At the start of a new financial year, many business people make ‘new year resolutions’ to manage their finances and reporting requirements more efficiently this year.
However, the day-to-day work of managing a retail business in the current environment can make it difficult to keep these promises. By August, many of those good resolutions will already be broken.
But it’s worthwhile to make the effort, as they can make a big difference to the bottom line. Indeed, with the government’s push to keep outsourcing responsibilities such as tax compliance record-keeping to businesses, most businesses are already doing the majority of the work needed to achieve their resolutions.
Use existing records
The financial information created for compliance purposes can be used to the business’s advantage. For example, information necessary for BAS returns can create useful and regular reports.
Keep a spreadsheet of BAS data showing total sales, purchases, and GST instalments for each quarter. This will help identify significant changes which could signal problems or opportunities. Add in payroll tax and superannuation liabilities to forecast future expenses. Where possible, identify the largest areas of expenditure and whether they are one-off amounts or regular payments, to help track and plan cash flow.
Minimise costs
Processes to save costs created by financial requirements, and to make the best use of the accounting function, cover three main areas.
These are:
- Do as much bookkeeping and simple processing as possible in-hous
- Keep processes and records simple so that accounts are easy to prepare
- Give information to accountants in ways that are easy for them to use.
For example:
- Reduce the number of business bank accounts and separate business and personal finances. Use business-only credit cards to simplify GST records.
- Consider employing a bookkeeper rather than having the accountant do all the work.
- Consider alternative methods of maintaining accounting records. For example, would employing an accounts clerk be cheaper than using external accountants for everything?
Look at a comprehensive accounting computer system, which can save time and money, particularly if all financial information is recorded within one accounting system.
Keep good records – this will always help when the time comes to prepare annual accounts and returns. For instance, clearly record details of all cheques on the cheque butt and make sure that cheque butts are filed in order.
Take advantage of expertise
Using accountants can be beneficial in other ways. Accountants work with many businesses and see how others cope successfully with problems that might be affecting you.
Some questions to ask your accountant include:
- Are there systems or processes you would recommend I use in my business?
- What other areas of the business can you provide assistance with?
- Do you hold networking events or seminars where I can meet other business owners?
Review regulatory changes
Businesses should keep abreast of changes to tax rules and legislation, to make sure they are taking full advantage of those that apply to them.
For example, changes to the small business asset write-off rules were introduced in the May Federal Budget. From 1 July 2012, small businesses can claim an immediate tax deduction for depreciable assets costing less than $6,500. This could include items such as computers, cash registers, store furnishings and fitouts such as shelving or clothing racks, or equipment such as steamers.
Also from 1 July 2012, small businesses can claim an immediate tax deduction for up to $5,000 of the cost of buying a business motor vehicle.
If the business is already contemplating replacing equipment, and can afford it, it certainly makes sense to do it now and take advantage of the tax deduction.
However, if business owners are concerned about the outlook for the next 12 months, acquiring assets now may not be a good idea, particularly if the business needs to borrow money in order to make the purchases. The additional loan repayments may put business cash flow under unnecessary strain and cause real problems.
So, if the delivery van is running well, IT systems are working OK, and display counters or cabinets can make it through another couple of years, preserving cash may be a more sensible option in the present climate.