In a report released today, the Australian Bureau of Statistics (ABS) has revealed that the total taxation revenue collected in Australia has increased between 2009/10 and 2010/11.
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Apr
18
Apr
17
May 15th is the final date for lodging tax returns with the Australian Taxation Office. That may be 4 weeks away, but you need to allow time to get your work done (along with everyone else who’s left it too late).
If you haven’t already been to see your accountant yet, you’d better get in quick as places fill fast at this time of the year. Leave it too long and they won’t be able to get your returns completed and lodged by the due date, which means you’ll be in penalty territory!
Apr
17
This is a unusual headline. It’s not about a high-pressure salesman trying to sell you some useless nicnac. It’s to do with you as a client of an accounting firm, which then sells your name, your contact details and your most private financial information to another accountant.
Apr
16
If you are going to engage anybody that will involve advice that could have dire consequences should it go wrong, then you need to make sure they are appropraietly qualified and have suitable insurance coverage.
Apr
12
I was at a seminar recently, the speaker being an insolvency expert from KPMG. He relayed a story that really highlighted what some people will do to save money.
He was appointed as a turnaround consultant by the particular companies’ lenders, to which end he reviewed the financial situation of the company, among other aspects. It seems the company was growing fast, and had run into severe cash flow problems. Their entire finance department consisted of a book keeper running a MYOB file! Of his key recommendations, one was to enlist the services of a dedicated Cheif Financial Officer (CFO) or person of equivalent capabilities and responsibilities. Hs say the need to have someone in-house to help take control of the finances and strategically guide the business, as well as provide important financial input towards the business operations. A year later KPMG was assigned the task of liquidating the same company, as it seemed the issues got the better of them. The insolvency expert (mentioned above) was assigned to the job.
As part of his investigations, he discovered that the company had followed most of recommendations furnished to them, including the appointment of a CFO. However, deeper investigation revealed a more troubling fact: the new CFO was in fact the same (previous) bookkeeper!
- Did the company owner knowingly engage the bookkeper as the CFO, to avoid having to pay a high salary?
- If so, why didn’t the bookkeeper refuse to accept the role, understanding that it was beyond their capabilities?
- Did the bookkeeper hold themselves out to be an expert / the expert in the is area?
- If so, why didn’t the company owner take steps to reasonably satisfy themselves that the person was genuinely up to the task?
In this case, both the company owner and the Bookkeeper (I believe) are equally responsible for the demise of the business. It also highlights the fact that you need to seriously check out someone’s abilties before engaging them, particularly if they are to be employees and there’s no insurance fall-back. It’s like hitting above your weight: sometimes it will come off, most times it won’t. Accountants in public practice have their PI insurance as a fall-back, and so aren’t going to accept an engagement in which they don’t have any level of expertise.
Apr
10
Business bookkeeping is not a very sexy subject at the best of times, especially when yo u are up to your ears in running, managing and problem-solving your business. However, as a critical ingredient in managing a business, a shabby set of out-dated accounts will really hold you back when you need to borrow and your bank manager is asking for current accounts, cash flow actuals and projections.
The banks have had a hell of a fright with the ‘Credit Crunch’ and are so much more demanding that you have current information for them to assess, before lending you money or extending an overdraft. Typically they want to see:
- Profit Budgets
- Cash flow forecastss
- Recent financials
- Copies of business contracts
- Any information supporting future income projections
Gone are the days when the last couple of tax returns would suffice to get a business loan.
In the past, your financials may have typically been prepared for tax return or GST purposes. You may have felt you had a good enough handle on how the business was going throughout the year, without feeling the need for regularly updated financial reports on demand to determine if you had made a profit or loss, or were looking forward to a tax liability.
These days, if you need funding for business growth or survival, you will need good quality current accounts, at least up to the end of the most recent quarter. I’ve seen many times where the books were done regularly but the quality of the data entry had seriously compromised the quality of the information being reported. Clearly, if the transactions entered are not correct, the reports from your accounting software will be misleading at best. Giving accounts like this to a bank (which include incorrect treatment of certain transactions), the bankers will question the ability of the business owner to manage their own money, let alone that of the bank.
How do you get your accounts in shape for both management reporting and borrowing purposes? Here are some simple quick-fixes you can do:
Bookkeeping
- Firstly your basic bookkeeping needs to be good quality and accurate.
- Your Chart of Accounts needs to be set up right from the start. These are accounts that you set up in your accounting software to categorise income, expense, etc.
- Have ‘Direct Costs’ been allocated to the correct accounts or have they been allocated to a general expense account or overheads? This can have a big impact on the gross profit shown in the Profit and Loss Statement. If the bank check your figures against industry benchmarks your results could be way out of line.
- Some reconciliation may need to be done to ensure it all makes sense e.g. is the total of your Accounts Receivables report the same as the figure shown in the Balance Sheet?
- Does the bank account reconcile or has it been fudged? This means have entries been entered in the past to make it balance?
- Has the GST been properly reconciled and have you paid or been refunded the correct amounts?
We strongly recommend that you have at least some involvement in ‘doing your books’, and Xero Accounting is perfect for this, as much of the traditional bookkeeping is automated. If you don’t think you can keep up with ‘doing the accounts’, we suggest engaging the services of qualified and skilled bookkeeper, however, this is likely to add additional cost to your business (not only for the bookkeeper, but also additional workload for the accoutnant). Alternatively, there’s a service called Banklink that can also do a lot of the work for you. Contact us for more information on this.
Your Accountant
- The accounts may need to be reviewed by someone other than the bookkeeper, if you aren’t 100% sure of the bookkeeper’s skills and qualifications.
- If you don’t have an in-house or outsourced Financial Controller you will need to approach your accountant.
- They will need information from you regarding the last couple of years accounts, if they aren’t already available.
- They will need information about the current year results from your accounting software and your bookkeeper.
- They will need to sit down with you and come up with the projections for how you think the business will perform in the next year or two.
- They will need to get information from you to produce a cash flow forecast, so the bank can see your cash position in the future.
As you can see there is quite a lot of work to prepare for a lending application, as well as maintaining your funding. Getting it right though can pay big dividends, if you want to assure the bank of your financial control management. Good information will set you apart from the others, who roll in with hastily prepared numbers with dubious accuracy.
For more information see Our Services.
Apr
1
“Sorry”, “Oprah Winfrey”
There is a scam doing the rounds in Western Australia at the moment. The scam mostly targets Indigenous Communities where the victims are told they will receive a ‘sorry payment from Kevin Rudd’ or ‘money from Oprah Winfrey’ in exchange for providing payment of up to $800 and their personal details. We encourage anyone who has been approached by anyone promoting this scam, or have been a victim of the scam to contact authorities such as ASIC and/or police.
Tax Refund Scams
This is playing on the fact that often times the ATO will contact taxpayers directly, and are not required to go through proper identity checks to establish that they are genuinely from the ATO.
There are elements in the ATO who have sloppy processes and outdated information, even to the extent whereTax agents have been contacted about wrong clients from ATO.
Our belief is that the ATO ought to go through the proper channels, and where a taxpayer has an agent, then the agent ought to be the first point of contact.
Generally, if ATO contact you, do nothing, but refer them to your accountant. They (the ATO) will try to contact you direct instead of going through your agent, thereby circumventing due process in order to expedite the result they want, may not necessarily be the outcome you want/need/can handle etc.
Could potentially be scam/fraudster as well. We advocate NOT to divulge any persoanl or financial information, particularly your tax file number.
Always refer the ATO back to your tax agent, who can then establish if it is a bonafide call that needs to be dealt with.
Mar
31
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This is a topic that seems to be coming up more and more frequently for me, the more I talk to different people.
The age old belief, which started in the industrial revolution, was that machines (i.e. capital) can be employed far more efficiently – and reliably – than can humans. It was in an age when demand was outstripping supply, and there weren’t enough people around to do the required work at reasonable price. A conflict that went on for decades that I guess culminated in visions of an army of robots build and painting cars on an assembly line, somewhere perhaps around early to mid-1980.
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Then something happened.
Maybe the prices of goods and services went beyond labour costs; maybe it was the shift in the economy from production to services. Not really sure.
But I think it’s swinging back to the issue of Labour vs. Capital, and I think it’s really been going on for a couple of years now. This is also where the concept of geoarbitrage is coming to the fore.
I first encountered the idea geoarbitrage in Tim Ferriss’ book The 4 Hour Work Week, where he describes it as exploiting global pricing and currency differences for profit and lifestyle purposes (note – I’ll add that I believe you can also use it to exploit time-zone differences as well). This is something that is well used in high level financial markets, but the wider implications are only just starting to filter out to wider commercial applications.
The most recent example was of Westpac Bank outsourcing/relocating its call centers to India. Not a good outcome for Australian workers. Sure it’s bank, and we all love to hate banks, but ultimately, like any business, they must do that is necessary to maintain service quality and preserve profits. Institutions have tried it with the automated phone services, and there has been a massive consumer backlash. So it must be people. But if the available people are too expensive for the value of the job, what do you do? You automate, or you find a cheaper source of that labour.
I’m also starting to hear of many other companies outsourcing or relocating various functions overseas. They need to keep plans highly confidential, fearing a consumer backlash.
As a business owner, you have to consider this path yourself. If your business is highly dependent of people, then you have an inherently high-risk business. As the CEO of a major recruitment company said along time ago, 95% of the value of his company goes down the elevator each night! Moreover, the scalability of your business (and even its salability) is highly dependent on finding and retaining suitably qualified and experienced people. But ultimately, with each new person you add in, there’s only a marginal increase in revenue and profit associated with that extra person.
So, what do you do? If you’re in this situation, there are a number of things options you can consider, but ultimately, you need to consider the following:
- Is, or can, the price of the goods and/or services be increased to create a better return?
- If the price that can be commanded for your offering is limited, then -
-
- How much of the work can be automated?
- How much can the task/job be “de-skilled” (and be performed by lesser skilled and hence cheaper people)?
- If negative answers to 1 & 2, then if and how can the work be sent off-shore to take advantage of geoarbitrage?
If its no or negative to all of these, then you might want to reconsider the business you’re in.
Mar
30
Sounds odd, but in my experience the fastest way to create problems in any business, especially financial problems, is not asking for help. Worse is to think that you know (or think you should know).
I’m working with a client now with legacy accounting system problems that just won’t seem to go away. Slow paying customers leading to cash flow problems, revenue slippage, transaction reporting problems, all stem from a single point and a single person who failed to ask the right questions of the right people. Instead, “solutions” were cobbled together to address a need at the time, without consideration of the wider implications and the bigger picture.
The way the world is now you cannot possibly know everything, even in a particular field. So we all need outside input from time to time. Moreover, the world is complicated and things are invariably nowhere as simple as they look.
If you need help setting up your accounting system – ask your accountant – please. A bookkeeper will set you up the way that suits them: more often than not the structure will not be compatible with financial reporting purposes. If you need advice with billing – ask.
All you need to do is ask. It’s better to ask and be proved your on the right track, than not to ask and be miles off course.
Mar
29
Working with a client lately reminded me of an article in the West Australian newspaper (Feb 11, p70) about the number of companies going to the wall amid a Tax Office crackdown on overdue debts.
Apparently, the number of companies entering external administration last year surged 9.2% to 10,481. That’s a lot of companies. According to ASIC, the insolvencies are driven by increased debt collection activity, including that by the ATO, which of itself become quite aggressive in recent years.
As Australia’s revenue collection authority, it’s determined to extract every available dollar from taxpayers and i f necessary, people who control them.
My current example is teetering on becoming a basket case, lumbering from one tax return to the next, pinning its hopes on receiving a sizable R&D refund each year to clear the decks.
This is a salient reminder that tax – as much as everyone hates it – must be allowed for when it’s incurred, especially GST. The best and most prudent option is to ensure monies are put aside periodically to cover the resultant liability. If you’re finding that you can’t do this each week/month/etc, there is some inherent flaw in your business model, or how you are running your business that needs fixing – now!
Remember, GST – although it is given to – does not belong to you. It has to be passed on. It’s not your revenue to keep! So, based on that little fact, if all your expenses and profit are not covered by 10/11ths of the sale price, SEEK HELP NOW.
In my experience, a sure sign a business is headed down the bankruptcy path is that it can’t pay its GST at the end of the quarter. This tells me the business is making poor decisions about spending.