Search Results

On the 22nd of March, the Australian government declared plans to implement a second economic rescue package worth $66bn – with the aim of minimising the potential economic fallout from the coronavirus. This comes after an initial $17.6bn package and over $100bn spent on measures to avoid credit freezes from banks. While there will be a delay before these measures take full effect, ultimately, they will help in achieving a flow of money to households and through small to medium sized businesses. These are the measures that are being implemented: Enhancing the instant asset write-off The threshold of the instant asset write-off is being increased from $30,000 to $150,000. Its range is also being expanded to include businesses with an overall annual turnover of below $500 million, up from the previous $50 million limit. It is a necessary policy. However, its effect will be limited as businesses may not have the money to invest in assets – nor the incentive to do so with the current unstable position of the economy. The policy will apply from 12th of March until 30th of June 2020 for all new or second-hand assets used or installed within this period. Boosting cash flow for employers As part of the most recent package, the government will provide up to $100,000 to entitled small and medium sized businesses. This will extend to not-for-profits organisations who employ people at a minimum salary of $20,000. This is essential in protecting the economy as it will help businesses to continue operating whilst retaining their staff and paying the required bills. Up from 50% – Employers will now receive payment equal to 100% of the withheld tax from their employees’ salary and wages. There will be a minimum payment of $10,000 and a maximum of $50,000. Furthermore, an additional payment will be given to employers for the July-October 2020 period. This will be equal to the total boost of cash flow payments they have received until that point. Altogether, eligible businesses will receive a minimum of $20,000 and up to $100,000 under this policy. Eligibility To be eligible, both businesses and not-for-profits organisations must be earning below the $50 million aggregate annual turnover threshold. Eligibility will be based on the previous year’s earnings. These payments will be available only to entities established before the 12th of March 2020. For not-for-profits organisations – date of registration is not a factor when considering eligibility. This is to reflect the amount of new charities that may register in response to the coronavirus. For the additional payment, scheduled for the period July to October 2020, employers must continue to be active. Both the initial and additional payments will be paid in instalments through automatic credits in the activity statement system. These payments will be vital in keeping many businesses afloat during the recession that is to come. Additionally, it means that the recovery will come from a stronger foothold. Temporary Early Release of superannuation Individuals who have had their income affected by the coronavirus will be entitled to access up to $10,000 of their superannuation from 2019/20, and an additional $10,000 from their 2020/21 fund. Tax will not be applied to the money released and it will not influence their Veterans’ Affairs or Centrelink payments. In terms of timing – people will be given access to their superannuation funds from mid-April 2020. After this, they will be able to access the funds for a second time after the 1st of July 2020. Eligibility To be eligible for early release, one or more of the following conditions must be met: You are in unemployment You’re entitled to receive job seeker payment, youth allowance for jobseekers, parenting payment (includes single and partnered payments), special benefit or farm household allowance. On or after the 1st of January, either: you were made redundant, had your working hours reduced by 20% or more, you are a sole trader who had their company suspended or experienced a decrease in turnover of 20% or more. From mid-April, eligible people will be able to apply through mygov and they will need to confirm they meet the above criteria. While this will free up funds for those with access to the scheme, there are potential consequences to consider. For one, the reduction of accumulated superannuation by up to $20,000 of those who will use the drawdown. This is especially true for those who are eligible because they are likely to already have low to moderate balances in their superannuation fund. Temporary reduction of superannuation minimum drawdown rates Lastly, the government is to temporarily reduce the superannuation drawdown requirements for account-based pensions and similar services. It will be a 50% reduction for 2019/20 and 2020/21. This measure seeks to help retirees by providing them with greater flexibility over the management of their superannuation assets. Further to the initial reduction in deeming rates, the government will reduce the rates by another 0.25%. This is to reflect the most recent rate reductions by the RBA. From the 1st of May 2020, the upper deeming rate will be at 0.25% with the upper rate at 2.25%. This policy is estimated to benefit 900,000 recipients of income support, including pensioners. Will these measures be enough? Overall, these are welcome changes and the economic measures to be introduced will be essential in supporting growth and resurgence during this period. On the other hand, the policies could be slow to affect the economy and are arguably not big enough. The government is aware of this and has reassured the public that there will be more support to come. Australian PM Scott Morrison has commented that the first two packages were aimed at those who are going to feel the initial blows. He went on to state “There will be more packages and more support” which will help to put people at ease.

Many entrepreneurs tend to develop a DIY mentality when it comes to starting and maintaining a business. They avoid paying for things that aren’t essential or that they can do by themselves. Initially, with low workload, handling financial records may be manageable and at the same time – teaches you vital skills as an entrepreneur. The problems arise when this workload increases and the financial situation becomes more complex. At a certain point, it is simply more cost effective to employ a professional or to outsource the bookkeeping to a specialised firm. Here are some of the main reasons you should consider hiring a bookkeeper for your business: Time Management Time is the single, most valuable resource on the planet. If, as a business owner, you take care of your own books – hours of time are likely being invested every week. This is time that could be spent focusing on other areas of the business such as growth, creation and marketing. Additionally, after crunching numbers for hours, your brain is probably not in its most creative state. An hour of time may be just what you need to come up with the idea for a game changing growth strategy. As a business owner, you want to be focused on decision making and coming up with the ideas behind the operation. Outsourcing the bookkeeping elsewhere will save you both time and stress, leading to a more productive state of mind. Expertise A lot of new business owners don’t have backgrounds in finance or even understand bookkeeping basics such as accounts receivable, accounts payable and the numerous types of taxes. We wrote another article about 5 common bookkeeping mistakes that we often see new business owners making. More importantly – many do not have the level of interest in the field in order to effectively learn these concepts. This is why it is important to hire people who have studied the subject and have the required expertise. People who have studied bookkeeping are also more likely to possess an interest in the subject. This is beneficial as it means they will keep on top of new software, trends and tricks of the trade. Generally, interest results in a higher quality of work. Expense For the most part, not hiring a bookkeeper is a way in which new businesses attempt to save money. Sure, it can be a viable strategy to begin with. When there is yet to be significant financial activity, the time and expertise needed to organise the books, is minimal. This means it may be a cost-efficient decision for a certain amount of time. With growth, a business will take on more obligations. With this, comes increased financial activity. This means more time invested to bookkeeping and… you get the picture. Eventually, organising the financial records of a business may be costing you more money than you are saving. As an entrepreneur starting out, you must consider how much your time is worth to your business. How much time does bookkeeping take away from your core business needs? How much time is wasted due to inexperience? With more financial records to deal with – there is a greater chance of making costly mistakes that come with lack of experience or expertise. Mistakes such as missing bills, tax calculation errors or late payments will become more frequent and expensive. When considering all these factors, it is easy to understand why once your business reaches a certain size – hiring a professional bookkeeper is a more affordable option than doing it yourself. Employee or independent contractor bookkeepers? So, your business is growing – and you’ve decided you want to use a professional to help with the bookkeeping. The dilemma you have now is whether to hire a full-time employee or to outsource the work to a bookkeeping company. Generally, for most new entrepreneurs, hiring full time employees to handle the bookkeeping is too limiting of a process. Many small businesses simply cannot afford to make the wrong choice in a hire. Furthermore, they may not currently have the resources to pay employee benefits or a HR team to manage the hiring process. Another issue is that with seasonal up and downs, an employee will have periods of time where they have little to do. They will still have to be paid for their time whereas with independent contractors – you are paying for the time taken to complete specific work. Especially with the trajectory of the global economy, amid the Corona Virus pandemic – hiring an independent contractor rather than an employee is recommended. Conclusion Ultimately, your time as entrepreneur is best spent doing what you do best. Why did you initially start up your business? What qualities do you have that make you a good entrepreneur? The answers to these questions are likely not to do with your bookkeeping skills. These qualities are what you should focus on as a business owner. The same principle applies for a bookkeeper. They focus on what they do best – which is handling the financial records and responsibilities of a business. They enjoy what they do, and you should enjoy what you do too. Lead your company to future success and hire a bookkeeper to record that success. #bookkeeping #bookkeepingblog #doineedabookkeeper

For many business owners, bookkeeping is just another mundane task they are required to carry out. The reality is – it should in fact, be a cornerstone of any business. Instead, its often overlooked whilst business owners lose sleep over their revenue, staffing and marketing. Whilst it is also important to focus on these things, bookkeeping should be just as high on their priority list. Here are 5 of the most common bookkeeping mistakes that we see businesses make: Not reviewing balance sheets Most business owners are familiar with the concept of a profit and loss statement (or income statement). It’s a commonly used financial document that lays out the revenue and expenses of a business over a certain period of time. However, if a business doesn’t review its balance sheet as frequently as they review their profit and loss – this could lead to financial consequences. For example, a profit and loss statement may show a business is making a high amount of revenue in a given period of time. A closer look at the balance sheet could show that the liabilities for that period of time far exceed the assets of the business. Perhaps, with time, the revenue will be able to cover the difference. The issue here is – the confidence a positive income statement can give without the perspective of a balance sheet. This could lead to a business taking on more liabilities than they can handle. It works both ways too. Businesses are sometimes afraid to invest due to a low-income period. An analysis of the balance sheet could reveal the business does in fact have a low enough liability-to-asset ratio to take on investments they thought not possible. Combining personal and business accounts Businesses start for a variety of different reasons. Many entrepreneurs are not considering the bookkeeping side of things at the beginning. This can lead to the mixing of their personal and business finances which would be problematic down the line. If a business isn’t completely independent from the owner’s personal bank account, they will make important decisions based on inaccurate information. This problem is easily fixed by opening a separate business account and potentially hiring a bookkeeper to handle reconciliation going forward. Hiring an unqualified bookkeeper Hiring professional help is a good decision but it should be ensured that someone is brought in with the required expertise. Poor bookkeeping could make the situation worse than it was to begin with. Some business owners will keep stumbling along, handling the bookkeeping themselves. Others, who realise they need a professional, make the mistake of employing an under qualified or inexperienced bookkeeper. This is where some costly bookkeeping mistakes can be made. It is essential for a business to invest in somebody with the right qualifications and experience to handle the bookkeeping for that specific business – even if it means paying more money than for less qualified options. Hiring a bookkeeper who doesn’t understand important accounting principles will end up being a costly decision with little return. Not only will their bookkeeping services be of lower quality, but the money invested in hiring them – is essentially wasted. Procrastination The accounting aspect of a business is a common source of stress for business owners. When the time comes to complete tax returns and business activity statements (BAS), many businesses request tax extensions in the hope of eventually organising their records. Additionally, investors may start asking questions about certain aspects of a financial report. Simply put, the time and energy spent worrying about these issues and trying to come up with last minute solutions – isn’t worth it. The thought of letting a professional bookkeeper see the records may be daunting but is often necessary to avoid further problems and delays as the business grows. The fact is – the more someone procrastinates on or avoids these issues altogether, the worse they will become. If a business is reaching a point where they need to hire a bookkeeper, it is usually a good thing. It means they are growing and hiring someone shouldn’t be held off for the sake of saving money. Bank Reconciliation One of the fundamental bookkeeping duties is reconciling a business’s books with their bank statement every month. It is relatively simple. A business must compare its books with their bank statements and ensure there are no inconsistencies. Many businesses however, overlook the potential opportunity that reconciliation presents. It gives them a chance to locate bookkeeping errors that need further investigation. It is common for business owners to leave things outstanding because they weren’t needed for reconciliation in a specific month. The problem is – unless resolved, these issues will continue to pile up. Conclusion Talking about money and more specifically – the mistakes people are making with money, can be a rough process for some. However, business ownership isn’t about instant gratification. Addressing the mistakes they make with bookkeeping and eventually hiring professional help – is something that will save businesses both time and money in the long run. We see many more bookkeeping mistakes made every day. We’re dedicated to helping business owners succeed – if you’re interested in how we can help your business, feel free to drop us a message here or give us a call one (03) 9084 7440

Bookkeeping is a crucial aspect of any business, but it is especially important for new businesses. Many start-ups, which are otherwise successful, have been held back by their inability to maintain and organise financial records. What a lot of new entrepreneurs find is – that they are juggling too many balls at once and don’t have the time or resources to invest in proper bookkeeping. It cannot be stressed enough however, the importance of keeping on top of and organising financial records in the early stages of a business. Here are some of the reasons bookkeeping is crucial for a start-up: Decision making In terms of goals – it is difficult for a company to plan for where they want to be when they don’t have an accurate perception of where they currently are. Bookkeeping allows business owners to understand the key financial benchmarks of the business and how successfully it is operating – which in turn lead to more well-informed decisions. Regular evaluation of the growth of a business is key to being successful as a start-up. With proper bookkeeping, the decision makers will be able to make a more accurate evaluation on the current growth and performance of a business. This will then be useful in developing new strategies in order to improve these indices. Taxes Another thing which is directly related to bookkeeping, is the payment of numerous taxes. If the balance sheet of a business is well organised and the cash flow in and out of the business is correctly documented, calculating taxes becomes a lot simpler. Searching for bills and statements last-minute will become a thing of the past and the tax adviser will be spared time and effort correcting statements. This means they will be able to focus more time and effort on providing tax-related advice. Cash-flow Cash flow management is crucial to the success of a new business. Proper bookkeeping will help to prevent cash flow issues before they start. A mistake many start-ups make is they take on too many responsibilities at once. A potential problem with fast growth – is running out of money. This might sound contradictory but usually, money must be spent to complete required work before receiving payment for it. If a new business is taking on too many projects without sufficient cash or credit to cover them, clients could be left displeased. How much is too much? With organised financial papers and records, this becomes a lot easier to predict. Proper bookkeeping prevents this sort of situation altogether by allowing a business to lay out the costs of incoming orders and ensure they have the required money to finish them. If this is not the case, slowing down the growth may be a viable option. Many new business owners start off by handling the bookkeeping aspect of the business themselves and delay hiring a bookkeeper until it is too late. It is important to assess when is the right time to pass on responsibilities to others. Reporting to Investors From an investor’s point of view, solid books are a necessity. This also applies to potential investors. Let’s face it, very few people are likely to invest in a new business that’s disorganised financially. If a business’s financial reporting systems are automated and consistent in conveying important financial information, investors are likely to satisfied. It shows them that the business understands their cash flow requirements and the key performance indicators that will lead to business growth. Frequent updates and reports are common amongst start-ups in order to achieve a level of trust and credibility with the investor. The bottom line As a new business owner, it is crucial to keep the books in order right from the start. A lot of inexperienced owners treat bookkeeping as a burden and realise its true value once it is too late. Proper bookkeeping can be one of the things that help transform a small business into a large-scale business. It can also be one of the main reasons a small business with potential ended up failing. #bookkeeping #bookkeepingblog #doineedabookkeeper #entreprenuer