2016

7 top tips to get paid faster

Small businesses depend on prompt payment, so we have come up with 7 top tips to get paid faster!

1. Discuss payment terms before you get started

Getting this sorted upfront means that there is no confusion down the track.  It also sets the client’s expectations around payment before you start the work.

2. Keep detailed records of materials used and time spent

This saves time when it comes to creating the invoice and makes sure you don’t miss anything.  It also means if things are going over budget you can let your client know, instead of sending them an expensive surprise at the end of the job.

3. Make the invoice clear and easy to understand

List the details of the job in a way that makes sense to the client – any confusion could create a payment lag.  It’s also good to personalise your invoice with your business logo – it helps carry on the professionalism of your work.

4. Set appropriate payment terms

Many invoices are paid after the due date, so if you need the money in your bank within 14 days, set your payment terms to 7.

5. Address the invoice to the person paying

Make sure your invoice goes straight to the person who makes payment to avoid getting lost in someone else’s inbox.  If you’re unsure exactly who that is, give them a call – it pays to know the person paying the bills.

6. Invoice as soon as possible

Send your invoice as soon as possible; the sooner a client receives an invoice the sooner they will make payment.  It also means they will receive it when the value of your work is still fresh in their mind.

7. Keep on track with debtors

The squeaky wheel gets the oil.  When things become overdue send reminders, monthly statements or make a phone call.  It will help remind your client that you are serious about getting the invoice paid.  Some accounting software sends you an update when the invoice has been opened.

Adjust invoice payment terms to suit you

Being a small business owner often means you’re short on time, but it’s worth making the effort to get your invoicing set up properly.  Having a process that helps streamline invoicing can drastically reduce the amount of time you spend collecting your hard earned money.  And that’s got to be great for your business.

Download our free checklist – 10 step-invoice-checklist-to-get-paid-faster

 

Other Blogs that may be of interest

5-common-bookkeeping-traps-that-will-cost-you-money

The ins and out of being-a-contractor

Get a better tax refund from the ATO or reduce your tax bill

 

5 Common Bookkeeping Traps That Will Cost You Money

Although most small business owners and subcontractors recognise the importance of carefully monitoring their finances, few have the time to spend reviewing their numbers.  After all, for subcontractors and small business owners, if you are not actually working, you are not making money.

However, not keeping a close eye on your income and expenses can be very costly for a small business.

Here are five of the most common bookkeeping pitfalls, and some simple tips for getting back on track.

1. Mixing business and personal

All too often, business owners adopt a “buy now, sort later” approach to expenses, using the same credit card for personal and business purchases.  At the end of the month, they’re left poring over statements, trying to sort things out.  Mixing business and personal expenses costs extra hours of bookkeeping each month, and muddies your overall financial picture.

Avoid this pitfall by using a separate credit card and bank account for your business and being disciplined about keeping those expenses separate.

2. Neglecting to track reimbursable expenses

Receipt tracking is a necessary part of your business.  You need to keep track of receipts to understand spending patterns and effectively manage your company’s finances.  And, if you want to claim deductions at tax time, you’ll need to submit receipts along with your tax records.

But far too many business owners take a haphazard approach to collecting and organizing receipts, especially while on the go.  Get the deductions you deserve and simplify your tax prep by using an expense tracking app.  Options like Expensify and BizXpenseTracker can record mileage, billable hours, and other expenses, as well as generate reports.  Plus, many of these apps sync seamlessly with your business bank account and accounting software.

3. Not taking advantage of technology

Are you still relying on manual accounting methods?  While basic spreadsheet tools can get the job done, they leave the door wide open for human error. What’s more, manual methods simply can’t match the technological benefits offered by accounting software like MYOB, QuickBooks or Xero.  These systems track invoicing, link with your credit card and business bank accounts, organize expenses and generate informative financial reports.


4. Not keeping accounts up to date

Let’s be frank.  Most business owners don’t look forward to that weekly appointment with “the books.”   In fact, many business owners cite bookkeeping as their most dreaded responsibility and will find a host of reasons to avoid it.

5. Not chasing money owed

Whether it’s a delay in sending invoices out or failing to follow them up when they remain unpaid, the longer they go unpaid the higher the chance of them turning into bad debts.  So ensure that you either make the time to follow up overdue invoices or engage a bookkeeper to do it for you so you can focus on your business.

We can help you manage your bookkeeping, reduce your costs and ensure your financials remain up to date with our simple stress free service.  Call us today for a quote or to book a free no obligation meeting.

Is it worth getting a second job

Is it worth getting a second job?

With tough economic times many people are turning to a second job to keep their family’s head above water.  Others are saving for a big holiday or deposit for a home.  So what are the tax implications of working another job and is it worthwhile?

At first you may think no, as when you get the pay packet from your second job it may seem like you’re paying a higher rate of tax.  This may seem grossly unfair but it’s actually just an accounting thing.  The fact is that you can only claim your tax-free threshold from one employer.  It makes sense to make the claim from the employer who pays you the most — your primary source of income — but this means that you will pay tax on every dollar you earn at your second job.

You need to ensure that you let your employer know that you will not be claiming the tax-free threshold on the money you earn.  Also, it’s worthwhile checking that you are getting paid correctly.  Sure, it may seem great to get the extra income in the short-term, however when it comes to tax time you will be hit with a hefty bill.

Other considerations

Before signing up for a second job, you should check your primary employer’s policy on the matter.  Technically, you don’t need to tell them about a second job; after all, you can do whatever you want in your own time, but there can be benefits to letting them know.  Letting the boss know that you’re thinking about moonlighting might be a wake-up call that a pay rise is necessary.

Alternatively, he or she may be able to offer you extra paid hours in your primary job, saving you a lot of stress and hassle.

Of course, there’s risk involved in laying your cards on the table.  Knowing that you’re working a second job might also make them think that you won’t have energy to put into your current job, affecting the way you’re viewed at work.

Work life balance?

Working huge hours every week will affect your personal life, so you need to weigh up whether it’s worth it.  Perhaps a better solution might be to find another day job that pays better and stick with one job.

If you are looking at improving your income to achieve that little bit extra in the budget every month, speak to us today.  We can help you review your personal circumstances and potentially identify ways you can reduce your tax, giving you more money without the need for that second job.

Being a contractor

The ins and outs of being a contractor

Are you thinking of being a contractor, tradesman in the trades and services industry?  For many there will be a point in their working life when they decide to make the switch from being an employee to a subcontractor.

Being a contractor can happen in different ways.  Some workers will simply switch from being an employee to a subbie with the same business, whilst others will start subcontracting to various different businesses.

When switching to subcontracting there are a few decisions that will need to be made.

You need to decide on your own business structure, which will in turn impact on your tax requirements and other responsibilities such as your insurance needs and superannuation.

In this blog we will take a look at the steps involved in going from being an employee to a subcontractor.

Business structure

Once you’ve decided to become a subcontractor you will need to work out which business structure will be best for you.

Many subcontractors, especially when it comes to tradesmen, operate as sole traders.  As a sole trader there is no separation between your business and personal finances when it comes to taxation.

As a sole trader you will have to apply for an Australian Business Number (ABN) which is to be quoted on your invoices.  You may also have to register for Goods and Services Tax (GST) if you expect your annual revenue to exceed $75,000.

Sole traders have a single Tax File Number (TFN) and lodge a single tax return which covers their personal and business affairs.  Essentially, you and the business are a single entity.

There are a few other options in between, however the second main option for your subcontracting work is to operate as a Pty Ltd company.  With a company you are creating another separate entity to take care of all matters relating to your business.

A company will also require an ABN and potentially GST registration but, unlike a sole trader, a company will require a separate TFN.  As a company owner, you will also have to lodge separate tax returns for your company as well as your personal returns.

Which business structure is best?

There isn’t necessarily one structure which is better than the other, however there certainly are advantages and disadvantages to each for the average tradesman or subcontractor.

Being a sole trader is cheaper in terms of setup and ongoing costs, and also takes up a lot less time in terms of administration and paperwork.

A company structure is more complex and expensive, however it does give you more protection as an individual and flexibility in terms of structuring and paying tax.

Another major concern is liability.  As a sole trader your business and personal matters are linked, so if something goes wrong in your business it could flow into your personal matters.  For example, if you were sued for any reason or couldn’t pay your business debts, all of your personal assets could potentially be up for grabs.

With a company structure your personal and business affairs are completely separated.  If your business is found liable for something financially or you run into other financial difficulties, your personal assets are protected and cannot be touched.

This is a major attraction for many tradesmen who could potentially be exposed to serious risks in their work.

Entitlements

As an employee on wages, you are entitled to sick pay, holiday pay and even superannuation contributions, but as a subcontractor you will become responsible for all of these costs yourself.  You will also be responsible for taking care of your own tax affairs.

As a subcontractor you only get paid for the work you do, so it is important to put money aside for holidays and sick days, as no one else will be paying you for this time.

Is it also important to keep on top of your superannuation responsibilities and income tax.  By neglecting your super or tax matters you could find yourself being hit with financial penalties from the Australian Taxation Office.

Insurance

The final consideration we will look at is subcontractors insurance.  As an employee most of your insurance matters are taken care of, but as a subcontractor you are responsible for your own insurance.

Most subcontractors, and especially tradesmen, will require public liability insurance.  This type of insurance covers you for any property damage or personal injury that you cause through your work.  Many tradesmen will not be allowed to enter a worksite without public liability cover.

Another form of cover that should be considered by subbies is income protection insurance.  This cover is optional for many subcontractors, however some workplaces and worksites do make income protection mandatory.

Income protection is still important for employees on wages, but for subcontractors it is even more important.  As an employee you are entitled to sick leave and even worker’s compensation in many cases, however as a subcontractor you are really on your own.

Whether it’s a month off the tools or years away from work due to injury or illness, income protection is vital for subcontractors and even more so for a tradesman who is exposed to major risks on the worksite.

More information

If you are in the process of becoming a subcontractor or even if you’re just thinking about it, why not book a FREE, No Obligation meeting with one of our trades tax experts.  We can answer your questions and help you make the important decisions.

As specialists in tradies tax, we can help take care of everything for you, leaving you free to concentrate on earning the money!

Contact us today on 9204 3733 or fill in the form opposite to see how we can help you.

Tax tips for new business owners

Tax tips for new business owners

Want to avoid paying more than you should come tax time?  Or a frantic last minute search for missing financial records?

New business owners have a lot on their plate, and can easily lose track of an approaching tax deadline or financial data needed to submit their return.

Organization is key when preparing for tax time, as is taking advantage of the many tools and resources out there to support new entrepreneurs.

Set yourself up for success by following these four pillars of painless tax prep.

1. Commit to clean bookkeeping from day one

Year-round, effective bookkeeping is the best way new business owners can minimize tax season stress.  With the wide range of accounting software out there, there’s no reason to rely on time consuming manual methods that leave room for error.

All-in-one options like Xero, KashFlow and QuickBooks automate your most important bookkeeping processes, including:

  • Tracking expenses;
  • Tracking sales and income;
  • Creating and sending invoices; and
  • Managing inventory.

With your financial records all in one place and up-to-date, you’re better positioned to maximize your refund, while avoiding penalties associated with incorrect or incomplete tax returns.

2. Capture every business expense

Each year, 21% of small business owners claim less than half of their business expenses, largely because they don’t have a reliable system for documenting expenditure while on the go.

Without carefully logged receipts, entrepreneurs must forfeit valuable tax deductions, sacrificing cash they could be funneling back into their business.

Cash in on claimable expenses by using a mobile app to record receipt data, track mileage and generate expense reports.  As an added bonus, many of these tools sync with your all-in-one accounting software.

3. Separate business from personal

Right from day one, small business owners should clearly divide their personal and business expenses.  Differentiating between the two will make it much easier to claim deductions on your tax return – and support those claims in case of an audit.

Recommended steps to separate your business and personal finances include:

  • Create a separate bank account for your business and designate a credit card solely for business purposes (this will help you track expenditure while building up your credit and borrowing power);
  • Never combine business and personal expenses (for example, if you buy printer ink for your home and your business at the same time, ask for two separate receipts);
  • Pay yourself a set salary from your business bank account each month (this will help you determine how your income, as well as the business, will be taxed).

4. Always consult with an accountant

Not sure exactly what you can claim as a business expense?  Wondering which accounting software to use or how to interpret local tax regulations?

Consult with an accounting professional to put your mind at ease – well before the filing deadline!  In addition to managing the nuts and bolts of tax preparation, regular meetings with an accountant will help you continuously improve bookkeeping practices and better understand the financial workings of your small business.

Those organizational strategies you commit to now will promote positive relations with your local tax authorities – and the long-term financial health of your company.