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Can You Completely Rely On Your Bookkeeper?

One of the things that a business owner needs to ensure is hiring a professional and experienced bookkeeper.  While this can be a challenge to those who own a small business, a bookkeeper who knows how to carry out the most crucial task in a business can provide business owners much greater peace of mind. However, there are instances when a business owner loses track of the business’ day-to-day transactions and relying heavily on the information that the bookkeeper provides is the only available option. Unfortunately, business owners are taken by surprise once they see financial statements in chaos. Where exactly does the problem lie?

Common mistakes bookkeepers commit:

1.    Failure to reconcile bank accounts for long periods of time. This mistake can be costly if not properly addressed. If you are the type of a business owner who leaves everything to your bookkeeper, without taking time to evaluate or check the financial statement, duplications in entries become unavoidable.

2.    Unmonitored cashflow. Business owners do not have the time to update bank and credit card reconciliations, payment processing and invoicing of debtors. This is why a bookkeeper needs to regularly update these records. Monitoring cashflow regularly allows the business owner to receive update of their current position so contingency plans can be formulated for future business development.

3.    Making a mistake in assigning accruing annual and personal entitlements. Bookkeepers have the ability to set up the entitlement calculations and superannuation in the accounting software and their job includes ensuring that the numbers are calculated accurately. As a result, employees are paid more than the 9% super based on their ordinary times earnings. If this is not corrected immediately, it can become a costly mistake for both the bookkeeper and the business owner.

4.    Unable to understand when Fringe Benefit Tax (FBT) should be applied. Old bookkeepers had erroneously entered wrong information causing businesses to suffer due to huge ATO debt. This could have been avoided, had the bookkeepers understood FBT and the schedule that the tax must be applied.

5.    Posting GST transactions incorrectly using the accounting software. Another mistake that can cause a diabolical mess is entering the wrong information in the accounting software causing figures to mix up. Dealing with GST requires accuracy to ensure that the Business Activity Statement (BAS) that is lodged with the tax office contains the correct information.

6.    Failure to categorise expenses and income. The profit and loss spreadsheet reports are one of the essential tools that bookkeeper use to know the business’ current standing. If the bookkeeper fails to review the reports and correct entries, reports become more vulnerable to a myriad of mistakes.

7.    Overlooking tax and compliance obligations. Bookkeepers may not be completely aware of lodgment dates and compliance obligations that business owners fall behind payment schedule. These dates are critical to every business and a bookkeeper needs to be aware of these important dates.

8.    Not filing invoices and receipts. Aside from financial statements, bookkeepers must also keep a record of receipts and invoices because they allow businesses to keep track of sales and services rendered. A bookkeeper must have a simple filing system that provides business owners and bookkeepers access to the essential business information.

Never Become A Hapless Victim Of Another Costly Bookkeeping Disaster

Bookkeeping and accounting fees can cause small business owners to tighten their belt, but imagining the vast amount of money you need to spend to repair a bookkeeping mistake can make rethink about skimping on bookkeeping cost. Any business owner is left with no choice but to submit for the business operation to continue.

A business that is competitive and you cannot afford to miss out on grabbing every business opportunity that comes your way. You know that customer loyalty is measured by how you deliver their needs. You know for sure that everything is on the right track until you open your email. Just the thought of opening your email fills you with excitement and fear. You are wondering where the email came from then lo and behold, an email from the ATO.

Although you have not completely gone over the email you received from the ATO, you know that something is not right. Your suspicions have been confirmed as you read the email. To make matters worse, the letter has already been forwarded to your bank by the ATO and they have already been advices of the non-payment. Nothing can be more horrifying than discovering that your bookkeeper is no longer doing what they are supposed to do. You know what is going on and you are waiting for the bank manager to give you a call.

If a small business owner no longer has the ability to pay debts, insolvency and bankruptcy are not far from happening. The bad news is, these things can be beyond the business owner’s control. Financial loss can be due to a number of reasons. For instance, if your business partner is experiencing marriage break down, it can definitely result in business mismanagement and cash flow shortages. However, a business owner still has the option to get out of this difficult financial situation.

A business can be compared to driving a car because you know to keep an eye on the dashboard and avoid driving too fast or too hard. It is also your responsibility to meet your financial obligations to keep the ATO at bay.

The Following Are Alarming Indicators That You Need To Pay Heed To Your Financial Activities:

• Your superannuation payments and GST are always falling behind their schedule.

• Wages, payroll and contractor’s bill are no longer met.

For A Business Owner To Ensure Financial Stability, A Bookkeeper Must Do The Following:

• Ensure that invoices go out promptly and reminder notices are received in a timely manner to avoid making late payments and incurring penalties.

• Create a system that provides bookkeepers the ability to highlight late payers as soon as they are falling behind payment schedule. Bookkeepers can also follow up on late payers the next day.

• Add terms on invoice so that collection costs waived once recovery service becomes a requirement.

A business owner must also perform their obligation so matters will not be taken to court. There are various options available to business owners in settling their unpaid debts. They can call the bank manager, call ATO, arrange payment plan, prepare budget and reduce head-count before the situation becomes worse.

Reasons Your ABN Can Be Cancelled By ATO

binding contract 948442 1920For business owners, there are various obligations that need to be fulfilled and once Australia Business Number or ABN has been issued, you need make sure that you do not commit any violations. Although there are only a few reasons your ABN can be cancelled, the process of obtaining ABN can be difficult. One of the reasons your ABN can be cancelled is when your business lacks profitability. For instance, a business that is no longer gaining a profit can have its ABN cancelled. ATO monitors businesses that can potentially have their ABN cancelled.

How To Avoid Cancellation Of ABN

When it comes to growing your business “one size fits all” does not apply. In fact, there is no special formula in ensuring profitability. You just need a dedicated team that can help you run your business in an efficient manner. You need to spend less and have an action plan that can help you promote effective management.

Your bookkeeper will also play a huge role in helping you avoid ABN cancellation. If you want to improve your company’s outlook, a positive cash flow is necessary. Although this is not the only technique to make your business more profitable, a steady cash flow can definitely make a difference. A bookkeeper can also help you monitor your business so you will know if something needs to be fixed. As a result, you will be able to make plenty of room for growth and you can also make necessary improvements.

A competent bookkeeper should help you separate assets from your liability. A bookkeeper is also responsible for organizing your financial statements and reports so you can easily determine if your business is generating a profit or a loss. When your business has proper bookkeeping, you can identify if your business is really doing well.

A cancelled ABN can be stressful, but this is definitely avoidable if you know how to take care of the financial aspect of your business. To ensure your business continues to be in operation, make sure you evaluate various financial factors.

• Re-evaluate your spending habits.

Assess how much you are usually spending and find out if your purchases are based on impulse. You may need to implement new measures if there are unnecessary spending going on. You can speak to your bookkeeper for some recommendations if you wish to re-evaluate your spending habits.

• Consider your business goals.

Ask yourself if you have already achieved some of the goals you set when you opened your business. If all of these goals have already been achieved, you need to make new ones. If there were goals that you have not accomplished, make sure you know the factors that hindered you from achieving them. You should also make necessary changes such as formulating some techniques so you can effectively achieve your goals.

• Establish new connections.

If your business has already been established, it is the best time to make new connections. You can build new connections if you attend networking events. A business with a strong system is more likely to get ample support during tough times.

• Reconnect with your associates.

As you build new connections, you should also reconnect with associates as they can help you obtain new approach that can make you improve your business and prevent ABN cancellation.

All You Need To Know About Keeping Your PAYG Payment Summary

file0001770792325As a business owner, you will be asked to run through your PAYG (Pay As You Go) payment summary and when you have nothing to present, it can spell trouble on your part. It is easy to get sidetracked by other business obligations and forget about the payment summary. You may consider these summaries less important especially when you lodge timely payments. However, there can be instances when you need to file a payment dispute and if you don't have any concrete proof to show, necesary corrections and updates cannot be made. 

What every business owner should understand about PAYG?

 There are two types of PAYG that every business owner must be familiar with: the first one is referred to as Pay As You Go Installment or PAYGI. This refers to the tax installment payments business owners make to the ATO. The second one is called Pay As You Go Withholding or PAYGW. This refers to the tax that employers or business owners collect from payees, workers or employees. The summary provides the payment made and the amount withheld throughout the financial year. 

The importance of payment summary to your business:

 Not everyone has a sharp memory to remember the payment made by the employees. Business owners are often busy on other tasks that tracking payments become the least of their priorities. With PAYG payment summary, it will be much easier to take note of the payments regardless of the date the payments were made. If there are discrepancies on the information, erroneous entries can be corrected right away. 

The benefits of keeping a copy of PAYG payment summary

1. The process of filing taxes becomes much easier.

When it comes to filing your taxes, accuracy is going to play a huge role to ensure a stress-free process. If you already have a payment summary, there is no need to do some calculations as figures are available. You are less likely to overlook essential details such as withholding taxes.

2. A detailed accounting information is obtained.

You can get very specific information about each payee right off the bat when you have a copy of PAYG payment summary. Their tax numbers, tax liablities, salary and earnings are available. In case payees need to gain access to the relevant information, you can provide what they need easily. 

3. It will be simpler and faster to generate reports.

The fact that PAYG information has already been sorted can save you a great amount of time generating reports. Since the information for each payee is available, discrepancies can be spotted easily. 

4. You can answer queries accurately.

If payees are going to ask about under or over-payments, you know where to get the answers from. The summary can also remove doubts especially when it comes to deductions. If you are being audited, the summary can help you stay on the right track. The request for accounting records can also be reduced when the summary is available. As a result, financial transactions become more efficient and errors are effectively reduced. Not only do you spend less time gathering data, but you also complete the task in a timely manner.

Signs You Need To Consider Hiring A New Bookkeeper

IMG 6960 2A bookkeeper will always be considered necessary in every business especially if you are managing a fledgling company. Aside from making your financial activities more sensible, they are also considered your partner in running your business. There are different aspects of your business that you need to keep an eye on and in your absence, your bookkeeper should be able to keep track of your budget or cashflow so your business' financial aspect remains intact.  

However, there are problems associated with hiring a bookkeeper especially when their presence does more harm than good. Have you ever found yourself doing the task that a bookkeeper is supposed to carry out? If you think that your business operation is interrupted because your bookkeeper is unable to achieve your business' primary goals, it can already be a sign that you and your bookkeeper need to part ways. 

Signs You Need A New Bookkeeper  

1.Your bookkeeper fails to deliver financial reports and other forms to you on time. 

One of the reasons you hired a bookkeeper is for you stay on top of your business' financial aspect. Your bookkeeper does not make the entire process easier for you if they don't deliver timely reports. Find out if you contributed to the delayed submission. Have you sent the reports they need on time? If all things that the bookkeeper needs are made available to them before the deadline, you may need to think twice of keeping the same bookkeeper. While these reports require ample time to be completed, being consistently late means you need to consider another person for the job. 

2. Your bookkeeper is always busy or out with other clients. 

A bookkeeper that has strong commitment to your business should be available whenever you need to engage their service. There are days when you can be very busy and you need financial reports done ASAP. However, when your bookkeeper is nowhere in sight, you may want to choose someone that can devote his or her time for your bookkeeping task. It's time to bid your current bookkeeper goodbye if your bookkeeping tasks become the least of their priorities. 

3. Your bookkeeper does not take time to explain financial reports. 

As a business owner, you have the right to understand your financial reports and your bookkeeper should schedule a meeting to present the reports. If you are being denied of your right to obtain information of your business's financial aspect, how can you be confident that the figures on the report are correct? You don't have any assurance that ATO also gets the right information and this can spell trouble on your part.  

4. You receive repeated notices from ATO.

If you are constantly receiving notices from ATO, this only means that your business has not been taken care of correctly. This is considered a serious warning sign because if notices become very consistent, you may have to deal with bigger problems with ATO. You might also be flagged as a repeat offender and this could mean penalty on your part. 

5. Your bookkeeper fails to return your phone calls. 

Do you always find yourself in a waiting game when trying to check in on your bookkeeper? If your bookkeeper never returns your phone calls even when you left a message, this can be a sign that he is no longer interested in working for you. While there can be instances when employees encounter circumstances beyond their control, it is a different story if this happens regularly. 

Reasons Good Bookkeeping Is Necessary

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A successful business follows a bookkeeping practice to ensure that payments are made in a timely manner and all financial activities are recorded properly. There's bad bookkeeping and there's good bookkeeping. One thing that separates bad bookkeeping from good bookkeeping is the system. Even if you have a small business, it is not a valid reason to not pay attention to your bookkeeping task. It may appear to be the most trivial task, but it can be the most critical to your business especially when you start auditing your finances. 

It takes a large chunk of your success and a lot of things needs to be undone if something goes wrong. In every business, you are expected to be in complete control of your financial activities. You don't just make a mental note of your expenses, budget and cashflow because you are required to keep a record. You may not fully appreciate the importance of good bookkeeping but you will once your business starts to grow. 

Reasons You Should Maintain Good Bookkeeping

It improves your tax return.

One of the dreaded obligations of most business owners is keeping their tax payments up to date. This is why many of them rely heavily on the expertise of a bookkeeper to ensure that everything is in proper perspective. Unfortunately, business owners often fail to realize that just integrating bookkeeping into their business is not enough to keep it in tip-top shape. You have to maintain organized records that can be easily analyzed when needed. 

It provides audit protection.

Having a separate checkbook should be regularly observed because it can provide you audit protection. More likely than not, ATO does not allow a great number of expenses, which usually take place when your personal and business accounts are one and the same. 

It substantiates the corporate veil.

A separate checkbook gives you the ability to recognize that the company is its own unique entity. You also avoid mixing your personal and business funds with a separate checkbook. 

It encourages tax savings.

Nothing can be more frustrating than falling behind tax payments. This can be due to a number of reasons and one of which the lack of ability to provide an accurate record of your finances. This can be very stressful on your part especially if you heavily rely on your bookkeeper to do the job without checking the details of your books. 

It makes record-keeping less stressful. 

When your records are disorganized, it seems like you are always try to beat the deadline. You end up juggling various tasks but none of them are accomplished. There's one important aspect of your business that you might have taken for granted. If bookkeeping is the least of your priorities, you need to change the way you manage your business. Good bookkeeping is as equally important as other aspects of your business. 

It helps you make the right decision.

Accurate records are going to be important when making a crucial decision that is related to your business. You can cloud your judgment and make poor decisions if you are being presented with records that you find difficult to understand. You can't be a good business owner if you can't get your bookkeeping task straight. 

How To Classify Your Allowances Correctly?

For employers, getting bookkeepers to ensure that financial activities including handling allowances are kept in check is a difficult responsibility to fulfill. In fact, it is one of the most complex areas that both employers and bookkeepers are trying to decipher. When you misclassify an amount, the impact on your business and your employees are going to be serious. There will be some corrections that need to be done so you can put your finances the way they should be. Why are there misclassifications on allowances and how can they be avoided? Misclassifications take place when the amount that employees expended are not identified correctly.

When are allowances given to employees?

Allowances are separately identified payments and they are given to employees for:

• Expenses that are work related such as traveling between work sites.
• Working conditions
• Expenses that are not considered as an employee’s tax deduction.
• Special duties or qualifications.

Allowances should not be mistaken or confused for reimbursements. Allowances are intended for covering anticipated costs and these are given whether or not the employee incurs these expenses. These are also considered an assessable income and they are already included in the employee’s tax return. The employee has the right to claim a deduction for the expense.


On the other hand, reimbursements are given to employees for the expenses they have already incurred. The employer may also shoulder the fringe benefits tax (FBT). The reimbursement is not considered an assessable income if it is covered by FBT. The employee cannot claim a deduction for this type of expenses.

Super obligations for paying allowances:

• Reimbursements and expense allowances are not considered wages or salary. They are not ordinary time earnings as well but can be included in ordinary time earnings.
• Employees will only be granted expense allowances if they have fully expended the money on items that are tax deductible.
• When employees are required to work during non-working hours, they will be excluded from ordinary time earnings.

Travel Allowance

• The expenses incurred when employees travel in the course of their duties.
• The expenses for food, drink accommodation and incidental while employees travel.

Reasonable rates for travel allowance

The travel allowances given to employees must also be compliant to the reasonable travel allowance rate for the following expenses:

• Meals
• Deductible expenses which are related to travel
• Accommodation

For domestic travel, the rates only apply in commercial establishments such as serviced apartments, motels and hotels. If another type of accommodation is used other than these commercial establishments, the rates will not apply.

In the event the allowance has not been fully expended, the amount must be recorded on the employee’s summary report and this should be part of the gross earnings. The employee must also show the allowance received as assessable income in their tax return. The claim will only be the amount of the deductible expense that the employee incurred. Tax Office tables can also be used for ensuring that the summary reporting for payment is error-free. Gaining a deeper understanding of how allowances should be handled can save you from committing some errors. You just need to be keen on details and be able to tell the difference between reimbursements and allowances.

Five Bookkeeping Tips Every Business Owner Must Keep In Mind

Keeping financial activities in check should be the best practice every business owner should follow. You just can’t run your business without following a system. Otherwise, it will be in complete chaos. Imagine running a business without any specific system in mind. You’ll increase the risk of losing important financial details and get into a serious trouble with the Australian Taxation Office (ATO), which is something any business owner wouldn’t want to happen.

Your business should have a long term goal and simply keeping it running and wait for things to happen at the end of the day is not the way it should work.

How do you maintain a steady cash flow and help your business stay on track?

1. Keep a record of deposits.

The benefits: It helps you prevent paying your taxes using money that is not obtained from your business income.

The steps: The first thing you need to do when recording your deposits is to choose a system that will straighten out your financial activities. It can either be bookkeeping software or a ledger. Regardless of the methods you use, it should provide you detailed information of your financial standing including the deposits you made all through the year.

2. Make a list of your expenses.

The benefits: You are more likely to prevent missing some tax write-offs and pay your taxes on time.

The steps: Auditing your expenses is a good habit that you should develop because it puts your business in proper perspectives. When going out on a business trip, see to it that you keep a notebook to record your business expenses on. With this simple habit, you can be sure that you remain in the loop with your business’ financial activities.

3. Plan major expenses carefully.

The benefits: You are well-prepared for bigger business opportunities that come your way even if it means spending vast amounts of money.

The steps: Make it a habit to plan in advance so you will know how much you should spend for some business improvements that you want to consider. You should also keep in mind that every business will experience peak and off-peak season. However, if you have planned ahead of time, major expenses will not worry you.

4. Store receipts and invoices.

The benefits: Cash flow will remain intact and you will reduce the risk of falling behind your bill payment schedule. 

The steps: Assign a person in your organization that will be responsible for tracking your billing. Make sure you keep track of your invoices and make a phone call to ensure that your payments have been settled in a timely manner. Invoices should not be confused for payment. Just because you have sent out an invoice does not necessarily mean you will not incur penalties or charges for late payment. 

5. Prepare money for paying your taxes.

The benefits: The ATO will not impose interest if you pay your taxes on time.

The steps: Set aside a portion of your business income for paying taxes. Don’t just make a mental note of tax deadlines as you might run the risk of forgetting them. Keep a note where you can easily retrieve it and make payments on or before the due date. Never underestimate the consequences of late payments because it can take its toll on your business sooner than you know.

­ Questions? Give Andrew a call 0450 605 592

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