a clear difference

Call 08 9204 3733 for expert advice

2017

Tax Tips for Small Business Owners

May 11, 2017 / on Blog / 0 Comment

Preparing for tax season really is a year-round endeavour for all small business owners, so here are few tax tips. Tip number one is to update financials on a monthly basis, using a streamlined software or cloud-based system.

This way, come tax time, everything you’ll need is all in one place and you’ll be better positioned to minimize your tax bill while avoiding penalties associated with inaccurate information and/or late lodgements.

Here are four more ways to take the stress out of tax time, and get the most out of your return.

Know your credits & deductions

Small businesses typically benefit from a wide range of tax credits, from special allowances for research and development, to programs that supplement wages for student employees and apprentices. Knowing which credits apply to your business can save you a bundle on taxes.

It’s also important to be savvy about deductions. After all, you want to keep as much of your hard-earned revenue as possible. Deductions that are often overlooked include:

Seminars, courses or conventions you attended to improve your professional skills;
Unused inventory that you’ve donated to charity (a good reason to consider donating your excess stock, rather than paying for storage); and
Capital assets such as office furniture, computers, and equipment.

Speak to your accountant about the full range of available deductions so you can plan ahead for each tax year.

Be careful about what you claim

If you run your business out of your home, you may be able to claim a portion of expenses like utilities, insurance, property tax and rent. But you’ll need to keep good records and all your receipts to justify why you’ve allocated business costs to your home office.

The same goes for home office computers and mobile phone expenses. The ATO will want to see how you’ve separated the personal and professional use of these assets when you claim them as work expenses.

Want to claim travel to and from work as an expense? Ensure you submit a log of your business-related kilometres so you can clearly demonstrate how your personal vehicle was used for business purposes.

Don’t miss the deadline!

This should go without saying, but every year businesses are hit with severe penalties for late lodgements. Missing the deadline can have negative repercussions, including:

Added interest to amounts already owing, plus a late lodgement penalty; or
Delay of loan approvals (lenders require a copy of your lodged tax return in order to process your application).

Seek expert advice well in advance

A recent survey of small business owners found that many don’t understand their tax obligations. What’s more, 27% only speak to their accountant at the last minute, just before the lodgement deadline.

Software has made it easier than ever for small business owners to keep on top of their record keeping, but when it comes to thoroughness and accuracy, nothing can replace the expert advice of an accountant. Consult one well in advance to ensure you’ll get the most out of your tax return and that your documentation is complete. On the bright side, accounting fees are often tax deductible!

Speak to us today! We are small business and tradies tax specialists and can help you pay the least amount of tax possible. Call us now and book in for a FREE, no obligation tax review. Take action now and keep more of your hard earned money in your pocket.

6 Essential Accounting Terms for Small Businesses

April 27, 2017 / on Blog / 0 Comment

Hiring an accountant is widely considered best practice for small business owners, but delegating financial analysis and reporting doesn’t mean you’re completely checking out of the process. On the contrary, it’s recommended that business owners work closely with their accountants throughout the year to better understand their financial position, and make smart plans for future growth.

Want to increase your accounting knowledge so you can have more informed, insightful discussions with your accountant throughout the year?

Start right now with this list of 6 essential accounting terms for small business owners.

1. Cash Flow

Do you have more cash flowing into your business each month than you pay out to cover costs and expenses? If so, your accountant will conclude that you’re “cash flow positive.” If the opposite is true, your cash flow statement will reveal that you’re “cash flow negative.”

Having excess cash on hand means you’re better equipped to keep up with debt, cover unforeseen expenses, and invest in growth opportunities. Your accountant can regularly generate a cash flow statement to keep tabs on this key performance indicator.

2. Profit and Loss Statement

The profit and loss statement (also known as the income statement) is one of the most important documents used by accountants to determine the profitability of your business.

The P&L statement lists revenues and gains as well as expenses and losses over a specific period of time (typically every three months for small businesses). It calculates your all important “bottom line” so you’ll know if you’re operating at a loss or making a profit.

3. Gross vs Net Profit

Gross profit is what remains when you subtract the cost of goods sold (COGS) from your total revenue. Net profit, on the other hand, drills deeper. It reveals your exact dollar per profit of sales after subtracting all operating expenses, including COGS, taxes, interest paid on debt, etc.

Gross and net profit are both profitability ratios. They are key for measuring business performance against an industry benchmark and your competitors.

4. Balance Sheet

The balance sheet offers a snapshot of your overall financial position at a particular moment in time. It lists the assets such as cash, inventory, accounts receivable and equipment and liabilities like accounts payable, income tax and employee salaries, plus shareholder capital. In a nutshell, the balance sheet shows what you own, as well as what you owe.

5. Accounts Receivable & Accounts Payable

Simply put, accounts receivable is money your business is owed by customers for goods sold or services provided. It is considered an asset on your balance sheet. Conversely, accounts payable is money you owe suppliers and any bills you have yet to pay, so it’s listed as a liability on your balance sheet.

6. Bad Debt Expenses

Bad debt happens when you can’t collect payment from your customers. Long term outstanding accounts receivable could be listed on your balance sheet as “bad debts”, and if they’re never collected, may have to be written off as a loss.

And there you have it – six key terms to help you build your accounting vocabulary, join the conversation, and empower smarter decision-making.

If you want to better understand your numbers and improve your business, then speak to the experienced team at BSN & Co. We avoid accounting jargon and help simplify the complexity of running a business.

Book a free no obligation meeting today!

Check out our free tools and guides to help you run your business

Tips for choosing a business bank account

April 11, 2017 / on Blog / 0 Comment

As any accountant will advise, it’s important for business owners to keep their personal and business banking separate.

Separating your business expenses will make your annual tax preparation much easier, and ensure you claim all your deductions. But it’s also important to protect your personal assets should your business find itself in financial trouble.

Another excellent reason to have a business bank account comes down to professionalism. As a small business, the ability to write and cash cheques in your business name — like bigger, well-established companies do — makes a much better impression on vendors and customers.

The question, then, isn’t whether to have a business account, but what to look for when searching for one. Here’s how to find the best small business banking package for you.

Identify your needs

Depending on your business, you may need very basic services, or a more robust banking package. A basic business account should offer the flexibility of a cheque and savings account, an ATM card, the ability to write and cash cheques, online banking and employee cheque accounts, if required.

Of course, some businesses will want additional services such as mobile banking, access to a company credit card, a loan or line of credit, and the ability to accept online payments.

Also, many banks provide access to a small business advisor who can help manage and grow your business.

With these services in mind, make a list of what’s important to you, now and in the future. Then start researching the options.

Compare rates and fees of all potential business banks

Take note: some banks charge a fee for every in-person business transaction. Others offer online banking packages at a low monthly rate. If you’ll need to visit your bank regularly to make cash deposits or withdrawals, location may be a cost consideration. If you travel internationally, you’ll also want to look into fees for international cheques, conversion rates and charges for withdrawing cash from foreign ATMs.

Bigger isn’t always better

If your business is new and you haven’t established a credit history, a community bank may be a better choice than a large national bank. You may find that customer service is more personalized. They may also offer lower rates and fees and you may qualify more easily for a loan or line of credit.

Final thoughts

Now that you’ve given some thought to what types of services your small business needs, follow these tips to find the right banking package for you:

Research local small community banks and large national banks online, then make a shortlist of the best options.
Arrange to meet with a representative from each bank on your list to discuss services, fees and any queries you have.
If you run an online business or have very basic banking needs, you might consider working with an online bank. Their fees are typically lower, but you’ll be sacrificing in-person customer service.

If you are looking for a small business accounting specialist then speak to us today. We offer fixed upfront pricing and have a wealth of experience in supporting small businesses in Perth to succeed. Request a FREE no obligation meeting today to discuss your individual needs. Simply call us on 9204 3733 or use the contact us form

Other blogs that may be of interest

How to apply for an ABN

Monthly checklist for your small business

Get a better tax refund

Three ways an accountant can save you money

April 4, 2017 / on Blog / 0 Comment

Many small business owners think they’re saving money by handling their affairs themselves. While it’s a real asset to learn the basics of bookkeeping, cash flow management and tax obligations, hiring an accountant to oversee these things has many benefits. Leaving your books in the hands of a pro will free up time so you can focus on serving your clients and implementing plans for growth. Here are a few ways an accounting professional can help you save money that you can reinvest back into your business.

1. Saving money

There’s no one more suited to saving you money than an accounting professional who can sort and systemise your bookkeeping. Better record keeping is the easiest way to allow you to quickly see – on a monthly, weekly or daily basis – where your money is going so you can cut costs if need be. Keeping your accounts up to date will also help you understand which of your business investments yield the greatest returns so you can be more strategic about spending. An accountant can spot trends that you can take advantage of to earn greater profits – and even find savings with vendors, staff and operating expenses. Hiring someone to manage your accounts will also reduce the costly errors that are commonplace when business owners try to manually track their expenses.

2. Avoid tax penalties

Your accountant may be your trusted advisor when it comes to keeping up to date with the latest regulations for small business taxes. They can also provide you with expert advice on how to maximize your benefits and minimize your taxes each year. Don’t underestimate the cost savings of hiring someone to complete your tax returns correctly and submit them on time. Penalties for late lodgements can quickly add up, so the longer you wait to lodge, the more likely you’ll incur penalties and/or interest charges. A business owner who is struggling with cash flow may not be able to pay penalties, which only increases the pressure. Having an accountant on board will let you rest easy knowing that everything will be up to date.

3. Business advisory services

Your accountant possesses business knowledge that can help you make more informed decisions. Rely on your accountant for advice when you draft or revise your business plan; those key insights on assessing profitability will help you move your business in the right direction – and avoid wasting time and money on strategies with a lesser chance of success. Look to your accountant to help you determine your most valuable clients, how much money you need to invest in a growth plan and which marketing strategies yield the best ROI. Having someone you can rely on to help set targets and monitor your progress is an invaluable asset that can help you not only save money, but earn greater profits.

What is the bottom line? Your accountant can do much more for you than simple bookkeeping or ensuring you’re on the right side of the ATO. Hire an accountant and you’ll be doing a lot to help increase your chances for long term growth and success.

If you would like to speak to a specialist small business accountant speak to us today!

We can assist you with all aspects of your business accounting, provide you with ongoing advice and support (in plain English, not accounting jargon), and will offer fixed price services quoted upfront.

Book a free no obligation meeting with us today and let us assist you and your business!

3 hot tax reduction ideas tradies and small businesses need to implement now!

March 16, 2017 / on Blog / 0 Comment

With the end of the tax year looming, now’s the time to implement tax reduction strategies and reduce your tax bill. Leave it much longer and you will run out of time.

1. Make payments into your super fund

If you’re a contractor, sole trader or self-employed, then you probably already know that superannuation is just as important for you as it is for regular employees.

Since there’s no compulsory Superannuation Guarantee to make sure you have regular contributions flowing into your super fund, you’ll need to keep an eye on this. After all, if you don’t put some of your income aside now, you might not have enough money to live on when you retire.

Contributing to your super fund not only secures your future, it’s a great way to minimise the amount of tax you pay. All pre-tax super contributions are only taxed at 15% instead of your normal rate.

Most sole traders, self-employed business people and contractors can contribute up to $30,000 per year and receive a tax benefit. And if you’re 50 years of age or more, you can contribute up to $35,000 per year. From 1 July 2017, individuals can contribute up to $25,000 per year regardless of age.

2. Purchasing equipment and tools

If you buy tools, equipment or other assets to use at work to earn an income, you can claim a deduction for some or all of the costs.

If the tools etc are used for both work and private purposes, you will need to apportion the amount you claim – e.g. if you have a computer that is used for private purposes for half of the time you can only deduct 50% of the cost.

The type of deduction you claim depends on the cost of the asset:

for items that cost $300 or less, you can claim an immediate deduction for their cost
for items that cost more than $300, or that form part of a set that together cost more than $300, you can claim a deduction for their decline in value.

You can also claim the cost of repairing and insuring your tools and equipment and any interest on money you borrowed to purchase those items.

If you use items for both personal and work-related purposes, you need to keep records such as a diary so that, if requested, you can show how you apportioned the amount of private use and work-related use.

3. Making a major purchase – e.g. premises

Last year we saw the introduction of the instant tax deduction for assets costing up to $20,000. It is worth noting that this will end on 30 June 2017 and revert back to the $1,000 threshold.

In addition, assets valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).

What qualifies and what can I buy?

Here are a few ideas:

IT hardware such as desktop computers, printers, scanners and photocopiers, but not in-house software where the firm intends to claim under the software development pool rules
Office or shop furniture and fittings such as new tables for a cafe
Display screens, kitchen equipment, signage and air conditioners
Work vehicles such as a $19,999 ute. Just wait for the EOFY sales ads!
Tradesmen’s tools and machinery
Plant and equipment
Sheds or storage containers for storing equipment

This tax concession is ideal for those businesses that were planning to purchase assets anyway or have a real need to update equipment. If it can improve your bottom line (net profit) then look at taking advantage of the opportunity.

However, be aware that this is not a grant or allowance, and you should not rush out to buy any asset before checking with your accountant. If your business is not making a profit, then a tax deduction is of no use to you.

Speak to us today; we are small business and tradies tax specialists and can help you pay the least amount of tax possible.

Call us today and book in for a FREE, no obligation tax review. Take action now and keep more of your hard earned money in your pocket.