In today’s fast paced environment, knowing how to start and run your business is key to success. This article will cover five simple checks that will question the efficiency of your processes and help you to reach your business goals.
Starting a business is in itself a very big decision. Having the right people to assist you with a business plan, design a structure and obtain the financing required to start your business is essential in determining the profitability and viability of your proposed business venture. No one can predict the future however starting with a good plan and advice from knowledgeable advisors can help you get a head starting in your business.
Many business owners do not understand why they need to register for GST, lodge activity statements or even make payments to the ATO. Firstly, you must register for GST if you are carrying on a business and your projected annual turnover is greater $75,000. The GST you collect does not belong to you – It belongs to the Tax office. Therefore, you must be able to pay this money (less any GST credits you can claim from paying for a GST item) to the ATO by the due date of your activity statement. There are two methods available under the GST tax system: Cash or Accruals, depending on eligibility criteria. Deciding on the right method can help you with your day to day cash flow of the business. For instance, on an accruals method you may be liable to pay the GST portion of your sales before you have even collected the money, creating undue pressure on your cash flow.
The first few months of the start of the operation are normally the most chaotic. Money flows out of the bank account into a black hole and you wonder six months down the track “How did that happen? Or, what did I pay for?” It is therefore a very good idea to manage all you payments and have a proper record system of all the invoices paid, bank & credit card statements along with cheque butts. This really simple mechanism of record keeping will not only save you time when you visit you accountant for the preparation of your quarterly BAS or end of year financials but also ensure your compliance with the Australian Taxation Office.
The undoubtedly most important factor whilst running your business is cash flow. It is the life of your business and it is therefore crucial to have a cash flow budget. Plan for the everyday business running expenses and also to meet your tax and super obligations. Any shortfall should trigger a cash management analysis in order to identify the availability of cash and thus remedy the situation. There may be many reasons for cash shortages: Is there a decline in sales? Have the debtors paid on time? Are wages paid draining your funds? Accordingly, a cash flow budget will highlight all the issues before it is too late for your business.
When the business is profitable, we instinctively, think about expanding by employing more staff, opening a new store or even borrow funds to purchase income-producing assets. Whilst bank balances and projected cash flow provide a good overview, it is imperative that we look at macroeconomics factors such as inflation, customer confidence and employment. The most appropriate action will be to contact your accountant and together do an analysis of your business. The cost in getting proper guidance in this area is invaluable.
If you would like to receive more information or arrange an appointment to discuss in more detail the state of your business, please contact our office on (03) 9798 6622 or email firstname.lastname@example.org.
About the Author
Sandrine has been with Zimsen Partners Pty Ltd for almost a year and is one of the South-East Melbourne’s most respected accounting firms.
Her passion is partnering with business owners to bring them closer to their goals.
This article was produced by Zimsen Partners. It is intended to provide general information only in summary format on accounting, business advisory and taxation issues. It does not constitute accounting advice, and should not be relied on as such.