S & H Tax Accountants

Tag: Bookkeeping Basics for Small Business Owners

  • Changes to NFP Self-Review Return

    Changes to NFP Self-Review Return

    Changes made to NFP Self-Review Return

    The ATO has made recent changes to the NFP Return. Non-charitable and Non-For-Profit entities who have an active ABN must now lodge an annual self-review return, in order to self-assess their eligibility for tax exemption. These changes will imply to the financial year of 2023/2024. These changes were announced in 2021, however came into effect on the 1 July 2023. A registered agent is also able to lodge the self-review return for their clients.

    https://www.ato.gov.au/businesses-and-organisations/not-for-profit-organisations/statements-and-returns/in-detail/reporting-requirements-to-self-assess-income-tax-exemption/how-the-self-review-return-will-work

    The Self-Review Return

    The self review return will

    1. include questions which are provided now in the current self-review worksheets
    2. guide NFPs to consider their purpose and activities against specific eligibility requirements of an income tax exempt entity
    3. it will not have a lot of questions relating to the financial nature, however will as the NPF of their estimated income for the financial year.

    After the Entity has completed that, they will receive a notification summarising their self-review. After the first lodgment, the NFP will be able to confirm or even update their self-review return. If this is not done correctly, then there are penalties that will apply to the NFP.

    ATO publishes guide for NFP self-review returns

    If you need any assistance in lodging a Self-Review Return or have any questions about it please feel free to contact S & H Tax Accountants. We are a small firm based in Cranbourne as well as Cheltenham. We have an exceptional team, which consists of well-qualified, vastly experienced and extremely professional. Book a consultation today at S & H Accountants, call us at 03 8759 5532 or you can email us on info@sahtax.com.au.

     

  • The importance of budgeting, forecasting, and setting goals for your business

    The importance of budgeting, forecasting, and setting goals for your business

    If you’re like many business owners, you may find yourself struggling to understand what your finances mean or how you can use your financial information to make decisions for your business. Often we get into business because we love a product or service we want to provide. It’s not as common that we love managing the financial aspects of our business. 

    As a business owner, you have your best chances of success when you regularly set budgets, develop financial forecasts, and establish goals. Here’s what you need to know about all three activities. 

    They are invaluable tools for businesses

    Budgeting, forecasting, and goal setting are tools that help you manage your finances effectively. A budget is a plan for how you will spend money in the coming year. It’s also a way of setting goals, such as opening another store, expanding your product line, or hiring more employees. Forecasting helps you look at your finances in the short term to make sure they align with the long-term strategy of your business. Goals help you establish your financial priorities and set a plan for moving your business forward. 

    Why you need a budget

    A budget is a plan for how you will spend the money your business has. You can think of it as a roadmap that helps you reach all the goals and objectives in your business, including financial ones.

    By having a budget, you’ll be able to control cash flow. A budget will help ensure that your business stays on track with spending so you don’t pay out more than you’re bringing in. It also lets you know when you have enough money in your accounts to meet expenses such as payroll, taxes, and bills. If you don’t have enough money to cover your expenses, you can look at your budget and revise it, to free up additional money.

    Lastly, budgets allow you to understand how money flows into and out of your business, which makes it easier to meet your immediate financial needs while planning a sustainable future.

    Financial forecasting helps you determine where your business is headed 

    Forecasting is a great way to determine where your business is headed in terms of profit and loss. It helps you predict future cash flow, sales, expenses, and more.

    Financial forecasting can help you take control of your finances by enabling you to anticipate what might happen in the future and plan for it accordingly. This can help prevent overspending or under-budgeting during slow periods or high-demand seasons. Also, it allows you to provide accurate budget projections when seeking funding from banks or investors.

    Goals help you budget and forecast more effectively

    Your goals enable you to set a vision for your business and implement steps to achieve it. For example, if you know that you want to bring in 100 new customers in the next two months, you’ll need to explore whether your marketing budget can accommodate that, and adjust accordingly.
    If your goal is to hire additional staff you can look at your forecast to determine the best time to hire–and how long it will take you to build up the revenue to bring in new people. 

    Additionally, goals enable everyone on your team to know what you’re working towards, so they can feel engaged in the process and take ownership over progress. 

    Final thoughts

    Budgeting allows you to understand how money flows into and out of your business, which makes it easier to meet your immediate financial needs while planning a sustainable future. Forecasting encourages you to examine your records and anticipate the future, so you are prepared for fluctuations in your cash flow. Goal setting creates your vision for the future, so you can identify financial priorities.
    All three are important to building a sustainable and thriving business. If you’d like to learn more about how we can help you with your budgeting, forecasting, and goal setting, contact us today. 

    Starting a small business can be difficult, especially when it comes to the finance aspect, this is where S & H Accounting can help. We do not only offer taxation services but also help our clients to set up their business, such as apply for an ABN, register for GST as well as making the annual reports. Our team also consists of well-qualified, vastly experienced and extremely professional. We aim to provide the best level of service possible to all of our clients. Book an appointment today with S & H Accountants, call us on 03 8759 5532 or you can email us on info@sahtax.com.au.

  • Financial best practices for small business

    Financial best practices for small business

    When you run your small business, you have a lot on your plate. That makes it tempting to let some tasks slide, especially tasks that are related to finances, which can be challenging and is often outside your preferred skill set or experience.
    There are some tips you can follow that keep your finances healthy and enable you to thrive. Here are some financial best practices for managing your business, so you can have the best chances of success.

    Pay yourself

    As a small business owner you may be tempted to keep putting every cent you earn back into your small business, but it’s important to compensate yourself as well. You need to pay your own bills and be financially sound personally. You’ll also need to have money set aside for your retirement.
    Make sure you draw a regular income from your business that you use to take care of your personal expenses.

     Have a separate business bank account

    Keeping your business and personal finances together makes it more difficult to track how your business is doing, and how you’re doing. When you have separate bank accounts for your business and personal finances you can more easily monitor where and how you’re spending money. Finally, it makes things easier to track for tax purposes.
    Have separate accounts for your business and for your personal finances and deposit your salary (see the above tip) into your personal account. 

    Have a good billing strategy

    When you own a business you’ll deal with clients who are slow to pay their bills. Money your clients owe you isn’t accessible to you until it’s in your bank account. Monitor your invoicing system to see which clients pay you on time and who takes their time paying your invoices. If you have too much money tied up in unpaid invoices, you may need to adjust your payment policies.
    Consider charging interest on late payments or giving more strict terms. Or you could offer a slight discount if they pay within 10 days of invoicing. See if you can charge a deposit for your goods or services so you still have some cash flow while waiting for clients to pay the remainder.
    Remember to invoice immediately and follow up before the payment deadline, so you aren’t stuck waiting for payment. If your clients are large companies with their own payment terms, find out what those are and be mindful of them when billing. 

    Keep your receipts

    Now that there are digital platforms for managing the financial aspects of your business, you don’t have to have physical receipts taking up space in your office. Instead, you can go paperless, and keep all your receipts digitally.
    Make sure you know the laws in your area for how long you have to hold onto receipts, pay stubs and other financial documents and keep them for at least that long. If you do still use paper receipts, make sure you have a way of storing them so they’re easy to manage and find when you need them. 

    Have a budget

    Your budget is your plan for success. It shows how much money you expect to bring in and how much you might spend in a given period. You can anticipate times when your profits may be higher and times when you may have a surge in your expenses. Additionally, bankers, investors, and other stakeholders may ask for a budget when they consider financing your business.

    Final thoughts

    There are other strategies that can help you run your business and set yourself up for financial success. Those include automating your bill payments, having a cash flow statement, and choosing the right business structure for you. But as a place to start, creating a budget, keeping your receipts, adjusting your billing strategy and drawing a salary that you keep in a separate bank account are important first steps.
    Want to learn more about how we can help you stay on top of your finances? Contact us to learn more. 

    Starting of a new business can be difficult, however the tips listed above are extremely beneficial. If you do need assistance in starting off your business, then please contact S & H Accountants. We offer business services, such as registering the business, registering the name and all of the important services needed for a business to be set up. We also offer bookkeeping services, that assist a business in maintaining and organizing their finances. Our team includes well-qualified, vastly experienced and extremely professional, we always aim to provide our clients with the best level of services possible. Book an appointment today with S & H Accountants, call us on 03 8759 5532 or you can email us on info@sahtax.com.au.

  • Understanding and improving working capital

    Understanding and improving working capital

    When it comes to running a thriving business, understanding and effectively managing your working capital is crucial. Essentially, working capital is the cash readily available for the day-to-day running of operations. The more protracted the business cycle, the higher the working capital requirement tends to be. Your goal? To ensure you have enough working capital on hand to cover operational expenses, with a reasonable buffer in place.

    How to improve your working capital

    Feeling anxious about your working capital? No worries! To improve it, let’s start by figuring out how much working capital your business actually needs. By using cash flow forecasting, you can proactively calculate when you might run out of cash and determine the minimum capital required to avoid that situation.

    Ways to reduce working capital needs

    The key to reducing your working capital needs revolves around cutting down on expenses. Here are some strategies to consider.

    • Limit large personal withdrawals.
    • Avoid buying major assets out of daily operating profits. Remember, there are other financing options available, such as leases or loans.
    • Refrain from overtrading, which can lead to increased overhead costs and delay customer payments.
    • Assess your inventory costs. Think twice before placing bulk orders, even if it comes with a discount.
    • Simplify payment collection. Explore mobile and online options to make it easier for customers to settle their bills.

    Shortening cash cycles

    Another effective strategy is to shorten your cash cycles.

    • Collect money quickly and efficiently.
    • Negotiate better terms with suppliers. Paying your bills faster than your customers are paying you can lead to an unnecessary increase in working capital.

    Forecast your cash flow and profit-and-loss

    Accurate cash flow forecasts can provide valuable insights into your working capital, allowing you to take proactive steps for improvement. Profit-and-loss forecasts, on the other hand, help assess future profitability, enabling you to make informed decisions about your working capital needs.

    Wrapping Up

    The goal is to lessen working capital concerns by understanding what it is, how much you need, and ways to improve it. Once these processes are in place, managing your working capital will become second nature, allowing you to focus on growing your business and boosting profitability.

    Remember, it’s always beneficial to consult with your accountant regarding your working capital needs and possible improvement strategies.

    We’re here to help – get in touch now.

    Making sure that you have effectively managing your working capital, can be a little confusing and stressful at times. That is why S & H Tax Accountants are here to help, we are one the best accounting firms in Cranbourne. S & H Tax Accountants offer business consultations to their clients. Our team of accountants aim to provide our clients with the best level of services to all of our clients. Our accountants are well-qualified and vastly experienced. Make a booking today at S & H Tax Accountants, call us at 03 8759 5532 or email us info@sahtax.com.au.

     

     

     

  • Essential bookkeeping practices for start-ups

    Essential bookkeeping practices for start-ups

    Starting a new business is exciting, but it also comes with its fair share of responsibilities. One of the most critical responsibilities is maintaining accurate records of your business transactions. From saving receipts to processing employee payroll, every money-related detail should be documented. It’s not just about keeping things tidy; it’s about understanding the financial health of your business and meeting all your tax obligations.

    Don’t underestimate the basics

    Some small businesses continue to rely on traditional systems, like pen, paper, and a trusty shoebox. Although it may seem outdated, this method can work well for businesses with very few transactions. These businesses might not have the latest payment technology, and could be invoicing customers or receiving immediate cash or cheque payments. In such cases, they would need to maintain a record of all receipts, past, present and future jobs, as well as a log of their customers and transactions.

    Of course, if you’re serious about your business, you might want to consider using a more accurate system.

    The power of spreadsheets

    In the digital age, spreadsheets offer a simple and effective way for start-ups to keep track of their financial activities. When you’re just starting or operating a part-time business with a limited budget, a spreadsheet can be a cost-effective alternative. As your business grows and becomes more complex, you can transition to specific accounting software.

    With a spreadsheet, you can set up a basic accounting system to track invoicing, perform calculations, and even set up a budget.

    Embrace accounting software

    For those more serious about their business, subscribing to accounting software might be the best option. Modern accounting software often links directly to your bank account, making it an efficient way to document all necessary transactions. It also reduces the risk of errors and offers features like generating professional invoices, tracking debts, and ensuring everything is entered accurately for your accountant at tax season.

    If you opt for a cloud-based solution, you’ll enjoy real-time access to your accounts, increased data security, and the flexibility to access your financial data anytime, anywhere.

    Stay on top of your cash flow

    Regardless of the accounting system you choose, a good system will enable better decision-making based on real-time financial insights. Identifying cash flow trends can help drive your business growth by revealing your most profitable products and services, your biggest customers, your highest costs, and more. The ability to monitor these trends places you in a better position to improve your profits and spot potential areas of growth.

    Wrapping up

    As a start-up, your primary task is to evaluate your business needs and choose an accounting system that allows you to track your cash position accurately, keep precise records for tax purposes, and identify cash trends.

    Consulting with your accountant can be an invaluable first step. They can offer advice on the best system to use and ensure it’s compatible with their processes. Remember, your financial records are the lifeblood of your business, and keeping them in perfect order is integral to your success.

    Want to discuss what system will best suit your needs? Contact us now for advice.

    Bookkeeping is an essential part of a business, as it helps a business to stay organised especially when it tax season. S & H Accounting offers the service of bookkeeping. We understand that keeping a track of every purchase and sale can be tiring and stressful. Our team consists of amazing staff whom are vastly experienced and well-qualified. Wo aim to provide the best level of service possible to our clients, as our priority is your growth. Book an appointment today with S & H Tax Accountants, contact us on 03 8759 5532 or you email us info@sahtax.com.au

     

  • Differences between BAS and IAS

    Differences between BAS and IAS

    Running a business comes with a lot of financial responsibilities, and as a business owner, you’ve probably come across terms like BAS (Business Activity Statement) and IAS (Instalment Activity Statement). While they may sound similar, understanding the differences between these two statements is crucial for maintaining compliance and staying on top of your tax obligations. In this article, we’ll break down the nuances of both BAS and IAS and provide actionable advice to help you navigate through them with ease.

    So what is BAS?

    Let’s start by demystifying the BAS, shall we? The Business Activity Statement is a form that all Australian businesses use to report and pay their tax liabilities. It’s a summary of all the business taxes you have paid or will pay to the government in a specific period. It can include the following payments, if they apply to your business:

    • GST
    • Pay as you go (PAYG) income tax instalment
    • Pay as you go (PAYG) tax withheld
    • Fringe Benefits Tax (FBT) instalment
    • Luxury Car Tax (LCT
    • Wine Equalisation Tax (WET)
    • Fuel tax credits

    If your business is registered for GST, you’ll need to lodge a BAS. If your business turnover is less than $20 million, you can choose to lodge monthly or quarterly. If your turnover is more than $20 million, you must report monthly.

    BAS statements are issued by the ATO either monthly or quarterly. A form needs to be lodged with the ATO and payment made to the ATO by the due dates as follows.

    For monthly BAS: within 21 days of the end of the month on the form
    For quarterly BAS: as above for IAS

    Understanding IAS

    Now, let’s look at the Instalment Activity Statement (IAS). While the IAS may seem similar to the BAS, there are some key differences you should be aware of.

    The IAS is the simpler of the two forms and is only issued quarterly. It’s without GST and some other taxes. Businesses that are not registered for GST, and individuals who are required to pay Pay as You Go (PAYG) instalments or PAYG withholding (such as self-funded retirees), use this form to pay PAYG. The ATO will tell you what your GST instalment amount is and if applicable, what your PAYG instalment amount is.

    The instalment amounts will be payable as follows:

    IAS Key Dates

    • July – September Quarter is due 28 October
    • October – December Quarter is due  28 February
    • January – March Quarter is due 28 April
    • April – June Quarter is due 28 July

    How to Navigate BAS and IAS

    Understanding the differences between BAS and IAS is one thing, but knowing how to tackle them effectively is another. Here are some actionable tips to help you navigate through these statements with confidence:

    • Stay Organised: Maintain accurate records of your business’s financial transactions, including sales invoices, purchase receipts, and tax-related documents. This ensures that you have all the necessary information when it comes time to complete your BAS and IAS.
    • Use Online Accounting Software: Consider using accounting software to streamline the process of preparing and lodging your BAS and IAS. These tools can automate calculations, track your GST obligations, and generate accurate reports, saving you time and reducing the risk of errors.
    • Seek Professional Guidance: If you find the complexities of BAS and IAS overwhelming, don’t hesitate to seek help from a qualified BAS or Tax Agent who can lodge these form for you. They can provide personalised guidance, ensure compliance, and help you maximise your tax benefits.
    • Stay Informed: We keep up-to-date with the latest ATO guidelines and regulations related to BAS and IAS. The ATO website offers valuable resources and updates that can keep you informed about any changes that may affect your business.

    Wrapping Up

    Understanding the differences between BAS and IAS can help you run your business with less stress. And staying on top of your BAS and IAS requirements not only keeps you compliant but also sets a solid foundation for your business’s financial success.

    We’re here to help you navigate the world of business, BAS and IAS. If you have a question, please don’t hesitate to get in touch.

     

    These two statements are very important to businesses, as the BAS is the summary of all of the businesses taxes that you have paid in that specific time period, usually quarterly whereas the IAS does not have the GST tax and some other business taxes. If your business needs help in completing these forms, then please feel free to contact S & H Tax accounting. Our team consists of experienced and very well-qualified accountants, who always aim to provide you with the best level of service possible. Book a business consultation with S & H Accountants today, call us at 03 8759 5532 or email us at info@sahtax.com.au.

  • Unravelling the mystery of missing profits: A guide for new business owners

    Unravelling the mystery of missing profits: A guide for new business owners

    Starting a business is a wild ride with its fair share of ups and downs. One hurdle many new entrepreneurs encounter is the difference between the profits they expected and the hard cash available at the financial year-end. This guide aims to alleviate these concerns by shedding light on where your missing revenue might be hiding.

    Possible causes of missing profits

    There may be several reasons why your business has shown good performance throughout the year, yet there’s little cash to show for it in the end. Here are a few possible places your profits could be lurking:

    1. Unsettled debts: Some of your customers might have acquired your products or services without paying yet.
    2. Inventory: Your profits might be tied up in unsold stock or raw materials, especially if you buy in bulk.
    3. Asset acquisition: If you’ve purchased new assets like a work vehicle, these expenses are depreciated over several years and not all claimed in the year of purchase.
    4. Owner withdrawals: Balancing the amount of profit you withdraw from your business for personal use can be tricky.

    Navigating financial statements

    One of the key components to understanding your financial situation is your profit and loss statement. This document represents your business’s income and expenses over a given period, whether these transactions have been completed or not. This means that sales or purchases made on credit are included, which can create a disparity between your profit figures and actual cash on hand.

    Bridging the gap

    To bring your financial statements closer to your actual financial situation, regularly review your debtors. Vigilance in following up payment requests and taking action for late payments is essential. Additionally, using a cloud-based accounting system to track transactions in real time can aid in timely decision making.

    Dealing with creditors and debtors

    Businesses often have customers who pay on credit, as well as suppliers who offer credit for purchases. This can lead to a time lag between the record of transactions and the actual monetary exchange, increasing the figures in your ‘Sales’ and ‘Cost of Goods Sold’ (COGS) categories while your bank account remains stagnant.

    Understanding COGS

    COGS represents the direct costs involved in creating or acquiring the goods you sell to customers. This includes the initial inventory, purchases made during a specific period, and the inventory left at the end of that period. Other costs like freight, storage, and factory overheads could also be included.

    The role of reinvestment and owner withdrawals

    In a bid to expand their operations, businesses often reinvest their profits. This reinvestment could take the form of increased stock, debtors, or capital expenditure. On the other hand, excessive withdrawals by the business owners can restrict growth and deplete cash reserves. It’s essential to set sound budgets for each owner to prevent drawing too much profit.

    The Bottom Line

    If you’re facing a fiscal year-end with profits but no cash in hand to pay your taxes, don’t panic. Dig deep into your financials to uncover if your cash is tied up in extra stock, debtor accounts, or new assets. Managing a business is a journey, and understanding these financial intricacies will empower you to navigate it better.

    Contact us for a deep dive into your financials.

    Managing the financial aspect of a business can be one the most difficult parts of handling a business. However, S & H Tax Accountants offer services such as business advice. Our team understands that this requires a lot of effort, thus can cause a lot of stress for our clients, that is why we are here to help. We are known for our well-qualified, experienced and extremely dedicated staff, who aim to fulfil your needs to best possible level. Make a booking today with one our clients, call us at 03 8759 5532 or you can email us at info@sahtax.com.au

  • Decoding the language of financial ratios

    Decoding the language of financial ratios

    As a small business owner, you’re likely already wearing many hats. But the hat of a financial analyst might seem a little oversized, particularly if your background isn’t in finance or accounting. However, understanding financial ratios can be a game-changer for your business, helping you assess your business’s financial health and make informed decisions.

    Financial ratios: what are they?

    Think of financial ratios as a thermometer for your business’s financial health. These are calculations that compare one item in your financial statements to another. For instance, how much current assets you have compared to liabilities, or the percentage of each dollar of sales that remains after all expenses have been deducted.

    They reflect the financial relationships vital to your business operations.

    The power of financial ratios

    To harness the power of financial ratios, it’s important to understand the financial relationships they represent and the implications for your business. Unless you are well-versed in accounting principles, consider engaging an accountant or bookkeeper to help you interpret these ratios.

    The ratios that matter

    Let’s delve into some of the key financial ratios every small business owner should know:

    1. Current ratio: This ratio measures your business’s liquidity. A higher current ratio indicates efficient cash management and the ability to meet short-term obligations. If your current ratio is less than 1:1, it might be a signal that additional financing is needed to meet upcoming commitments.
    2. Return on equity ratio: This ratio offers insight into the returns your business is generating for its owners. It’s an efficiency indicator, showing how effectively your business uses its owners’ money.
    3. Gross profit margin: This ratio helps understand the relationship between your sales and cost of goods sold. A low gross profit margin could indicate weak product demand or need for better cost control.
    4. Net profit margin: It’s the percentage of each dollar of sales remaining after all expenses. It’s a critical indicator of your business’s expense management capabilities.
    5. Debt to equity ratio: This ratio compares the financing you’ve received from creditors to the amount invested by the owners. It highlights the balance between debt and equity in your business.

    The journey of understanding financial ratios might seem like traversing uncharted territories, but it’s a journey worth embarking on. Decoding the language of financial ratios can provide invaluable insights into your business’s financial health.

    If you’re feeling overwhelmed by the intricacies of financial ratios, don’t worry. We’re here to help!
    Feel free to contact us and leverage our expertise.

    These Financial Ratios help a business to understand their financial position and thus leads to better decisions to be made. S & H Tax Accountants are always here to help their clients with any of their business inquiries. Our Team consists of hardworking, extremely qualified and vastly experienced. We aim to make sure that all of our clients are provided with the best level of service. Make a booking at S & H Tax Accountants, call us at 03 8759 5532 or you can email us at info@sahtax.com.au

  • 5 essential steps to crafting a solid business plan

    5 essential steps to crafting a solid business plan

    Creating a robust business plan is crucial to the success of any startup. It not just provides a roadmap for your business, but also helps to attract potential investors.

    Here’s a practical guide to help you put together your business plan.

    • Gather Relevant Information

    Start by collecting all the necessary information about your business. This includes understanding who will run the business, who will advise you, and a thorough analysis of your industry, competition, and target market. Remember, more data is always better. Even if you don’t use all the data you collect, it’s helpful to have it at your disposal.

    • Crunch the Numbers

    Nothing validates your business idea better than concrete financial figures. Your financial plan should include your projected revenue, expenses, and profit or loss. These can be presented in the form of an income statement, a cash flow forecast, and a balance sheet.

    • Write the Body of the Plan

    Once you have your numbers, it’s time to delve into the strategy behind them. This is where you explain your business concept, market analysis, marketing strategies, operations, and management team. Each section should be addressed in detail, providing in-depth insights into your business.

    • Seek Feedback

    Sharing your draft business plan with industry experts and potential investors can provide invaluable feedback. You want these individuals to challenge your strategies, question your numbers, and put you on the spot. This will only make your business plan stronger.

    • Edit and Tighten

    Less is more when it comes to a business plan. After receiving feedback, take the time to revise and refine your document. Look for areas where you can tighten your thinking, clarify your intentions, or remove unnecessary sections.

    Creating a solid business plan requires thorough preparation, detailed financial analysis, and a meticulous review process. Remember to keep your business plan concise, focused, and visually appealing. Your business plan is a reflection of your business idea, and a well-crafted one can open doors to numerous opportunities.

    Need help with your business plan? Get in touch with us today

    Having a well thought out and concise plan can really help a business to succeed. As it was mentioned above that a business plan is combination of numbers and strategies, however we understand that it can be a little difficult to understand. S & H Tax Accountants is the firm that you need. Our team is known for their punctuality, experience and the level of service that we provide our customers. Book an appointment today call us on 03 8759 5532 or email us at info@sahtax.com.au.

  • Tax Season Tips for Small Business Owners

    Tax Season Tips for Small Business Owners

    Preparing for tax season is really a year-round endeavor. Tip number one for SMB owners is to update financials on a monthly basis, using a streamlined software or cloud-based system.

    This way, come tax time, everything you need is all in one place. And well organized SMBs are better positioned to minimize their tax bill while avoiding penalties associated with missing or inaccurate information.

    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 for SMBs to be savvy about deductions. After all, you want to keep as much of your hard-earned revenue as possible. Often-overlooked items you may be able to deduct include:

    • Seminars, classes or conventions you attended to improve your professional skills;
    • Unused inventory that you’ve donated to charity (a good reason to consider donating your overstock, 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 you can plan 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 expenditures 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. Tax authorities 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 drive-time as a work expense? Ensure you submit a log of your business-related mileage, so you can clearly demonstrate how your personal vehicle was used for professional purposes.

    Don’t miss the deadline!

    This should go without saying, but every year SMBs are hit with serious penalties for filing taxes late. Missing the deadline can have a range of negative repercussions, including:

    • Added interest to amounts owing, plus a late payment penalty;
    • Losing your claim to a refund;
    • Loss of credits toward retirement or disability benefits; and
    • Delay of loan approvals (lenders require a copy of your filed tax return in order to process your application).

    Seek expert advice well in advance

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

    Software has made it easier than ever for small business owners to file for themselves, but when it comes to thoroughness and accuracy, nothing can replace the expert advice of an accountant.

    Consult a professional well in advance, to ensure you’re getting the most out of your tax return, and that your documentation is complete. On the bright side, accounting fees are often tax deductible!

     

    When it comes to accounting it is very important to stay organised, especially when it is Tax time. S & H Tax Accountants offer our services to small businesses as well. We have well-qualified and very experienced accountants which aim to always provide you with the best level of services so that you are able fulfil your desired outcomes for your business. Book a consultation today with S & H Tax Accountants, call us on 03 8759 5532 or you can email us on info@sahtax.com.au.

     

  • 10 concepts every small business owner needs to understand

    10 concepts every small business owner needs to understand

    Even if you have outsourced your financial functions, as a small business owner, it is crucial to have a solid understanding of key financial concepts to work with your advisor and ‘speak their language”. This article outlines several important concepts that every small business owner should be familiar with.

    1. Basics of income and expenses
      As a small business owner, it’s important for you to understand how you generate and spend money. This way, you can maintain fiscal responsibility while also promoting business growth.
    2. Income statements (P&L) versus cash flow
      To make smart short-term financial decisions, business owners should always stay on top of the latest cash flow analyses and projections. Remember, a P&L doesn’t tell you if you can pay your bills or how liquid your business is. Keep that in mind!
    3. Operating cash flow
      Understanding a company’s operating cash flow is vital for assessing its performance and cash runway.
    4. Gross sales versus net profits
      As a small business owner, it’s important to pay attention to both sales and expenses to ensure a healthy and well-managed business. Remember, gross sales don’t equal net profits. It’s crucial to understand every expense, know the industry averages, and have enough cash on hand to thrive long term.
    5. Reading a balance sheet
      As an owner, it’s important to understand the line items on a balance sheet. Taking a deep dive into these details can provide valuable insights into your financial well-being. Soon you will instinctively know if something doesn’t look right.
    6. Unit economics
      For small business owners, it’s crucial to have a clear understanding of the expenses and revenues linked to a specific product or business unit. You need to be able to dive into the nitty-gritty of your finances, and that’s where unit economics comes in. The basic idea is simple: you should know the ins and outs of your expenses and revenues for a particular product or business unit. By grasping your unit economics, you’ll have a better grasp of your business as a whole, and it will also help you gain credibility with partners or investors.
    7. Return on equity
      This concept helps us decide whether we should keep investing in the business or look into other investment options. You see, there are always opportunity costs to consider for every investment.
    8. Cost of goods sold
      It’s really important to have a clear understanding of the cost involved in producing your products or services. If you’re not sure how much it actually costs to make your product or provide your services, it’s hard to know how much you’ll have left to cover your overhead expenses..
    9. Accounts payable and accounts receivable
      Effectively managing cash flow through digital tools for accounts payable (AP) and accounts receivable (AR) is crucial. After all, cash is king for small businesses!
    10. Working capital
      Monitoring working capital is important for ensuring the business has enough funds to operate smoothly. If you can’t get enough working capital because of seasonality or other external factors, then you can get loans. A working capital ratio between 1.2 and 2 signifies a healthy business to lending companies. The working capital ratio shows the ratio of assets to liabilities, i.e. how many times a company can pay off its current liabilities with its current assets. The working capital ratio calculation is: Working Capital Ratio = Current Assets / Current Liabilities

    To wrap things up…

    Having a solid understanding of these key financial concepts enables you to make informed decisions, effectively manage your finances, and strategically drive the growth and long-term success of your businesses.
    With financial acumen, you can identify opportunities for expansion, mitigate risks, and build a sustainable foundation for your business ventures.

    Don’t navigate your finances alone – we’re here to help.

    Understanding financial terminology and how they are used can be a little difficult to understand at times, that is why we are here to help. S & H Tax Accountants, offer the services of business advice whether it be about the structure, the finance or even just general inquiries, we can help you! Our accountants are well-qualified and vastly experienced, thus are able to help you reach the outcomes and goal you had desired for your business. Book an appointment today, contact us on 03 8759 5532 or email us at info@sahtax.com.au.

  • Launching a business? Ask these 9 questions

    Launching a business? Ask these 9 questions

    Starting a new business can be incredibly exciting, but it’s important to thoroughly evaluate your business idea before taking the plunge to ensure you’re creating a sustainable and successful venture. To get started, here are 9 questions to consider as part of an overall evaluation process.
    Save yourself money, time, and heartache down the line by investing a little time now.

    What customer problem does your business solve?

    Your business should aim to solve a customer problem in a unique and innovative way. An idea can be cool or interesting, but that doesn’t necessarily mean that it can meet an existing need in the market.

    If you can identify a problem that many people face and create a business that offers an effective solution, you have a much higher likelihood of success.

    How well does this business fit the current market conditions?

    External factors, such as changes in the economy or advances in technology, can have a huge impact on whether a business will thrive or fail. The rise of sharing and gig economy apps is a great example of this. These apps not only gave consumers more affordable options for daily tasks and errands, but also provided individuals with a new way to earn money on their own schedules.

    Think about any new opportunities that may be available in the current economy and technological landscape.

    What limitations will you encounter?

    Costs may be high, requiring careful planning. It’s possible that you’ll need to educate your customers and convince them to adapt to your business before they’re ready to use it. And let’s not forget about the competition that already exists in the market.

    Are there other businesses already doing what you want to do?

    Find out what’s the closest thing to your business idea already in the marketplace and ask yourself, “Why is my business idea better?” It’s a tough question, but if you have a convincing response, you might just have a good idea.

    Competitor research is key when evaluating your business idea. Knowing who your competitors are, how they operate, and what their strengths and weaknesses are will help you create a successful strategy.

    What is your understanding of the current market and trends?

    Study your market – How big is it? What are the demographics of your market? Who will be your target audience? How much of the market is already cornered by your competition? This will help you to really hone in on your target market.

    What resources do you need to start your business?

    Starting a business requires resources, including financial capital, intellectual property, and staff. Make sure you have the necessary resources lined up, or can access them easily before getting started.

    Knowing what barriers to entry exist is important. These barriers could include high startup costs, tough competitors, or regulatory hurdles that may need to be overcome.

    How will the business make money, and how long will it take?

    Think about how your business will generate income, and how long it will take to get it to a point where it is self-sustaining. Will you be able to keep it afloat until it reaches that point?

    What are the potential risks you face?

    Not every business idea is a guaranteed success. There are always inherent risks involved in starting a new venture. Evaluating these risks and creating contingency plans to address them is an important part of the evaluation process.

    Starting a new business will take long hours, hard work and sacrifices. You’ll have to pour money and time into getting the business off the ground, possibly at the expense of time with your family and friends and financial security. Make sure this is something you really want to do.

    Who is on your team?

    Assembling a great team is vital to starting a successful business. Think about the skill sets necessary for your business idea and start building a team that can bring it to life.

    Not everyone is an expert at everything. So when evaluating a new business idea, you have to ask yourself whether you have the right skills to pull off launching and running the business, or who you can gather around you to support you.

    You can’t do it alone!

    Good luck

    While it might seem that we asked you all these questions to deter you, what we really want is to help you think about what you’ll need to do to turn your idea into a successful business.

    Considering these questions will leave you with a better understanding of the viability of your business idea and the steps needed to make it a success.

    Set your business on the path to success – reach out to us today!

    Starting a new business can be a little daunting, as there is so much to consider whilst doing it. Another factor to consider is the financial position, as it is important that a business has a stable financial position when it is commencing to operate. S & H Tax Accountants offer the service of a business consultation, our accountants are well qualified and vastly experienced. Thus are able to guide you in the correct way and help you to achieve the business of your dreams. Book an appointment today with S & H Tax Accountants, call us on 03 8759 5532 or email us on info@sahtax.com.au

  • 6 Essential Accounting Terms for Small Businesses

    6 Essential Accounting Terms for Small Businesses

    Hiring an accountant is widely considered best practice for small business owners.  But delegating financial analysis and reporting doesn’t mean completely checking out of the process each month or quarter. 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 account this quarter?

    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 will generate a cash flow statement each quarter to keep tabs on this key performance indicator.

    1. 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 know if you’re operating at a loss or turning a profit.

    1. 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.

    1. 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); liabilities (like accounts payable, income tax, and employee salaries); and shareholder capital.  In a nutshell, the balance sheet shows what you own, as well as what you owe.

    1. Accounts Receivable & Accounts Payable

    Simply put, accounts receivable is money your business is owed by customers for goods or services sold. 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.

    1. 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.

    Terms such as Bad debt expenses or even the balance sheet can be daunting to small businesses. That is why it is advised that small businesses hire an accountant. S & H Tax Accountants are well known for their services as we have experienced and well-qualified tax accountants. We aim to ensure that our clients are able to reach the best outcome and thus will go well and beyond to assist your clients. If you would like to make a booking with S & H Tax accountants, you can call us 03 8759 or email us at info@sahtax.com.au

     

  • Debt management tips for small business owners

    Debt management tips for small business owners

    For a small business owner, managing finances can be a daunting task. Keeping track of expenses, payments, and cash flow can be overwhelming, especially if you’re dealing with debt too. A business loan, line of credit or a business credit card can help your company hire new employees, purchase inventory, purchase equipment, and finance growth, but too much debt can become an unsustainable expense. Debt management is vital to the success and sustainability of any business. Read on for some tips on effective debt management as a small business owner.

    How to manage business debt

    Rank your debts: The first step in debt management is understanding which debts are immediate and which can wait. Ranking debts can help you address the most pressing ones first and avoid defaulting on any payments. Defaulting on loans and credit can result in a decrease in your business credit score and can harm your business financially in the long run.

    Consolidate debt: Consider consolidating your debts into a single monthly payment. This can make it easier to manage and track all your debts, avoiding missed payments and late fees. Consolidating debt also lowers the interest rate of high-interest loans, which in turn saves you money on interest payments.

    Increase revenue: One of the most effective ways to manage debt is by increasing your business’s revenue. Tweak your current offerings, expand your market, or even invest in new products or services that align with your brand’s vision. The more revenue you generate, the more money you’ll have to repay your debts without incurring additional interest expenses.

    Reduce spending: Cutting costs and managing expenses can also play a role in managing your debt. This can include negotiating with suppliers for lower prices, investing in energy-efficient equipment, and even renegotiating loan terms to lower monthly payments. Avoiding unnecessary expenses can help your business free up cash to pay off debts while also saving money for other business-related expenses.

    Seek professional advice: Finally, if you’re struggling to manage your debt, consider seeking professional advice. This can help you identify areas where you can improve, provide guidance on debt consolidation options, and create a budget that aligns with your business goals.

    Last words..

    Managing debt can be stressful and challenging for any small business owner, and we understand that. Remember you’re not alone in facing the challenges of business debt management. Countless small business owners grapple with these issues and navigate their way to financial stability and success.

    We are here to help. Feel free to call or send us a message.

    S & H Tax Accountants understand that taking care of your debt can be difficult at times, however it is very important to understand that debt can always be improved by using certain strategies like the ones listed above. Our accounting firm can help those who need assistance to shorten or even eliminate their debt. Book a consultation today with our experienced clients, so that you can get manage your business debt in the most efficient manner. Call us on 03 8759 5532 or you can email us on info@sahtax.com.au

     

  • Avoid These 5 Costly Accounting Mistakes

    Avoid These 5 Costly Accounting Mistakes

    A Canadian bank recently surveyed over 500 small business owners about what they love and hate most about owning their own business.

    Unsurprisingly, flexibility and feeling in control ranked first in the “love” category. Meanwhile, almost 60% said bookkeeping was hands-down their most hated task.

    Most business owners understand that effective financial management is key to their success. But lack of knowledge, frustration, and even avoidance can add up to accounting mistakes that derail future growth.

    Protect your business and reduce your stress by avoiding these five costly accounting errors.

    Mixing personal and professional finances

    From day one, business owners should have a separate bank account in which to deposit their income and pay their business expenses.

    It’s also crucial to designate a business-only credit card. Come tax time, separate statements will make submitting claimable expenses quick and easy, while reducing the risk of a painful audit.

    Letting accounts receivable slide

    It’s frightening easy to lose track of which customers have paid you and which clients are late. Implement a strict policy and schedule for tracking accounts receivable and pursuing unpaid invoices.

    • ask customers to pay at the point of purchase or no more than 30 days later;
    • contact clients to confirm they have received your invoice and to agree on a payment date;
    • follow up immediately when payment dates are missed; and
    • keep accurate, up-to-date records of each client’s payment history.

    Investing in a cloud-based accounting solution can make AR a breeze by automating your monthly invoicing – and contacting late payers with a reminder email.

    Not using tech to track your expenses

    Tired of chasing down missing receipts and struggling to justify claims come tax time? There’s an app for that! Choose from numerous options, such as Receipt Bank, Shoeboxed or Expensify.

    Many of these apps generate expense reports that are easy to share, or sync automatically with accounting software.
    Neglecting to strategize for long-term growth

    Effective accounting means managing day-to-day finances while making provisions for future growth. Software and cloud-based solutions offer easy ways to track your financials, but they also generate reports and provide analytic tools SMB owners can use for future forecasting.

    Familiarize yourself with the reports your software can generate to track long-term trends, identify and mitigate risk, and discover new ways to increase profitability. Talk to your accountant about which reports and metrics are most important for your particular business and how to utilize them.

    Final tip: Don’t go it alone

    Small business owners are rarely trained accountants. Don’t try to manage your company’s finances all by yourself.

    Collaborate with a trusted professional, invest in quality IT solutions, and spend some time familiarizing yourself with relevant tools and trends.

    You’ll feel empowered, which is step one to forging a more love-filled relationship with small business accounting!

     

    Handling a business can be difficult, as there so many aspects to it. It is clear that many businesses generally do not enjoy the task of bookkeeping, as it can be tedious at times. S & H Tax Accountants are here to help, our team is well-qualified and rather experienced. We aim to provide our clients with the best level of service possible, as we offer bookkeeping services and all other tax services as well. To book an appointment now, you can call us at 03 8759 5532 or email us at info@sahtax.com.au

  • Adapting your small business to a slower economy – tips and advice

    Adapting your small business to a slower economy – tips and advice

    It’s hard to go a day without reading something in the news about the state of the economy. Whether it’s interest rates rising or the cost of living, there’s no getting around the fact that in 2023 there are many doing it tougher than a few years ago. But while there are some economic challenges for individuals and businesses, it’s important to not go too far down the rabbit hole. Remember – economic conditions are forever changing, and one thing history tells us is that things can change at any point.

    If you’re concerned about the economy’s impact on your business or have already experienced its effects, read on. In this article, we’ll explore ways to adapt and improve your business during slowdowns, so that when the market bounces back, your business can emerge stronger.

    Take the time to really understand your market conditions

    The news can often overwhelm us with negativity. While it’s crucial to stay informed, consuming every opinion piece and social media commentary can lead to a negative mindset. Instead, focus on your own business and industry to identify the real challenges you’re facing. Research might even uncover some opportunities too.

    Consider the following:

    • Have there been changes in your industry or customer behaviour?
    • Can you identify any new, untapped opportunities?
    • Are there any emerging trends that you can take advantage of?

    Understanding your business’ position in the market and identifying opportunities to differentiate from competitors is crucial. It guides your marketing budget allocation and shapes your products/services.

    A chance to improve for efficiency

    If your business is experiencing a slowdown and you have some extra time, it’s a great opportunity to work on improving your business. Many business owners find it challenging to make improvement initiatives a priority over customer or administrative tasks, but now you can focus on executing those long-standing plans. These activities can make your operations more efficient, and this will be even more beneficial once things pick up again.

    Documenting processes

    Capturing your business processes is a valuable way to improve efficiency. Documenting procedures and creating visual aids can help onboard new team members faster and safeguard against knowledge loss. It’s essential to protect your business from the risk of key personnel leaving.

    Automation

    AI and automation are changing everything. Explore how these technologies are used in your industry to streamline tasks like data entry, reporting, and inventory management.

    Update old systems

    Migrating from one system to another can be complex and time-consuming. Businesses often stick with legacy systems for longer than necessary. But new tools can speed up daily tasks, benefitting long-term business growth. These new tools are good for business long term.

    Exploring different revenue streams

    Consider exploring additional offerings if there is a decline in demand for your core services or products.

    Service related businesses

    Consider your team’s existing knowledge. Can you broaden your work to capture more customers? For example, if you’re a builder who completes new builds, think about how you can communicate your skills for property maintenance, custom carpentry, outdoor living spaces, or project consulting. Your skills and industry knowledge can be used in various ways – just take some time to think about it.

    Product related businesses

    Consider expanding your product offerings to include items that align with your brand and are cost-effective to source. This can help diversify your revenue streams, keep your brand current, and provide marketing opportunities through email campaigns.

    Nurture customer relationships

    Focus on your existing loyal customers as a top priority, as their satisfaction is key to maintaining a successful business. While acquiring new customers is important, remember that the cost of acquiring them is often higher than retaining the ones you already have. In today’s digital age, providing great customer experiences is crucial, as online testimonials and recommendations greatly influence potential customers. Take advantage of any quiet periods to add spontaneous value to your loyal customers, whether it’s offering advice, checking in on their satisfaction, or surprising them with something free. Going the extra mile for your customers and thinking beyond transactions will earn you their trust and respect, resulting in positive word-of-mouth and referrals that can significantly impact your long-term success.

    Expanding B2B opportunities

    Consider if your business, focused on serving end users, could also extend its offering to cater to other businesses. This can provide a consistent revenue stream with less time and management compared to direct consumer engagements. Assess whether pricing for businesses could be lower than for consumers. Estimate potential revenue against reduced margin. If the numbers align, explore this opportunity while maintaining your core business.

    Keep track of your finances and budget

    Regularly reviewing your finances is crucial to improving your business’s health. During quieter periods, you have the opportunity to implement cost-saving practices that can have a lasting impact. For example, consider reviewing your suppliers for cheaper options to save time and money. Conducting a comprehensive expense review can unlock savings without significant disruption.

    Understand natural business cycles

    Keep calm and avoid making hasty decisions based on short-term events. While it can be difficult to ignore the constant commentary on the economy, it’s in your business’s best interest to rely on concrete facts and data when making decisions. Having a long-term business plan serves as a reference point for guiding your choices.

     

    If you need help balancing short-term actions with long-term goals, reach out to our team for advice.

    S & H Accountants understand that it can be difficult for small businesses to have the ability to easily adapt to various changes in the economy. However, S & H Accountants offer services to businesses which assists them in their day to day activities, this may include the document recording or even the use of accounting software. Our team consists of well-qualified, vastly experienced and extremely professional accountants. We always aim to provide the best possible level of services to our clients. Make a booking today with S & H Accounting, call us on 03 8759 5532 or you can email us on info@sahtax.com.au

     

  • Superannuation Guarantee Increase – 1 July 2023

    Superannuation Guarantee Increase – 1 July 2023

    For small business owners and payroll managers, staying up-to-date on the latest superannuation changes is essential. And, with the Australian Superannuation Guarantee (SG) set to increase from 10.5% to 11% from 1st July 2023, it’s important to understand what this means and how it could affect your business. As an employer, this increase, and subsequent increases, will have an impact on your payroll management and accounting systems.

    Here’s what you need to know about the SG increase.

    What is Changing with the Australian SG and When?

    Effective from 1st July 2023, the SG rate will increase to 11% of an employee’s OTE (Ordinary Time Earnings). This increase is part of a gradual, planned increase that will see the SG rate rise to 12% by 2025.

    Who Will be Affected by the SG Increase?

    All employers who pay their employees a wage or salary are required to make SG payments on their behalf. Therefore, all businesses employing staff in Australia will be affected by the SG increase.

    The extent to which your payroll management is affected will depend on how your employment contracts are structured, most commonly being a base salary plus Super or a total remuneration package that includes Super.

    What Can You Do to Prepare for the Australian SG Increase?

    If you’re a small business owner or payroll manager, it’s important to start preparing for the SG increase now. Key steps you can take include:

    • Reviewing your payroll systems and software to ensure they are set up correctly to calculate and apply the SG increase
    • Budgeting for the increased SG payments and adjusting your cash flow projections accordingly
    • Check your specific obligations on the ATO website

    The Australian Superannuation Guarantee increase is an important change that will impact all businesses employing staff in Australia.  We can help you understand your obligations and make sure you remain compliant so please get in touch if you need advice around this.

    The Australian Superannuation Guarantee will impact all businesses in Australia thus, S & H Tax Accountants are here to help you. We understand that with this new increase, there will need to be changes in the payroll system as well as being financially prepared for this increase. Book an Appointment today with S & H Tax Accountants, you can call us on 03 8759 5532 or you can email us at info@sahtax.com.au.

  • What is a balance sheet and how does it help me manage my finances?

    What is a balance sheet and how does it help me manage my finances?

    You’ve likely heard the phrase “in the black.” Your balance sheet is the tool that shows you whether your business is indeed “in the black.”

    Your balance sheet includes a section for your assets (things you own or will receive that have value), your liabilities (what you owe to others) and equity (retained earnings and funds from investors) at a specific time. The relationship between these three sections shows how financially healthy your company is. If your assets outweigh your liabilities, you’re in the black. However, if you have more liabilities than assets, you’re in the red – which is undesirable.

    But how does a balance sheet help you to manage your finances? Read on to find out.

    Track your assets and liabilities over time

    Most companies prepare a balance sheet quarterly, but you can certainly complete yours more or less frequently than that. The key is to prepare one regularly to understand how you perform over time.

    When you have a set of successive balance sheets, you can clearly see how your assets and liabilities measure up on average. For example, you may have had a costly period with critical equipment requiring replacement or repair. That balance sheet might not look so good if that’s the only one you have to interpret.

    But when measured against other balance sheets, you may see that it was just an anomaly from which you have handily recovered. Perhaps the improvements even helped you to earn more money once they were complete. There’s no way to know unless you use several balance sheets together.

    Measure risk

    Your assets act as security for your business because if you found yourself in a situation where you had to, you could sell them to cover your debts. This is how you determine how liquid your business is. Your balance sheet easily identifies how much you own and how much you owe, so you have an easy way of assessing your liquidity.

    This also enables you to determine how much risk your business faces. If you find you couldn’t readily pay what you owe by liquidating your assets, it would be clear that you couldn’t currently take on any more risk by borrowing money or buying something new.

    Calculate decisions

    Similarly, your balance sheet will help you see if now is a good time to spend your money or if you should hold off. For example, if your business is healthy, with plenty more assets than liabilities and easily able to pay shareholders, that would indicate a good time to make some capital improvements.

    If you find things more precarious, your balance sheet will guide you to hold off on making any major purchasing decisions until you’re in better shape. It may even indicate you need to find a way to offload some debt to get back on track.

    Use with other financial statements

    Your balance sheet helps you see your assets and liabilities clearly. It becomes even more useful when used with the other two main financial statements: income statements and cash flow statements.

    An income statement (which may also be called a profit and loss statement or an earnings statement) shows your revenues, expenses, and profitability. It tells you what you earn and the costs you incur to make that revenue.

    Your cash flow statement will show what money came in and went out of your business during a specified period. Its primary purpose is to highlight your ability to operate based on how money moves through your business.

    Together, these three financial statements give you a clear picture of how your company operates and how financially healthy it is.

    Final thoughts

    If you’re unfamiliar with financial statements, a balance sheet can initially seem intimidating – especially if it shows that you’re in the red. However, once you prepare one for your business, you will find it invaluable to help you see where you stand and what you can do about it.

    Get in touch to have your balance sheet questions answered and learn more about how we can help you prepare this critical financial statement.

     

    Recording your financial information is a useful way of identifying your financial position. S & H Tax Accountants are able to assist you with recording your financial information accurately as well as being able to guide and assist you to reach your financial goals. Whether it be a balance sheet or income statement, our accountants can do it all. Book an appointment today at S & H Tax Accountants, call us at 03 8759 5532.

  • How small start-ups can level the playing field against established competitors

    How small start-ups can level the playing field against established competitors

    Starting a small business is both exciting and daunting. While the entrepreneurial spirit may drive you to take the leap of faith, the reality is that you may be entering a market that has already attracted some large competitors.

    It can be intimidating to think about competing against larger, more established competitors, but it’s not impossible. Here are some steps you can take to help your small business take on larger, more established companies.

    1. Identify your unique selling proposition (USP)

    Your USP is what sets you apart from everyone else. That USP could be the quality of your product, your excellent customer service, your laser-like focus on one area of expertise, or your innovative approach to solving a problem.

    When identifying your USP, ask yourself what it is that makes you different. Explore why you felt there was a need for your offering–what pain point are you solving that others aren’t already solving? Did you create this business because you noticed a gap in the market? Did you see a problem that didn’t yet have a solution?

    Take time to identify what makes your business unique and use that to your advantage. Highlight your USP in your branding and marketing strategies.

    2. Focus on your niche

    One of the advantages of being a small business is you can be more niched than larger companies. Focus on a specific niche within your industry and become an expert in that area. By honing in on a particular area or pain point, you can create a loyal customer base that appreciates your expertise and the value you bring to the market.

    3. Build strong relationships with your customers

    As a small business owner, you have the opportunity to build personal relationships with your customers. Take the time to get to know your customers and their needs. Provide excellent customer service and go the extra mile to make them feel valued. Ask them what they’d like to see you offer, or how you can serve them better.

    Clients and customers like the personal touch, and they appreciate feeling seen and understood. When you can have a one-on-one relationship with your customers, they’re more likely to stick with you.

    4. Embrace technology

    Technology can level the playing field for small businesses. You can use technology to automate processes, streamline operations, and reach customers online. Embrace social media and digital marketing to expand your reach and build your brand. Use tools like customer relationship management (CRM) software to manage your customer interactions and track your sales pipeline.

    Technology isn’t just for the big companies. Anyone can use it to improve productivity and enhance the customer experience. By leveraging technology, you can compete with larger companies without breaking the bank.

    5. Collaborate with other small businesses

    Collaborating with other small businesses can help you reach a wider audience and gain credibility. Look for opportunities to work with businesses that complement your products or services. For example, if you run a boutique clothing store, you could collaborate with a local shoemaker to offer a bundled product. By working together, you can tap into each other’s customer base and create a mutually beneficial relationship.

    6. Offer excellent value

    Large companies may have more resources, but that doesn’t mean they always offer the best value. As a small business, you can provide excellent value by offering personal service, high-quality products, and competitive pricing. Make sure you price your products and services competitively while still maintaining profitability.

    By offering excellent value, you can build a loyal customer base that will choose your business over larger competitors.

    7. Stay nimble

    A huge advantage of being a small business is your ability to pivot and adapt. You can make an adjustment in much less time than a large company can. Traditionally, large companies stay more focused on their traditional offerings, preferring not to experiment or make changes, which gives you an edge.

    Stay nimble and be willing to adjust your strategy as needed. Keep an eye on market trends and be open to new opportunities. As you become more of an expert in your field you’ll be able to anticipate changes in the market.

    Don’t be afraid to experiment and try new things. By staying nimble, you can stay ahead of the competition and adapt to changing market conditions.

    By identifying your USP, focusing on your niche, building strong relationships with your customers, embracing technology, collaborating with other small businesses, offering excellent value, and staying nimble, you can take on the big players in your industry. Remember, success doesn’t happen overnight. It takes hard work, dedication, and a willingness to learn and adapt. Keep pushing forward, and you’ll get there.

    We understand that it can be difficult to start-up a business, that is why we here at S & H Tax Accountants are here to help. Our accountants are well-qualified and experienced and thus, are able to give accurate advice and help their clients. We aim to provide the best possible service to our clients such as collaboration with small businesses and ways to make an excellent customer base. Book an appointment with S & H Tax Accountants call us at 03 8759 5532 or email us at info@sahtax.com.au.

  • Bookkeeping Basics for Small Business Owners

    Bookkeeping Basics for Small Business Owners

    On average, small business owners spend 10 hours each week recording, organizing, and processing financial transactions – everything from accounts receivable and payable to employee payments, expense receipts, and supplier invoices.

    While the process may be time-consuming (and tedious!), effective bookkeeping is the foundation of sound financial management – which in turn, is the lifeblood of your business.

    Feeling overwhelmed by mountains of paperwork and complex calculations? Here are three bookkeeping basics to help ensure a healthy financial future for your small business.

    Faithfully track expenses

    Accurate and consistent expense tracking is crucial for claiming tax deductions and lowering your overall tax bill. Plus, analyzing expenses can offer crucial insights into spending patterns and the overall profitability of your small business.

    Business Finance Man Calculating Budget Numbers, Invoices And Fi

    Small business owners should consider using a mobile app for simple, consistent expense tracking. Options like Expensify and Receipt Bank help do away with manual data entry with automated functions, including:

    • Receipt data capture via your smartphone’s camera (no need to hold onto paper receipts, which can get lost or misfiled);
    • Synchronization with your phone’s GPS to track mileage of business travel; and
    • Importing bank and credit card data, plus integration with accounting software.

    Systematic invoicing and filing

    Efficient invoicing is about more than ensuring you get paid in a timely fashion. An invoice is an official record of the terms of each transaction and must be completed accurately to avoid errors in your bookkeeping process.

    Here are a few tips for professional invoicing:

    • Ensure each invoice includes all the important details: contact information, a tracking number, a detailed list of products or services rendered, and a breakdown of the total amount due;
    • Provide an electronic receipt to reduce waste and create a “paper trail” if there’s ever a dispute; and
    • Maintain an invoice-filing system that records when you sent the invoice, to whom, when payment was made, and any reminders sent out.

    An online invoicing tool can streamline this aspect of your bookkeeping process and provide an efficient backup filing system.

    Save time with accounting software

    By law, every business is required to keep organized and timely financial records. However, manually posting income and expenses to ledgers and journals is time-consuming – not to mention stressful for the math-averse.

    Shave some time (and stress) off your weekly bookkeeping with an all-in-one accounting software solution like Xero, QuickBooks, ClearBooks, or KashFlow.

    Online bookkeeping offers numerous advantages, such as:

    • Instant reports and real-time insights on profits and loss, customer accounts, payroll – and your overall financial “big picture”;
    • Simplified data entry so you can collate and print invoices, purchase orders, and payroll much faster than with manual methods; and
    • Improved accuracy through automation (once data is entered, the software handles all subsequent calculations and processes – including invoicing).

    When it comes to accounting, vigilance is the key to mitigating risk and ensuring the long-term profitability of your small business. Be sure to set aside time each day, week, and month to update and review your books to catch any red flags and ensure your finances are on track. 

    At S & H Tax Accountants, we understand that keeping a record of your transactions, organizing your documents and keeping your receipts can be very tiring. That is why we are here to provide you with the highest level of service possible. We have well-qualified staff members who are able to help you. Book an appointment today, call us at 03 8759 5532 or email us at info@sahtax.com.au.

     

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