Are you on top of your accounts?
Owning and managing a small business can be tougher than many realise, partly because of all the forms and accounting measures you must maintain. Don’t be left scrambling at tax time; here are a few things to consider throughout the year to help you stay on top of your accounts.
Keep software updated and data entry regular
Accounting software has transformed small businesses, making bookkeeping much more simple, however you’ll still need to reconcile transactions with the software. Instead of leaving this until tax time or the month’s end, make time to access your Xero accounts, reconcile transactions, and add any data required at the end of each week. You’ll be so glad you did when tax time comes around.
Get paid faster to prevent debts getting out of hand
Online payment gateways allow your business to be paid faster to help you stay on top of your accounts. Anyone with a small business loathes chasing unpaid invoices, and online payments are the answer.
A great option is to send an online invoice through your accounting software, with a link to ‘Pay Online’ where the client can enter credit card details and payment is made straight away. Not only is the client experience better, but you’ll also reconcile your accounts faster, which helps balance the numbers when it comes to tax time.
Stocktake and GST
Recording the stock in your shop is one thing, but you’ll also need to reconcile stock balances in your software with a physical stock take. Next, you’ll want to keep up to date with your GST every month, review your payroll system, and create a profit and loss statement and balance sheet quarterly. At the end of the year, it’s useful to create a cash flow forecast document, particularly if you have investors, so they can see how bright your business’ future is.
Forms and returns
Every working man and woman completes an income tax return, but small businesses have many more forms at tax time. Here are the forms you’ll likely have to complete at tax time if you run a small business:
- Income tax return
- BAS or IAS (Business activity statement)
- Australian securities and investments commissions annual report (companies only)
- PAYG withholding payment summary annual report
- PAYG statements (group certifiate) for employees
- Payroll tax
- Worker’s compensation insurance
- superannuation payments
- solvency declaration for companies only
- Staff salaries and conditions
- Government grants
Your Business Activity Statement
Your Business Activity Statement will automatically be sent to you by the ATO if your business is registered for GST. The BAS is designed by the government to help you report and pay the correct taxes and costs so you don’t end up with fines and penalties.
The BAS includes:
- Goods and services tax (GST)
- Pay as you go (PAYG) instalments
- PAYG withholding tax
- Other taxes.
Completing the BAS is a vital part of running a business in Australia, but it won’t tell you as much about your company as your balance sheet. Luckily, you don’t have to wait until your accountant prepares your balance sheet at the end of the year, you can use your accounting software to create one for you. Even if you’re awaiting payments, viewing your balance sheet throughout the year can help you get a good idea of the financial health of your company.
What your accounts can tell you about your business
Accounting processes for a small business may seem complex, but they’re established to help you understand the health of your company. You’ll see if there is no profit from a product or service, or if a product needs too much working capital relative to its profit level. Once you have this information in black and white, you can reconsider what products or services you sell and continue to build a successful business.
Accounts will also help you tread gently when starting your business so you don’t end up stuck with huge debt, or with services that aren’t working. By watching your accounts via your software and completing all the tests above, you’ll learn not to increase fixed overheads quickly, not to over-purchase stock and not to over-invest in equipment.