the sales Invoice. In the real world it is conceivable to think that a business may send a sales Invoice at a certain date, however it is not necessary that the client pays at the same time there may be a delay. Anything between 7 days to 90 days or more in some cases. If you decide to report on an Accrual basis then the GST become payable on the date you sent the sales invoice.
In contrast to this on a cash basis the GST is only payable when you have actually been paid for the sales, i.e. you have received the funds.
This decision should be taken after giving some thought.
So how did we do?
For any business the most basic and most important reports are the Profit & Loss and the Balance Sheet.
So what is a P&L and why is it important?
The profit and loss statement is a summary of a business’s income and expenses over a specific period. It should be prepared at regular intervals (usually monthly and at financial year end) to show the results of operations for a given period. A Profit and Loss is calculated in the following way.
Ok so then “What is a Balance Sheet? And why do I need it?”
The balance sheet is one of the major financial statements used by accountants and business owners. The balance sheet is also referred to as the statement of financial position. This report presents a company’s financial position at the end of a specified date. A sort of “snapshot” of the company’s financial position at a point in time. Because the balance sheet informs the reader of a company’s financial position as of one moment in time, it allows someone like a creditor to see what a company owns as well as what it owes to other parties as of the date indicated in the heading. This is valuable information to the banker who wants to determine whether or not a company qualifies for additional credit or loans. Others who would be interested in the balance sheet include current investors, potential investors, company management, suppliers, some customers, competitors, government agencies etc. Below is a sample Balance Sheet.
Sample Balance Sheet
Although the above is a rough guide, and there are a lot more things involved, these are the very basic steps that anyone who is considering starting a business should be aware of. A successful business manager/owner understands the value of good product/service placement and delivery. However, often overlooked is the importance of monitoring, reporting and interpreting its performance. Budgets, forecasts and comparison reports allow operators to make strategic decisions. For this to happen it is vital that business owners get accurate and timely information. This is fulfilled by having the financial information for the business processed and reported by professional and competent personnel. Whether this is done internally or externally, high level financial feedback is invaluable when looking at key business decisions. It often makes a difference between success and failure.
PLEASE NOTE: The above is meant to be a guide only and is focussed towards Management Accounts, please get in touch with us for more detailed and current information or consult the Australian Tax Office.
What do you think of our new website? We love it and we hope to use this News section to keep you all abreast of the goings on at Knight, throughout the industry and anything else we think will be of interest to you. Please let us know what you’re most interested in reading about.
