Making time to look over your financial reports each month is an important task for any business owner. If you are not taking the time to do this, either because you’re too busy or perhaps you don’t really understand what you’re looking at and it doesn’t make sense to you, then here are six reasons we recommend that you should start to.
- Understand your business better – by looking at your Profit and Loss (“P&L”) report monthly you will get a good picture of how your business is performing month by month and it will provide a better understanding of what makes up your profit. Looking at revenue and expenses clearly on one page in a monthly P&L or comparing periods, this will help to identify trends in your data and may also help to highlight anomalies in coding/categorising.
- Accurate information for lending purposes – if you are applying for a loan or an overdraft, the bank or financial institution will look closely at both your Profit and Loss report and the Balance Sheet as a lot can be learned about a business by looking at these reports together. If you are unsure what some of your balances are in your accounts, get in touch and we can explain them further.
- Get paid quicker and reduce bad debts – by looking at your Accounts Receivable Aged Summary each month you can follow up with overdue accounts promptly which often results in getting paid quicker. The longer an overdue amount is left unpaid the higher the risk of it not being paid at all, so it is important to keep on top of this.
- Better relationships with your suppliers – assuming you are entering your supplier bills into your accounting software (recommended for most businesses to get an accurate profitability figure) your Aged Payables report will alert you to any unpaid or overdue amounts. Supplier relationships are an important aspect of your business and paying on time is crucial to maintaining those relationships.
- Better cashflow – having an accurate understanding of how much money the business is owed and how much money the business owes, can help with cashflow planning to ensure that there is enough money when needed. Additionally, understanding the trends of your business, its profitability drivers, expenses, etc., can help to plan sales and marketing campaigns so that the revenue keeps coming in.
- Better business decision making – your financial reports tell the story of your business and it’s important that you understand the story that they are telling you. The better you understand what’s going on in your business the stronger position you will be in to make better business decisions that affect the profitability of your business and its financial viability.
Depending on the complexity of your business, at a bare minimum you should be looking at the following reports:
- The Statement of Financial Performance, also known as the Profit and Loss report (P&L) or the Income Statement. As the name suggests, it’s how your business is performing over a period of time, such as a month or a financial year. In broad terms it shows the revenue that your business has generated, less the expenses for that same period. In other words, it shows how profitable your business is.
- The Statement of Financial Position, also known as the Balance Sheet. This shows the value of the business’s Assets, Liabilities and Equity.
- Assets include things like money in bank accounts, Plant and Equipment, Accounts Receivable balances
- Liabilities include things like Bank loans and credit cards, Accounts Payable, and Hire Purchase balances
- Equity is the difference between your Assets and Liabilities and includes Retained Earnings and Owner Funds Introduced
- Accounts Receivable Ageing report (Aged Receivables) shows how much money is still owed to the business as at a certain date in time, and is usually segmented as to how overdue they are or sometimes by how far past the invoice date they are. Generally you will have Current, 30, 60 and 90 days columns.
- Accounts Payable Ageing Report (Aged Payables) shows who the business owes money to as at a certain date in time and, like the Accounts Receivable Ageing report, is usually segmented by overdue period.
So why bother?
If you would like to know which reports are relevant to your business and you want to better understand what’s going on in your business, then get in touch so we can make a time to go through them with you.
Your business success is important to us and we are here to help you.
If you have income from investment properties, now is the time to start gathering your records and reviewing your expenses for the 2021 financial year.
Income to Declare
All income earned from each property must be declared. If you have multiple properties, keep the records for each property separate to make the tax return more efficient.
- Rent received, whether paid directly to you or through an agent or through an online management platform. Rent includes recurring regular amounts as well as any lump sum amounts paid in advance.
- Rental bonds returned (eg. if the tenant caused damage or defaulted on rent payment).
- Insurance payouts received as compensation.
- Expenses reimbursed by the tenant (eg. if they have caused damage and you have paid for the cost of fixing the damages, or if they have reimbursed you for water).
- Extra fees received (eg. letting or booking fees).
- Government rebates (eg. installation of solar utilities).
You will need statements or recipient created tax invoices from agents or management platforms and documents for all other payments received.
Deductible expenses for property are different for residential and commercial properties. Not all expenses related to owning a property are allowed as deductions, so it’s important to check what you can claim.
- Advertising for tenants
- Body corporate fees
- Council rates
- Water supply charges
- Land tax
- Cleaning, gardening, pest control and property maintenance
- Agent fees
- Repairs and maintenance
- Some legal expenses
- Loan interest
There are some expenses which need to be claimed over a longer period such as several years or decades. These can include borrowing expenses, capital expenditure, depreciation, initial repairs and capital works.
Some expenses cannot be claimed for. These include stamp duty, loans and repayments, some legal expenses and some insurance premiums.
Get Help to Simplify Your Property Records
Tax matters for property investors can be complex. The ATO keeps a close eye on tax returns that involve property investment, as it’s easy to make mistakes. There are other matters to consider such as the period of rental availability, private use of the property, capital gains tax, legal contracts and positive or negative gearing.
Did you know that government agencies use Australian Business Number (ABN) details to identify individuals and businesses in communities affected by emergencies or natural disasters?
This can happen any time and any season, so we encourage you to keep your Australian Business Register (ABR) details up-to-date. This enables immediate emergency services assistance and ensures affected businesses are contacted in the event of crisis.
Details to Update
- Check that your recorded names are correct – If you have legally changed your name, you should update that with the ATO so that the correct legal name is linked to your ABN.
- Email address – This should be one that you can easily access from your phone or other means during an emergency.
- ANZSIC code – It’s a good idea to check that this is correct for your business type in case your business services have changed since you registered your ABN.
- Business address – This is essential to update, so that if an emergency or natural disaster affects your area you are contacted.
- Telephone number
- Postal address
- Additional business locations – You can add multiple locations if your business operates from more than one premises.
- Authorised contacts for the business – Consider adding more than one contact for the business.
Business, Individual and Company Names
Name changes can’t be updated on the Australian Business Register. If you need to update a business name, a legal individual name or a legal company name talk to us about liaising with the ATO or ASIC on your behalf to update your details.
Update Your ABN Details Now
Changes made to the ABR reflect immediately. It is always important to keep ABN details up to date, but for businesses in disaster prone areas, it is especially crucial as this can make all the difference with getting help quickly. Emergency services can access contact details from the ABR, which means affected businesses can get important updates and assistance from emergency services without delay.
Visit ABR to update your ABN Details or let us submit these details on your behalf.
When times get tough it can be easy to let some of your people processes fall away as you concentrate on the basics of the business.
Take the performance review. They can be unpopular, sucking up a lot of time and making employees and managers stressed. So why not skip them? Well, because good performance reviews work. They’re an effective way to track people’s progress, provide feedback, gain insight, support development and align individual performance with company goals, which helps the business achieve results.
It’s imperative however that they are done well. So here are some tips for getting the most out of your performance reviews:
- Target the right people – not everyone has to have full, formal reviews. Prioritise the positions that have a genuine opportunity to deliver over-and-above results.
- Focus on the conversation – documentation provides a basic way to articulate expectations, track performance and measure results, but it shouldn’t replace honest, two-way communication with your people.
- Keep it simple – structure the review around the objectives needed for success in the role, the skills needed to achieve the objectives and a development plan that aims to improve skills, reach goals and help with career development.
- Get the review cycle right – align full-scope reviews to an annual cycle and schedule regular check-ins at meaningful times throughout the year.
- Use software – good software will help lighten the admin load and make it easier to chart and really analyse employee performance.
It’s been a financial rollercoaster of a year for most businesses, but Christmas time invites us to pause and celebrate what’s gone right and thank the people we rode with. Here are eight ways to keep your costs down without sacrificing festive fun.
- Go alfresco – Enjoy a free venue that’s good for the body, mind and party games….outside! Ask everyone to bring a rug and head to the local park or beach for a picnic-style Christmas bash.
- Share the love – Is your business in a large office or shared space? Throw a party with your neighbours. Saves money, resources and creates a valuable networking opportunity.
- Plan a potluck – Putting on a huge spread or taking your team out for dinner can be costly. Why not ask everyone to bring a plate? (Nibbles, cookies or fresh bread).
- Go locally-made – Support our economy and buy locally-made gifts for staff and clients.
- Make it a day thing – Serving a holiday lunch, brunch or mid-afternoon party can be more affordable because guests fill up with satisfying but inexpensive fare like sandwiches, pancakes, muffins, finger foods, crackers and dip. Plus, it’s often easier to fit into people’s diaries during the busy festive season.
- Choose a local venue – Keep costs down for you and your staff by hosting your Christmas party close by. That way people don’t have to spend lots on taxis getting to and from the party.
- Give the best present ever – Get in everyone’s good books and give them the morning off after the Christmas party. A small gesture that’s worth its weight in gold.
- Take the pressure off – If last year was the bash of the decade, don’t worry – people understand it’s been a tough year. Parties thrown on a shoestring budget can be the most memorable because they strip away all the window dressing and put the focus on people and fun.