Small Businesses: Tips for Improving Your Cash Flow

achievement-18134_1280If you are currently managing a small business, then I am sure that you are always looking for better ways to manage your finances, particularly your cashflow. This article provides some tips on how you can improve your cashflow in terms of managing suppliers, customers, inventory, and forecasting.

Managing Suppliers
When it comes to dealing with your suppliers, the number one tip is to pay them on time as much as possible. If the situation allows, you could also ask them for credit terms, which basically provides an interest-free loan for your business. Likewise, do not hesitate to ask for a discount or a good deal, especially if you order in bulk or make your payments early. In case you are not able to make a payment on time, communicate with your supplier as early as possible in order to set a formal agreement about the matter. Generally, the main purpose here is to maintain a good relationship with your suppliers.

Managing Customers
The secret to effective customer management is good communication. Whenever you have a new customer, always make sure that the payment terms are clear to them, and that your banking information is stated on your invoices. It is also a good idea to conduct a credit check on new customers, just to be sure that you do not run into any problems. In cases of large transactions, do not hesitate to ask for a deposit or set up a progressive payment schedule with your customers. Meanwhile, if you come across non-paying customers, the best thing that you can do is to offer them a payment plan that will eventually clear their debt. More importantly, regardless of the type of of customer that you are dealing with — be friendly.

Managing Inventory
In terms of inventory management, the two things that you need to watch is your profit margin and stock turnaround. Take a look at your products, identify which ones are making the most profit, and focus your time and investments on those items. Similarly, identify which products are “slow-moving” and come up with a plan on how to move them out as fast as possible. The money that you make from moving out these obsolete stock can eventually be used to invest on your more popular products.

Forecasting Your Cashflow
When it comes to forecasting your cashflow, what you can do is to search for a simple forecasting template and learn how to use it. By doing so, you can analyze your sales as well as identify patterns on when sales are at their highest and lowest.

By considering the ways in which you manage your suppliers, customers, and inventory; plus by learning how to do some basic forecasting — you will find that your cashflow will eventually improve in the long run.

The Functions Of Cloud Accounting Software For Small Business

Bookkeeping is one of the aspects of your business you need to focus on so you can seamlessly crunch the numbers. These days, it is easy to reconcile bank statements, access data, generate invoice, prepare reports and collaborate with bookkeepers and accountants using of cloud accounting software.

Bank reconciliation

In the past reconciling bank statements was indeed a long and tedious process as you need to look through your actual bank statements. After which, you need to input the data into the software and reconcile both records manually. This can be such a hassle if you have other business obligations to fulfill. With cloud accounting, it is much easier for you to reconcile bank statements automatically. This is because your data are stored on the cloud. As a result inputting data and manual reconciliations become a thing of the past. Tasks that were used to be accomplished in hours can now be carried out in minutes with just a few clicks. You can even check your records so you will be able to know if there are some discrepancies.

Business performance monitoring

There is a certain level of security if you have the ability to monitor your business in real time. This is made possible by cloud accounting software. If you used to look at a heap of financial reports to find out about the financial health of your business, it is now made easy by cloud accounting. It only takes minutes for you to do a quick performance check especially on critical business numbers. With this ability, it will be easy for you to keep tabs on your finances.

Collaborating with bookkeepers and accountants

Critical business numbers must be interpreted by an accountant. Since accountant heavily rely on financial data to find out if your business is still going well, accuracy should be given importance. Conventional accounting tools will not be able to provide the level of accuracy you are looking for. Thanks to cloud accounting software, it is now easy to collaborate, access essential data and present the information you need using real-time financial data.

Accessing financial data 24/7

Cloud accounting software lets you access your financial data anytime, anywhere. You can preview your most recent activity with just a single click. In fact, you can use your mobile phone if you want to check your business finances. It does not matter what time of the day you want to obtain these important data as cloud accounting can give you 24/7 access.

What Does The Future Of Bookkeeping Look Like

Many small businesses have already adopted cloud accounting software. One of the reasons for the switch is the efficiency it provides especially in terms of data entry and reconciliation. These tasks can be time-consuming and they also demand accuracy. The cloud accounting software ensures these manual tasks are successfully done with ease. However, it cannot be denied that there are still small businesses that prefer to keep their legacy systems. The common reason is the unwillingness to adopt the new cloud culture.

With technology gaining traction on small businesses, cloud accounting software will have a full impact on various business processes. Even when the bookkeeper still handles the data processing work, less time is required to finish the task.

Is this the end of traditional bookkeeping services?

The common misconception of adopting cloud accounting software is that it completely eliminates the human touch from any bookkeeping tasks. The truth is cloud accounting software provides a chance for traditional bookkeepers to increase the number of clients because the tasks that used to take hours can now be done in minutes. It is also a chance for bookkeepers to redefine their role. That said, they need to focus on higher-end functions. These functions include review, regular reporting, interpretation and more.

The changes that are taking place in bookkeeping technology is also a great chance for bookkeepers to re-shape client perception. In the past, clients view bookkeeping services as merely taking care of their tasks and making a payment for the services. Bookkeepers can change this perception by letting clients realise that they can gain financial peace of mind by engaging the services of a bookkeeper.

How to expand traditional bookkeeping services

1. Payroll is probably one of the most complex minefields for clients. It often takes a large chunk of their time because the details need to be accurate. This is a service that can be offered by a traditional bookkeeper. Aside from enabling the client to save time and money, bookkeepers will also reduce the risk of non-compliance.

2. Good debtor management ensures a steady stream of cash for clients. Bookkeepers are the ones keeping the business on its feet as they can identify the clients having trouble collecting their own debts.

3. Software consulting is also beneficial to clients especially when adopting cloud accounting software. Even traditional bookkeepers undergo training so they can make use of the advances in bookkeeping technology. These bookkeepers can also provide sound advice on the cloud options available to the clients.

What Can Businesses Do With Late Payments

An unpaid invoice blurs the lines between collapse and survival. It cannot be denied that late payment is an ongoing problem for many businesses. More often than not, business owners find themselves chasing clients to make them pay, but despite the effort, things are always easier said than done. When clients take longer to pay the bills, it can greatly impact the firm’s cash flow. As a result, it will not be easy for businesses to invest in their operations.

It is no secret that late payment has been considered a problem for many years. If businesses do not have the ability to maintain a steady cash flow, they always end up borrowing money. The problem is, repaying the money owed may not be easy. The good news is, there are still some techniques that businesses can use to meet this challenge and to ensure that firms that owe you money will be able to pay you back.

Require upfront payment

One approach businesses can use to avoid late payments is to require upfront payment. Many companies may expect credit terms to be part of the service and when you take this approach, they may choose not to do business with you. Make sure you set the company’s expectations before requiring upfront payment.

Act promptly when chasing overdue

Be sure to act promptly when chasing the debt once it becomes overdue. If the credit terms are 30 days, you can start to chase the overdue account by issuing a reminder on day 31. The reminder should clearly state when the payment should be made. You can pass the debt over to a reputable debt collection firm if payment is not received by your deadline.

Late payment fees

You can also apply a late payment fee for clients who have failed to settle their debts. However, you need to take a few things into consideration. You need to make sure that the terms and conditions adhere with any legislation or regulation that applies to the industry or business. However, you need to keep in mind that this move may have a negative effect on customers. As a business owner, you need to be prepared to lose customers.

When you face late payments it is important to state your terms and conditions and this only be specified on the initial invoice so your clients will know when you expect to be paid. When dealing with a late payers, you have to ask yourself if you are still making money of this client. If you are losing money, it is about time to let the client go.

Payroll Challenges Most Small Businesses Face

Once you hire staff for your business operation, you need to make sure that you know the details of payroll. Employing someone is not as simple as having a verbal agreement. There should be a fair amount of initial preparation including business relations and business processes. There are many challenges that business owners face when hiring employees, here are the most common.

1. Superannuation Obligations

Superannuation only applies to ordinary time earnings However, superannuation can be applied to commissions, bonuses, loadings and allowances. For contractors that are sole traders, it is also important to make a payment for superannuation depending on the working arrangement’s nature.

Some business owners may consider a worker as a contractor simply because of invoicing and their services are only used sporadically. However, ATO will still consider the employee  for superannuation purposes. Using the online contractor decision tool, the ATO will determine if superannuation still applies to the employee. It is important to pay superannuation on time to avoid penalties. The director can also be held liable for any late super, which is not paid for by the company.

2. Pay Slips and Record Keeping

It is mandatory for business owners to keep records of receipts for a period of 7 years. The records that should be kept include the pay records, leave records, hours worked super contribution, payment details and others. These records must be handled with confidentiality. When it comes to pay slips, employees must receive them within one working day of pay day. In case the employee is on leave, certain information must be included.

3. Taxing Correctly

These days, small business bookkeeping software makes it easy for employers to calculate employees’ tax. However, the software is not capable of correctly taxing unusual payments such as commissions, terminations and bonuses. If these are not properly reviewed, it can lead to either overtaxing or undertaxing employees. For unusual payments, the tax must be calculated manually.

4. Default Superannuation Fund

It is mandatory for employers to provide a choice of superannuation to workers whether they are employees or applicable contractors. In case the worker does not select a fund, superannuation contribution must be paid somewhere. The default fund will be used to make a payment. It is the employer that selects the default fund.

5. Payment Summaries

There are cases when payments to employees are not taxed or set-up correctly. This only implies that you are taxing a worker for a payment, which is considered tax free. The employee may not get a refund even especially if it is reported incorrectly on the annual Payment Summaries. The money that is supposed to be awarded to employees will end up going to the ATO if correct payroll is not set up.

Is There A Way To Keep Your Tax Bill Down

Paying taxes is every business owner’s obligation. Miss a payment and you will get yourself into hot water with the ATO. This is something you do not want to happen. Tax may be deemed as a complicated subject matter because of the responsibilities you need to fulfill. However, it is actually much simpler than you might think. If you are going to do your own research, you will come to realise that there are still ways you can keep your tax bill down.

Pay Superannuation Contributions

It is important for employers to make a payment of superannuation contributions withing 28 days of the end of the quarter. For instance, all June quarter superannuation contributions must be paid by June 30. Doing this can accelerate your tax deduction. You should also keep in mind that the only way a tax deduction will be available is if you have actually paid the contributions, cleared them in the business bank account and the employee’s have received super fund before June 30. It is also necessary to pay any other outstanding amount before year-end.

Pay Bonuses To Your Employees

You have to put a properly executed bonus plan in place if you intend to pay bonuses to your employees. This plan should be executed by June 30 so you will be able to claim the deduction this year. A deduction will be available for employee bonuses if you have incurred the expense before year-end. No deduction will be available if your organisation failed to calculate or authorise the amounts of any bonuses.

Write Off Bad Debts

Insolvency can really hurt a business, but it can be inevitable. If this happens, you can write off a debt for the tax deduction to be available. Bad debts are the ones left unpaid. This is considered to be an allowable deduction so long as it was included as assessable income in a previous or current income year. What you can do is go through your debtors list for you to find out if there are any that you believe cannot make a payment. You need to write off those debts by June 30 so you can claim the deduction this year. You will also have to keep a written record as proof that the debt has been written off.

Pre-Pay Business Expenses

Another way you can get a tax deduction is when you consider pre-paying business expenses. For this deduction, the expenses must cover a period of no more than 12 months. The expenses included in this category are the insurance premiums, internet and telephone services, rent or leasing charges and more.

The Benefits Of Lodging Your Tax Return Online

Filing your tax returns in a timely manner should be observed to avoid penalties and fees. You can also get a good impression from the ATO if you do not fall behind your schedule. Tax returns cover the financial year from July 1 to July 30. The due for lodgement of tax returns is by October 31. There are various ways you can lodge your tax return and the most convenient and easiest way is by using MyTax. Since MyTax is web-based, you have the option to lodge your tax return from any device be it your computer, tablet or smartphone. Make sure you have a myGov account linked to the ATO to use this option.

Why Lodge Online

  • By late August, the information from your bank, employer and government agencies will be pre-filled and what better way to do this than to opt for the online option.
  • When it comes to protecting your sensitive information, myTax uses online banking encryption to ensure that your information is safe from data breaches.
  • Regardless of the time you wish to lodge your tax return, myTax is available 24/7.
  • You can also get your refund within 2 weeks.
  • Even sole traders can take advantage of myTax because it is available for all individuals who wish to lodge their tax return online.

The upgrades and features to expect in 2016 include:

  • fully integrated tools and calculators
  • ability to amend or lodge prior year returns
  • myDeductions data automatically loads into your return
  • new online tools to records capital gains and depreciation
  • helpful messages that will guide you through lodgement

Pre-filling your online tax return

Pre-filling your tax return means partially completing the tax return by automatically loading information through myTax. The information you will find in your pre-filled tax return are the current year information from the organisations that report to the ATO. These usually include government agencies, employers and banks. The data from your previous tax returns and account activity are also supplied.

You can review your pre-filled information and supply any missing details. You can also update incorrect details. The purpose of pre-filling is to make the process of lodging your tax return easier. It also ensures that the information is complete and accurate. Once you report organisations report to the ATO, the pre-filling information will be available within a couple of days. The information is made available by early August.

Pre-filling is beneficial because it enables you to resolve discrepancies before you decide on lodging your tax return. Checking tax returns for any discrepancies is important because the ATO checks that the information you have provided matches the information your report on your tax return.

Consider These Factors When Selecting Bookkeeping Software

The tasks involved in managing the books for your business should not be taken lightly because good bookkeeping means making good financial decisions. If you do not pay attention to your bookkeeping system, major oversights can wreak havoc on your business. Since bookkeeping is a time-consuming task, you need to invest in reliable bookkeeping software to make your job easier.

The software will also enable you to see the strengths and weaknesses of your business. Using bookkeeping applications will give you and your bookkeeper the ability to access the books from another location. You do not have to worry about security because with today’s technological advances, financial information can be securely accessed. There are plenty of options on the market and choosing can be a bit difficult. There are five factors to take into consideration that will help you with the selection process.

1. Price

Business owners who are concerned about the cost will explore free options. However, skimping on bookkeeping software may not be a good idea. While quality comes at a price, there are still some options that offer quality and savings at the same time. You can still enjoy efficiency in your bookkeeping system without worrying about the price tag.

2. Data Protection

Security is a common concern for business owners who store their financial data in the cloud. The vital information can be compromised if the level of security of your software is not high enough to counter threats and breaches. If you are going to choose cloud-based software, make sure that it has the ability to block malicious activity. It should have Secure Socket Layer (SSL) encryption, routine external audits and multi-layered firewall server protection.

3. Integrates with other essential tools

When it comes to ensuring that your  business operation runs smoothly, you need to use a plethora of tools on a daily basis. If your software does not have the ability to integrate with your other business management tools, you will find it difficult to keep up with your day-to-day tasks.

4. Ease of Use

It is important that the software you choose is easy to use. It should have a straightforward dashboard that enables you to check your company’s financial health. It should also highlight your key accounts and give you insights of the performance of your business. If you find it difficult to use the software, you are instantly defeating the purpose of simplifying your bookkeeping operations.

5.Customer Support

When learning any new software, it is important the software providers are available to provide you additional support when answers to your questions are not in the manual. You can choose for software that offers training such as webinar and video tutorials so you can familiarise yourself with using the bookkeeping software.

Streamline Your Bookkeeping Operations In Four Ways

Being in a business allows you to take control of your future.  It breaks the cliché of earning money that often entails punching the clock and carrying out the task assigned to you. Running a business is indeed exhilarating, but reality sinks in once you deal with bookkeeping. While reaping the financial rewards of your hard work is the motivational factor of being in a business, ensuring that bookkeeping is properly done can be such a daunting task.

However, it is an integral part of your business. If you do not keep detailed and accurate financial records, you will never stand a chance to be in business for long. This may not be the fun part of your business, but you just cannot afford to take bookkeeping for granted. However, there are improvements in modern technology that enable you to streamline bookkeeping operations. This means, you no longer have to consider bookkeeping as a serious pain.

Streamline your bookkeeping operations with these five techniques

1.    Be sure to get everyone on the same page. Creating a culture in the workplace is the first step you need to take if you wish to streamline your bookkeeping operation. Whether you have a few and hundreds of employees, you need to make sure everyone is on the same page. Workplace collaboration is important in ensuring that your employees submit accurate expense reports.

2.    Create specific categories. If you have already developed a habit of tossing your receipts in a shoebox, bookkeeping can be such a headache at the end of each month. By establishing specific categories, you will be able to find it easier to identify your expenses. This technique simplifies bookkeeping and you will also ensure that the details in your report are accurate.

3. Keep records up to date. When you have little time and so much work to do, you can be easily tempted to fall behind on your bookkeeping task. Bookkeeping may have to take a backseat if you have a number of duties to fulfill. However, this is not a sign of a healthy business. Make sure you keep your financial records up to date and in order. This will only happen if you are doing the bookkeeping regularly.

4. Reconcile with the bank. Bank reconciliation can be time-consuming, but it is part of running a business. You do not have to stress yourself with reconciling with the bank statement because technology enables you to integrate account information with your bookkeeping software. This means that the job that used to take hours can now be done in minutes.

Common Superannuation Mistakes

If you are running a small business, one of the most essential employment obligations you should fulfill is the superannuation. Aside from paying super contributions for eligible employees, it is also considered a key incentive area for your employees. One of the best practices to follow so you can prevent problems with superannuation is generating report of bulk payments and regular pay cycle. When you have already paid the super contributions, you need to process and maintain the employee records related to superannuation. However, there are still instances when business owners fail to follow the correct process. Here are the common mistakes often committed when it comes to complying with superannuation laws.

Mistakes To Avoid According To The ATO

  • Missing the due dates
  • Failing to understand when super should be paid for workers
  • Failing to pay the required amount of super for employees
  • Failing to pass on the employees TFN to their super fund
  • Error recovery

These Mistakes Can Be Avoided By Following These Rules:

  • Be sure to calculate income correctly
    Super Guarantee contributions are based on the income of your employees. This is why you need to see to it that their income is calculated correctly. Since the contributions are set as a percentage of regular Ordinary Time Earnings, it is important to note that shift loadings, paid leave, allowances and commissions are included in the regular wage of the employee.
  • Avoid influencing an employee’s choice of fund
    You are not allowed to make changes to the employee’s choice of fund unless you hold a Financial Services Licence. The employee will be the one to find out how to join a fund or get product information. If the employee needs additional information about their choice of fund, you simply direct them to government websites so they can make a comparison of different super funds.
  • Pay your employees’ superannuation guarantee
    Any eligible employees must have a compulsory contribution or Super Guarantee contribution, which is paid directly to employees nominated super fund. It is the employer’s obligation to make Super Guarantee contributions. It is a percentage of the employee’s regular income. As of 2015/16, the Australian Government has set the rate at 9.5% of regular income.

Superannuation Cut-Off Dates

When paying superannuation contributions, an employer must also take note of the cut-off dates. Contributions must be paid at least four times a year. For the 1st quarter covering July 1- September 30, the cut-off date will be on October 28. for the 2nd quarter covering the period October 1 to December 31, the cut-off date will be on January 28. For the 3rd quarter covering January 1 to March 31, the cut-off date will be on April 28. For the 4th and final quarter covering April 1 to June 30, the cut-off date will be on July 28.