In this article we will give you 10 advices which you could follow when preparing accounts for your business.
We understand that as a small business owner, you are packed with work and busy managing your business. With all that in mind, maintaining and preparing accounting records by yourself can be stressful.
1. Keep records neat and tidy
Keeping manual records can be cheaper than a maintaining a computerized system. If you are keeping manual records, keep them neat and tidy so that you can track them later on.
Keep your documents organized so that you don’t have to waste time searching for them. Collect all your business related receipts and file them according to the date.
It doesn’t matter how much the receipt is for. If it is related to the business keep them with you.
Further make sure to keep the records in detailed as possible so that you can trace them later. This will help you to trace the business expenditure and prepare the financial statements.
2. Maintain two separate bank accounts
Maintaining a single bank account for personal and business dealings can be convenient at the beginning. However when the payments get piled up, it can be difficult and takes more time to differentiate the business transactions from personal transactions.
Keep your personal transactions away from the business dealings. Maintain two separate accounts so that when you get the monthly statement for the business account, you can trace them easily.
3. Keep the books up to date
Don’t wait until the last moment to update your books. The books are important to keep track of the performance of your business.
It would be easy to maintain the books if you use an accounting software. The software will update the books as and when you add the data.
However if you are using manual records, reserve a scheduled time every week to update the books.
When you keep the books up to date you don’t have to be stressed at the year end to complete them. Updating your books every now and then will help you to file for taxes at the year end.
4. Choose an accounting method
It is important to select an accounting method at the startup itself. The available accounting methods are the cash basis and accrual basis. The two systems will depend on how you treat the income in a given year.
Cash basis – Recognizes the income only when cash is received
Accrual basis – Recognizes the income if it is due in the given year even if cash is not received yet.
This will be a consistent accounting approach for tax purposes.
5. Learn the tax rules
Not every tax rule is relevant for your business. However you must learn all the tax rules which is relevant for your business. The tax rules may differ according to the business structure, the industry etc.
If you are not sure about the tax regulations which are relevant for you, then get professional consultations to avoid legal issues.
Always stay updated about tax deadlines and pay taxes on time.
6. Use an accounting and invoicing software
Using an automated software for accounting and invoicing can be expensive, but it can be really convenient and helps to minimize the hassle.
The software will help to keep proper records and update the books accordingly. You don’t have to waste your time and energy entering the records manually and updating the books if you use a software.
The level of accuracy will be high, if you use accounting and invoicing softwares.
7. Keep track of your inventory
Misplacing or theft of inventory can be serious and untraceable issue for a business if it does not maintain proper inventory records. Keep note of the date on which the inventory was purchased, purchased prices, stock number, date and price it was sold for.
This will help you to keep track of the inventory and minimize the risk of theft.
8. Plan for major expenses and taxes
You must always anticipate for unexpected expenditure on maintenance, repairing and upgrading of the assets which are required for the business. Further you must be prepared to pay a percentage of the yearly profits as taxes on the given deadline.
The best advice is to save a portion of your monthly income as a reserve to meet the major expenses in the future.
9. Follow up on accounts receivables
You will not get paid just because you issued an invoice. Maintain records of the credit sales made. Follow up on the debtors with kind reminders and make sure that they pay on time.
These records will help to avoid overpaying the taxes and maintain accurate accounting records as per the accounting method you chose.
10. Prepare financial statements
It is always advisable to prepare all the financial statements including income statement, balance sheet and cash flow statement. These statements will indicate the financial health of the business.
If you are unable to prepare them all, then at least try to prepare the income statement. You must know whether the business is making profits or losses. The Income statement or the profit and loss statement will show you the profitability of the business.
The income statement will also be useful when filing for taxes.
Contact SPS
If you still feel that you need help to maintain accounting records for your business, then our team is ready to help.
Don’t worry about the scale of your business. We value every business and no business is too small for us.
We are professionals in accounting and business consultations in Narre Warren. If you are looking for a professional expert to handle your books, then please don’t hesitate to contact us.
It can be difficult for a contractor to maintain the books and do the taxes for the business by his own. Especially since a contractor would spend most of his time on the road and on construction sites.
A contractor would carry out several projects at the same time with unique features and different completion dates. Therefore it is important to maintain the books to keep track of each job and identify how it affects the company as a whole.
This article will give you a brief idea why hiring an experienced specialist to handle your books and tax accounting function could be the best for your construction business.
Importance of Hiring an Experienced Specialist
1. Helps you to focus more on your business
When a third party specialist handles your books and tax accounting function, you can give more attention to your business.
2. Provide professional advices
An experienced specialist firm will provide you professional advices to stay on top of your business and industry.
3. Keeps you in-line with new tax laws and regulations
Laws regulating the construction industry can be complex in Australia. A professional specialist will keep you in-line with changing legal framework, and keeps you away from possible legal issues.
4. It is cost effective
It can be cost effective to hire a third party specialist to handle your books and taxations rather than recruiting a permanent team for the business.
5. Alert you about the frauds and shortcomings
Third party service providers do not have control over your business. Therefore they cannot get involved in frauds. However a professional specialist will detect them and inform you to take corrective measures.
6. Avoids the hassle at the year end
Filing for taxes and finalizing your books at the year end can be hectic. A skilled professional will ease your mind by managing them on your behalf.
Why SPS Business Consultants
If you are looking for a specialist to handle your books and tax accounting function, then we can help you. We are specialists in tax accounting and bookkeeping in the construction industry. Our team can help you to stay ahead of your business and the competitors.
Here’s why our customers trust us to get their job done perfectly.
1. Years of experience
We have been in the industry for more than 20 years of combined experience. With the experience gathered in taxation and bookkeeping, we have helped many small and medium scale businesses in Narre Warren and Melbourne to achieve outstanding results.
2. Strong client base
We have a client base of more than 300 happy customers who have trusted and recommended our business.
3. Fixed rates
Unlike other accountants, we charge a fixed rate for our services. There are no hidden costs. It doesn’t matter how complex your construction business is, we can handle it. Our proposals are tailored according to your business
4. Affordable service
We provide a high quality service at an affordable rate. Our clients will always receive value for the money they pay.
5. Deal with the ATO
Dealing with the tax office can be hectic. But don’t worry we will do it on your behalf. We will make sure that you never miss the deadline to lodge the tax file so that you don’t face any legal issues.
6. Catch up work
It doesn’t matter if you have never done bookkeeping before. We will go through all your records to prepare your books and get you back on the track.
7. Accredited for cloud best practices
We value and respect your privacy. We have protected the privacy of our clients with utmost confidentiality. This is why we have received the “Certificate of Cloud Best Practice” for the systems we follow.
Contact SPS
We guarantee you that we are the best bookkeeping and tax accounting solution for construction contractors in Narre Warren and Melbourne. We will also provide you with the best consultations on financial and business planning.
Don’t worry about your business structure, we have tailor made packages to suit your own business. We can help you to stay ahead of your business by helping you to manage your finances and taxes.
Do you know why the Australian Taxation Office (ATO) would issue a Director Penalty Notice (DPN)? The directors have the legal responsibility to ensure that their company meets the taxation obligations.
Under several circumstances the directors will be held personally liable to compensate for the due taxation obligations. Therefore the directors must be vigilant about the obligations of the company towards the government, to avoid legal issues.
This article will give you a brief insight about the DPN and some of the most asked questions related to it.
What is a Director Penalty Notice?
It’s a notice sent by the ATO to the directors of a company, making them personally liable for the unpaid tax obligations of the company. The DPN outlines the unpaid amounts and remission options available to you.
Why would ATO send a Director Penalty Notice?
The ATO must recover the unpaid taxes and the due penalties from the directors of the company if the following obligations are not met.
Pay As You Go (PAYG) withholding
Super Guarantee Charge (SGC)
Goods and Services Tax (GST)
Luxury Car Tax (LCT)
Wine Equalisation Tax (WET)
For this purpose the ATO will issue a DPN notifying you about the unpaid amounts and mitigation options available.
What are the types of DPNs?
The ATO will basically issue two types of notices depending on the degree of offence made by the company.
The date that ATO post or leave the DPN is considered as the date the notice is given to you.
The ATO will use your address registered with Australian Securities & Investment Commission (ASIC). Otherwise they will use the last known address to send the DPN.
1. Traditional 21 day notice (Non-lockdown)
This notice is sent to the directors when directors have willing taken the steps to submit the following statements on given time periods.
Business Activity Statement lodged within 3 months of its due date.
Super Guarantee Charge statement lodged within 28 days of the end of the relevant quarter.
A non-lockdown notice will not hold you liable for the company’s debts until 21 days has passed from the notice date. Further you must take one of the following options within the 21 days to ensure that you have taken reasonable actions and avoid penalties.
Paying the due debt.
Begin to wind up the company (As per the Corporations Act 2001).
Appointing an administrator as per the section 436A, 436B or 436C of the Corporations Act 2001.
Appointing a small business restructuring practitioner.
2. Lockdown notice
This notice is sent when directors have not taken the steps to submit the above statements within the stipulated time period. If a director receives a lockdown notice he will immediately be held liable for the company’s debts without a 21 day grace period.
When you receive a lockdown notice you have to pay the debt in full. You cannot place the company under voluntary administration or go into liquidation under lockdown notice. Be mindful that you can also receive a lockdown notice when it’s under voluntary administration or liquidation.
Who will be issued a DPN?
As the name suggests, a DPN will be issued to the directors of the company. However the ATO could issue DPNs to the existing directors, new directors and even resigned directors under certain circumstances.
1. Existing directors
Existing directors have the obligation to submit the due statements and pay the taxes on time. The ATO will hold the existing directors responsible for not taking the corrective measures.
2. New directors
The new directors must watch out for the unpaid taxes and obligations of a company when joining it. They can be held liable for the unmet obligations of the company which occurred before the appointment. However the new directors must take one of the options as mentioned above under the non-lockdown DPN within 30 days of appointment to avoid the penalties.
3. Retired directors
Even though you have retired as a director from the company, you will be held responsible for the obligations that were due before your resignation date. They will also be liable if the withholding events leading to liabilities occurred when they were active directors.
What are the defenses against DPNs?
There are several defenses against the DPN as mentioned in the regime, which excludes the directors from personal liability. These defenses can be:
Facing an illness or any other acceptable reason which prevented you from taking part in the management of the company during the relevant period.
Took all the reasonable steps to ensure that the obligations of the company are met. Or taken one of the following options.
Paying the due debt.
Begin to wind up the company (As per the Corporations Act 2001).
Appointing an administrator as per the section 436A, 436B or 436C of the Corporations Act 2001.
Appointing a small business restructuring practitioner.
How will ATO recover the penalties?
Issues garnishee orders- This is an order which make it compulsory for the individual or companies who holds your money on your behalf, to remit that money directly to ATO. These entities can be banks, your employer, people who owe you money.
Initiating legal actions against you to recover the penalties.
Offset your penalties against your tax credits.
What are the consequences of non-compliance?
The DPN will hold the directors personally liable. Therefore the penalties and unpaid amounts will be recovered directly from the directors or their assets.
Key actions to avoid legal offences
Submit the BAS and Superannuation guarantee statement on time
Ensure that ASIC details are correct and up to date
Be proactive and get advices on time from experts when fulfilling the obligations against the government
Remain informed about PAYG, net GST and SGC payment obligations
If you are planning to start a new business, you should know that there are four types of business structures. It is important to identify the most suitable business structure for your business before starting it.
Each business structure has different characteristics varying from each other. These differences can be in terms of business registration process, taxation conditions, profit sharing and so on.
This article will give you a brief idea about the characteristics of the main business structures in Australia. Our goal is to help you to choose the most suitable structure for your business by yourself.
1. Sole trader businesses
This is the simplest form of business structure to start. A sole trader business will be owned by a single individual, hence the decisions will be made by the owner.
Following are the characteristics of a sole trader business.
Australian Business Number
Must apply for an ABN and use your ABN for all your business dealings
Start up
Quick, easy and cheap
Decision making and control
The decision making and control will solely be in the hand of the owner.
Reporting requirements
Has fewer reporting requirements and has a low cost structure.
Separate bank account
A separate bank account is not essential, however it is recommended.
Liability of the business
Liabilities of the business are unlimited. This means that the owners personal assets will also be used to settle the remaining liabilities if needed.
Profit share
The owner can take the entire profit of the business after paying the due taxes.
Business taxes
The due taxes can be filed under the individual tax file of the owner.
Tax File Number
Not required
Tax rate
Same income tax rates as individual taxpayers. You may be eligible for the small business tax offset.
Registration for GST
Registration is required if your annual GST turnover is $75,000 or more.
Superannuation
You are responsible to make the relevant super contributions of your employees on their behalf. You can also pay yourself a super payment, into the relevant super account.
2. Partnerships
Partnership is an entity which is started by 2 or more individuals with an agreement to share the control, profits and losses etc.
A written partnership agreement is recommended when starting the business.
Following are the characteristics of a partnership business.
Australian Business Number
Must apply for an ABN and use your ABN for all your business dealings.
Start up
Higher formalities than sole trader business but still quick, easy and cheap.
Decision making and control
The decision making and control will be shared by the partners as per the partnership agreement.
Reporting requirements
Have minimal reporting requirements.
Separate bank account
Required.
Liability of the business
Liabilities of the business are unlimited. The liabilities must be settled with the personal assets of the partners if needed.
Profit share
Partners will share the profits as per the agreement.
Business taxes
Each partner will pay taxes on their share of the partnership profit.
Tax File Number
Required
Tax rate
Same income tax rates as individual taxpayers. You may be eligible for the small business tax offset.
Registration for GST
Registration is required if your annual GST turnover is $75,000 or more.
Superannuation
Partners are responsible for their own superannuation arrangements. But the partnership is responsible for the superannuation of employees.
3. Companies
Companies are the entities which are owned by the shareholders of that entity. There are two types of companies as Public Companies (listed on stock exchange) and Private Companies (not listed on stock exchange).
Companies are treated as a separate person in the face of law.
Following are the characteristics of a company.
Australian Business Number
Must apply for an ABN and use your ABN for all business dealings.
Start up
Complex requirements, takes time to start and expensive.
Decision making and control
The decision making and control will be in the hands of directors but shareholders will own the business.
Reporting requirements
Higher reporting standards and requirements.
Separate bank account
Required.
Liability of the business
Liabilities will be limited to the assets of the business unless a director is legally liable for his actions.
Profit share
Profits will be shared among shareholders, and kept as reserves.
Business taxes
Taxes must be filed annually as a company.
Tax File Number
Required.
Tax rate
Company tax rate.
Registration for GST
Registration is required if your annual GST turnover is $75,000 or more.
Superannuation
Contributions must be paid for the employees including the directors.
4. Trusts
This is where a business is handed over to a legal third party (trustee) with the legal right to run and control the business.
Trustee can be a person or a company. In order to start a Trust the two parties must have a formal agreement.
Australian Business Number
Must apply for an ABN and use your ABN for all business dealings.
Start up
Complex requirements, takes time to start and expensive.
Decision making and control
The decision making and control will be in the hands of trustee.
Reporting requirements
Higher reporting standards and requirements
Profit share
Profits will be shared based on the agreement
Business taxes and rates
May be liable to pay tax depending on the wording of its deed and whether any income the trust earns is distributed to its beneficiaries
Tax File Number
Required
Registration for GST
Registration is required if your annual GST turnover is $75,000 or more.
Superannuation
Contributions must be paid for the employees.
Which business structure should you choose?
Each business structure has different characteristics. You must analyze them carefully before starting your business.
Contact us if you still have doubts to choose a suitable structure. We are professional consultants who can help you to make the right decision. We have helped hundreds of clients to make right decisions which lead them to success.
Tax accounting is crucial for any kind of business, including construction contractors who are liable to pay taxes. If a business fails to declare the revenue and pay the due taxes, then the business and its owners could face legal issues.
The construction businesses must declare the revenues from each project with different agreement terms varying from each other. This could make it challenging for a construction business to maintain the accounting records and file for taxes.
As a result the construction contractors must have a qualified accounting team or should hire a third party accounting service. This article will help you to understand why you should hire a third party tax accounting service rather than having an internal accounting team.
Cost efficient
Recruiting a separate accounting team for the business can be costly. Especially if your business is a small or a medium scale entity. You would have to pay the bonuses and other incentives to the employees in addition to their salaries.
This is not an issue with a third party service. They charge you for the service provided and you can hire them when their services are required. Therefore recruiting a third party accounting service can be cost efficient than having an internal accounting team.
More updated about changes in law
The regulatory bodies change the tax laws and accounting standards every now and then. It can be difficult for you to keep track of all the changes relevant to your business in the legal system.
The third tax accounting services are professionally qualified and has an updated knowledge about the changes in tax laws. They will keep you in line with the law and guide you to avoid legal issues.
Skilled and professional service
Accounting for construction contractors can be challenging and complex. This is since each project is unique from each other and has different conditions in their contracts.
The accounting team must identify this situation and adopt accordingly to report the respective revenues. In such situations the company must have a skilled team with considerable amount of members.
However if you decide to hire a third party tax accounting service, you will be provided with a skilled team. This team has the necessary experience and expertise to handle your tax accounting function according to the situation.
Detect the frauds and shortcomings
A third party accounting services has no control and interest over the internal operations of the business. Therefore they can’t get involved in frauds. On the contrary they will inform about the frauds and shortcomings.
One such shortcoming is under billing, which is a common problem in the construction industry. A professional third party service will detect such short comings early on and inform you to take the necessary measures.
Avoid the hassle at the year end
Financial year end can be stressful and hectic for most of the businesses, especially for construction companies. You have to declare your revenues, file for GST and annual taxes by the year end.
If you do the taxes by yourself, you would be stressed out just to do a function which could easily be outsourced. A professional tax accounting service will ease your mind from the year end hassle. They will help you to report the revenues and file for taxes on time.
Provide professional advice
A professional tax accounting service will have an expert team with the required skills and experience. As a businessman you have to identify and report your incomes accurately so that you don’t under pay or over pay the taxes.
A professional tax accounting service will advise you on how to declare your income so that you can pay the taxes accurately.
These advices can be essential to minimize legal issues and to improve the profitability of the business.
Summary
Calculating the due taxes and paying them on time is important for any kind of business to avoid legal offences. Therefore a business must have a skilled accounting team to report the revenues and file for taxes on time or hire a third party.
If you analyze the above points you will realize that using a tax accounting service can be beneficial for your business. Especially if your entity is in the construction industry operating under small or medium scale.
We are specialists in accounting and business consultations. If you are looking for a professional tax accounting service, we can help you. Our expert team has satisfied hundreds of clients over many successful years of operation. Contact our team for more information.
Are you in a doubt whether to hire a professional bookkeeping service? Regardless your business is sole proprietorship, partnership, or a company in any scale, financial records are highly essential.
Financial records are the fortune tellers of the business sector but with real predictions about the future of the business. The historical data of the business will be analyzed when preparing financial statements which will help to determine whether a business is running towards success or failure.
That is being said, you now know how important it is to maintain financial statements even for a small business. There are various professional bookkeeping services in the market which will help you with the financial statements. Here is why you should hire a professional bookkeeping service.
Helps you to focus more on your business
Your business needs your full attention to operate smoothly. When you outsource the bookkeeping function, then you do not have to be stressed and worry about preparing the financial statements by yourself.
This will save you a lot of time. Which could be used effectively to focus more on the business and work towards achieving the business objectives.
You might lack the necessary expertise
Most of the business owners in the industry does not have a proper background in financial reporting. Therefore they might lack the necessary experience and the expertise to produce the financial statements by their own.
If you lack such expertise then you could make various mistakes and errors when preparing the financial statements.
This could lead to legal issues which can affect your business and you negatively. Under such circumstances, it is better to hire a professional bookkeeping service before getting into trouble.
Can get professional advices
The success of a given business will partly depend on how the owners manage the finance of that business. There can be situations where you need advice of an expert when investing in assets of significant values.
Such decisions can be so crucial that a wrong move can affect the business negatively. A good professional bookkeeping service will assist you with such significant decisions by providing the required financial statements and advice.
Be in-line with the new tax laws and regulatory bodies
The government and the regulatory bodies would change and introduce new financial laws into the business world. It could be difficult as a business owner to keep track of every new law and new changes that is made in the legal system.
A professional bookkeeping service will do this on your behalf. They will track down every new changes in the legal framework and keep you in-line with the law. Therefore there will be minimum legal issues.
Could be cost effective
Having a full time accountant can be costly and high maintenance for a small business. The accountant would be idling most of the time until their service is required.
So why should you pay a significant salary to a permanent accountant when you can simply hire a third party service at the right time.
The cost charged by the bookkeeping service would be relatively lower than the salaries and other allowances paid to a full time accountant.
Avoid the hassle at the year end
A professional bookkeeping service will ease your mind on the year end hassle to report the revenues and filing for taxes.
If you had to do it yourself then you would have to stay up late at night and be stressed out just to do a function which could easily be outsourced.
Therefore a third party bookkeeping service will reduce your stress at the year end and keep you in-line with the law by reporting the revenues and filing for taxes.
Alert you about the frauds and short comings
A third party service has no authority over the internal operations of the business. Hence they cannot involve in frauds. On the contrary they will detect and alert you about any financial frauds by checking the records of the business.
Summary
Third party bookkeeping services can help you and your business in several ways. Most importantly they will take your stress away and keep you in line with the law, so that you will not face any legal issues.
It’s entirely up to you to decide whether to hire a professional bookkeeping service for your own convenience.
If you decide to hire a third party service, our expert team at SPS Business Consultants can help you. We have catered to hundreds of highly satisfied customers over ten successful years of operations. Do not hesitate to contact us for more information.
