We get it – sorting your taxes isn’t fun for anyone. Fun, no. But difficult, painful, boring and exhausting?
Also no. If tax time is making your cry, you need a different approach to how you’re doing your admin.
Here’s the thing: the way you keep your books can find you in a jumbled mess at tax time. Or it can be a straightforward practice that sets you up for stress-free accounting all year round.
“There’s no comparison between what our end-of-year used to look like and what it’s like since we started using QuickBooks Online [around five years ago],” says Annemarie Dove, owner of Byron Bay Candles. “QuickBooks allows us to keep our accounts up-to-date in real time, rather than trying to piece everything together at the end of the year. It’s made the process seamless and so much faster.”
The fact is, most new businesses don’t have the resources for a dedicated accounting team. There’s no one there week to week, reminding you to be meticulous with your receipts, your invoices and all the other paperwork that tax time demands.
Instead, there’s just you on 1 July with the best of intentions to carefully record your every business move… and you anytime after that with a box full of crumpled receipts and a long list of invoices you haven’t reconciled yet. Not to mention two BAS reminder emails from MyGov and a headache the size of your upcoming tax bill.
It doesn’t have to be this way! As Annemarie has found, tax time can be… well, maybe not fun, exactly, but certainly manageable. Here’s how to scale to the top of your mountain of paperwork.
1. Know what you need to do
The first step is to get a handle on exactly what you need to do throughout the year to make 30 June a peaceful day all-round.
That means understanding your ATO tax obligations and any concessions that might apply to your small business.
Some of the areas to consider include:
- GST and when to charge it
- BAS reporting and due dates
- PAYG withholding
- Possible FBT payments
- Any deductions you can claim for operating your business
- Tax concessions available to your type of business
- Record keeping (see below)
There are many more than this and it’s best to consult a registered tax accountant to confirm exactly what your specific obligations are.
One thing you can be certain of, no matter what those obligations are they will involve plenty of routine paperwork. Read on to find out how you can streamline your processes to keep that paperwork mountain from reaching Everest proportions.
2. Keep your records in order
This is one of the ATO’s golden rules: you must keep a record of any tax and super-related transactions conducted by your business. That includes records relating to starting, running, changing, and selling or closing your business that are relevant to your tax and super affairs.
One of the areas that frequently catches people out is failing to keep adequate receipts for purchases relating to your business. If you haven’t got a receipt, you can’t claim the purchase as a tax deduction.
“I absolutely love the [QuickBooks Online] Bank Feed feature,” says Annemarie. “As soon as an expense occurs it pops straight into QuickBooks. We have so many different banking systems, we’ve got PayPal, Square, credit cards… but they all integrate through Bank Feed. You can question things when you’re clearing the Bank Feed, your expenses are right there in front of you and you can keep an eye on things. I clear the Bank Feeds from each of our bank accounts daily, so I keep on top of things.”
Another way to use QuickBooks Online to record your expenses is to snap a receipt on your mobile to store straight into your books. You simply take a photo of your receipt and QuickBooks matches it to a transaction and categorises it for you. No more hunting for small bits of paper come tax time…
3. Automate where you can
You can automate more than just your receipts to help you stay on the tax time track.
While not exactly automatic, lodging things like your PAYG instalments, BAS and GST reporting online means that a lot of the paperwork will be automatically filled for you. You’ll also get an extra two weeks to lodge and pay your BAS.
Help yourself out by setting up calendar alerts for key tax dates like when your BAS or GST is due or when you have to pay your PAYG instalments.
If you have car expenses to claim at tax time, it’s important to keep your logbooks up to date at all times. To ensure that happens, the best place to keep your book is in your car. Try keeping it in the storage compartment in the driver door – that way, every time you open the door to get out of the car, you’ll be reminded to fill out your logbook. If you keep an online record, get into the habit of updating it via your mobile while you’re still in the car.
When it comes to automating your expenses, Annemarie uses the tagging and category features of QuickBooks to automatically allocate transactions as they come in. “We’ve set things up so that as soon as an expense comes in, QuickBooks automatically knows which account to send it to,” says Annemarie. “It’s simplified the whole process so much.”
4. Keep track of financial statements and logbooks
If you’re particularly hazy when it comes to keeping your books, it’s worth dedicating a drawer and shelf in your office for tax records. That way you can quickly find what you need at tax time (and any time the ATO asks for your files). You should also have a ‘tax’ file held securely in the cloud where you can upload all of your tax records for safekeeping. You’re obligated to keep your tax records for at least five years.
It’s a good idea to set aside an hour or two once a month – or a few minutes daily if you’re like Annemarie – to go through your files and make sure everything is in order.
“If I could ask every client to do one thing, it would be to keep an eye on your own finances regularly,” says Peter Fowler, partner at accountancy firm Collins Hume. “Do it every month so you know exactly where your business is at and you can take action quickly if something isn’t right.”
Areas you should be ticking off during these sessions include:
- Check your receipts have been allocated to the right bank transactions (just select ‘Banking’ and ‘Receipts’ if you’re using QuickBooks).
- Make sure you’ve correctly sent out all your invoices for the month.
- Chase up any outstanding payments and pay any due invoices.
- If you have staff, use this time to ensure all your staff records and superannuation requirements have been filled for the month.
- Check your logbooks against your calendar to make sure you haven’t missed any trips.
- Do a ratio analysis to check whether your margins are staying in line.
A further tip in this area comes from Gerry Incollingo, Managing Partner of LCI Partners. “Use the months leading up to [EOFY] as an opportunity to review your debtors,” says Gerry. “You may be able to claim back any uncollectable debts.
“For example, if you can provide evidence of emails and phone calls made in an attempt to recover the debt, including reminder notices issued, you will be able to write-off bad trade debts.”
5. Share your data with your accountant
One of the biggest headaches at tax time comes from getting your files to your accountant. If you’re used to dumping a huge box of receipts and records on their desk once a year and pleading for mercy, it’s time for a change.
Instead, use accounting software like Quickbooks Online to share real-time data with your accountant seamlessly. This makes a big difference to the insights available to your accountant and consequently the advice they can offer your business.
“Now that accounting software programs are in the cloud, it’s so much more streamlined,” says Peter. “So we can actually use the time we used to spend doing compliance to add value to a customer’s business. It basically saves us time and our clients money.”
This article is brought to you by Kochie’s Business Builders in partnership with QuickBooks Online.