A recent Xero survey found that three-quarters of Australian small businesses still store their receipts in shoeboxes and that can add up to 5,200 invoices a year – signaling the need for business owners to consider automation to pave way for better tax habits.
There’s no reason why the “New Year, New Me” mantra shouldn’t apply to the new financial year. There are many reasons why the now is the best time to develop better tax habits to make tax time next year a breeze.
The new financial year is the perfect time to reset, re-evaluate and prepare for the year ahead. As a business, you would have recently closed off your books for the last financial year so most of what you need to know about your business are readily available to you. You’re in a great position to know what’s doing well and what needs to change, and sorting out your finances early will take the stress out of tax time next year.
Here are some tips to help you start the new financial year right.
Keep it separate
It’s important to keep your personal accounts and your business expenses separate if you want to avoid raising red flags with the taxman. Keeping separate accounts and having specific credit cards for personal and business use will help prevent any cross over.
You do not need a credit card to be in your business name. A business card in your own name used solely for the business will suffice. This will also make going through finances a lot easier when tax time rolls around in 2017 as you’ll be able to easily identify business-related payments.
Make automation your best friend
While separating your accounts is a great first step, it won’t be much help if you don’t have a process in place for storing all the receipts and invoices that come through on your business account.
A recent Xero survey found that three-quarters of Australian small businesses still store their receipts in shoeboxes. With the average Australian business churning through 100 receipts and invoices a week, that adds up to 5,200 invoices a year. That’s a lot of information to go through next June. Getting this process right from the outset can save your accountant many hours of work next time, which means a smaller bill for you.
Make automation your best friend. Using good accounting software that automatically captures data and stores them can cut out a lot of time and manual labour. It can help you keep track of invoices that have been paid and any that are outstanding, as well as calculate your monthly or quarterly GST payments. Having these processes in place will remove a lot of stress and give you back time to focus on running the business and making money.
Make time to save time
While reconciling your accounts on a weekly or even daily basis might seem onerous, investing this effort will save you time in the long-run and also only require a few minutes each day. Doing regular check-ups on your business gives you immediate feedback on what is going well and what needs to improve. Has there been a sudden rise in costs? Are there patterns emerging in how customers are spending? Combining regular assessments with a good small business accounting software that presents this information in easy to digest displays can put you ahead of the game and help to preempt issues before they arise.
Accounting software can help to automatically capture data and regurgitate the numbers in easy-to-understand reports. Combining these reports with the expertise of an accountant can help your business perform at its best. Take advantage of their knowledge and the services they offer when making decisions about your business. Although accounting technology is readily available and easy to use, it doesn’t hurt to have expert advice.
James Solomons, Head of Accounting, Xero Australia