When you’re running a business, it’s easy—even normal—to get swept up in the hubbub of your responsibilities and activities. We hear about this from many of our clients, so we know that getting absorbed in what you need to do can get in the way of your accounting.
A common question we hear is why staying on top of taxes matters so much. I mean, can’t you just pay it and be done with it?
The problem is that taxes don’t wait for anyone.
If you’re not on top of your taxes, you may be bleeding money without realising it. You may even be leaving deductibles on the table that you could otherwise make the most of.
The good news is that managing your taxes is not as overwhelming as most people think. All you need is the right software for your business (and there are plenty to choose from) and a few tricks up your sleeve.
If you’re looking for a way to make tax management much easier than it is, here are some of our must-dos.
Make sure you’ve chosen the right entity structure
It’s common knowledge that different businesses are taxed differently. The challenge is that many people end up going with the wrong entity structure, which means they end up paying way more than they need to.
In Australia, we have various entity structures like a sole trader, a partnership, a company, a trust and other categories that affect how much tax you end up paying.
If you’ve felt like you’re paying more taxes than you’re supposed to, making sure your entity structure is correct is the first thing you need to do.
Maintain your records
One thing I’ve noticed that many small businesses tend to overlook is maintaining a clear record of their invoices and receipts. Sure this sounds a little old school, but only if you’re noting everything down on a book.
Today, there’s plenty of software you can use to stay on top of your record-keeping. The best part is that you don’t have to be particularly tech-savvy to use it. All you need to do is add the details of your income/revenue and expenses, and your software will do the rest.
Here are some quick tips that will serve you well:
- Record your expenses and revenue
- List out any personal withdrawals you make
- Maintain an inventory of the goods you’re using
- Keep your personal and business expenses separate (failing to do this is one of the biggest accounting mistakes you can make!)
- Maintain tax invoices for acquisitions when you register for GST
- Keep a record of your stocks
Make sure you’re on top of payroll taxes
Plenty of companies today, including small business, outsource payroll management. This is a good idea for the most part, especially if you find that your day-to-day demands distract you from focusing on the administrative side of your business.
If you’re working with a consultant or a company to manage your payroll, though, make sure that they’re remitting payroll taxes for your business.
If you don’t, this can land you in more trouble than it’s worth and potentially open you up to a tax audit.
Look into applicable GST adjustments
COVID-19 had a major impact on how many of our businesses operate. If you’ve had to cancel sales, stocks, or refund purchases because of the pandemic, certain adjustments may have to be made.
If you need support on this front, work with a tax specialist or you can even use ATO worksheets to calculate your GST adjustments. This covers everything from purchases, debts, sales, adjustment summaries and creditable purposes.
Tax management can be easy when you know what to do
I get it—managing your taxes is not necessarily the most fun thing to do. It is, however, critical to the success of your business. If you’re new to this, start by finding out more about small business tax planning in 2021.
You can follow the tips listed above to make your accounting processes much easier. If this is still a Herculean challenge, get in touch with a team who can take over this part of your work.
It’s important that you save your drive, energy, and motivation for the things that matter!