While the end of the financial year is an opportune time to review your financial position, when it comes to cash flow management, many small business owners need to be paying more frequent attention.
Research recently released by Intuit Australia revealed that Australian small businesses are losing an estimated $5.8 billion1 due to inefficient cash flow, with nearly half (46 per cent) admitting they’ve been at risk of being unable to pay their employees. Meanwhile, Industry Super Australia found that one in three workers in Australia, or a total of 2.85 million, are being short-changed on their superannuation payments.2
Simplifying accounting processes can be the key to driving greater cash flow management, ensuring business growth opportunities aren’t missed, and employees are paid on time.
So how can Single Touch Payroll (STP) help with this?
Out of sight, out of mind
The majority of small business owners are honest and hardworking Australians. They don’t deliberately pay employees inaccurate superannuation or aim to pay salaries late. The issue is that sometimes they simply do not have visibility and are unaware of any pending problems. Add to this the time it takes busy employers to prepare for payroll – that’s one week or more according to nearly half (47 per cent) of the small business owners we surveyed – it’s little wonder mistakes are sometimes made.
To be STP-compliant, small businesses (with 19 employees or less) will be required to send their tax and super information to the ATO at the time of each pay run. This means businesses will need to automate their payroll systems if they haven’t done so already.
Doing this via STP-compliant cloud accounting software like QuickBooks provides the broader opportunity to improve your entire financial management, including greater visibility of your cash flow. With this insight at your fingertips, more businesses will be able to take action early to fix any cash flow issues and avoid embarrassing and costly pay issues.
The same goes for super. Research shows that some employers have failed to pay nearly $6bn in entitlements, translating to an average underpayment of more than $2,000 per employee each year3
Raising the red flag
With STP’s requirement that employers report the tax and super information straight to the ATO on payday, Australians employed by small businesses can be more confident that they are paying entitlements correctly.
This flow of information means both small business operators and the ATO will have greater real-time visibility of finances. The ATO and Super Funds expect your payment to be made on time, and if it’s not, will trigger alerts to them that you have an outstanding liability.
Increased visibility will also ensure dodgy employers are caught out and the burden is not placed on the rest of the country’s honest small businesses.
The introduction of STP is crucial as it marks a new era of visibility for small businesses and the ATO. By raising red flags earlier, businesses, employers and the wider economy will benefit. Use STP as the opportunity to stay on top of your cash flow management this coming financial year and beyond.
1 Wakefield Research (www.wakefieldresearch.com) conducted the Intuit study by surveying 500 Small Business Owners in Australia with 0-100 employees between October 5 and October 19, 2018, using an email invitation and an online survey.
3 Research commissioned by Industry Super Australia (ISA) based on Australian Tax Office data from 2016/17.