Unfortunately, that’s an all-too-common situation. 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 can add up to 5,200 invoices a year. Without proper filing processes, the end of financial year can be a daunting time.
But tax time doesn’t have to be painful. Being organised, implementing good record-keeping, and taking a little bit of time throughout the year to keep up-to-date with your finances can take the stress out of the end of financial year.
The Australian Tax Office advises taxpayers to do away with paper and keep tax records electronically. Using cloud accounting software makes record-keeping easier and can streamline processes to make them more efficient and help monitor cash flows, a benefit to any small business.
Here’s a few tips to making tax time slightly less stressful.
Focus on efficiency
As a business, you need to record any money coming in as income if it is from a sale or a gain from the sale of an asset. You must keep a record of who paid you, when they paid, and how much GST was collected. On top of that, you need to record and categorise the same details for your costs, showing how much GST you paid, whether the expenditure is deductible or non-deductible, and whether you can depreciate it.
That’s a lot of information for just one invoice.
Australian small businesses have reported that they spend several hours a week processing receipts, which costs them thousands of dollars on paper admin.
However, using cloud accounting software could save your business time and money. Automatically capturing information from your bank account and storing it in your accounting records according to transaction eliminates having to manually go through and process receipts and invoices at tax time.
Small business owners who can send online invoices and manage purchase orders and bills from anywhere are able to manage their accounts with much greater ease and freedom.
Electronic record-keeping can report information such as GST to the tax office automatically, removing the need to go through a year’s worth of past receipts.
But easy record-keeping is just the beginning; once the financial information of your business is filed systematically, it becomes a powerful business tool.
Plan, plan, plan
Cash flow is king. Many businesses are unsuccessful not because they aren’t profitable, but because they don’t have enough money flowing in, in time to pay creditors.
Cash flow is all about timing – knowing when money is going to come into your business, when it’s due to go out, and making sure you have enough cash in the business to pay the bills.
Cash flow can be hard to track but using accounting software does the hard work for you.
Online accounting gives you a valuable overview of what’s happening in your business, making it easy to know your cash position at any time because it uses real-time bank feeds. More than this, an online accounting system that issues invoices and keep tabs on expenses can give you forecasts of your future cash flow and cash position on which to base your planning.
Switching to online accounting software provides a multitude of benefits and puts you, the business owner, back in control.
If you’re still struggling with a mountain of paper and shoeboxes full of receipts, making a new financial year resolution to go online could be the right move.
About the author
Trent Innes is the Managing Director of Xero Australia.
The information contained in this article is general in nature and does not take into account your personal situation or your business circumstances. You should consider whether the information is suitable to your needs, and where appropriate, seek professional advice from an accountant or other qualified professional.