Apr 18

BAS - 10 common mistakes

Posted by Mitch Uzelac at Friday, April 18, 2014

Well it's that time again and while new cloud software packages like Xero make it easy for Small Business to keep their books up to date, unfortunately it cannot substitute best practice bookkeeping...we all know the analogy "..garbage in, garbage out!"

Many issues and problems continue to arise for some business operators attempting to conduct their own bookkeeping particularly for those with little or no bookkeeping experience or time to tend to their books properly. This ultimately results in more time and hassle when the books become a real mess and need major repair work.

Submitting incorrect revenues and expenditures can result in interest charges and even penalties. Some of the more common mistakes that are made when compiling GST returns are:

1. No Tax Invoice
It is essential that you have a tax invoice to back up your claims on business expenses. If you do not have any proof of the transaction, you will need permission from the ATO to claim it or possibly not be able to at all.

2. GST Free Items
There are many items and services which do not attract the GST, therefore it is not viable to include them in your claim as you will not be legally allowed to collect a return if it was never charged in the first place.

3. Uncharged GST on Bank Fees
Banks don’t charge GST on their fees so these are not eligible as a GST rebate. They can however be claimed on credit card merchant fees as these do have GST attached.

4. Wages & Super Payments
These are non-taxable supplies and have no GST attached, therefore it can be a big mistake to treat them as such as it will involve large recalculations and affect your profit and loss assessment.

5. Company Vehicles
If your car is classed as a ‘luxury car’, then it has a limit on how much of the GST can be claimed. This limit does change periodically so must be checked before submission.

6. Sale of Equipment
This includes vehicle sales, telephone equipment and business assets will be subject to the GST, much the same as any other transaction would be.

7. Residential Properties
Residential properties are input taxed, so GST can’t be claimed on any expenses that may arise from them. This being applicable for an entity registered for GST.

8. Government Grants
Where your business has received a government grant or an incentive, you will need to include it in your GST return as it must be accounted for without exception.

9. Stamp Duty
On an insurance policy, there is stamp duty that does not have any GST attached and has to be excluded from your return. The correct amount will be stipulated on the renewal form or tax invoice.

10. Entertainment Expenses
These expenses need to be treated as entertainment costs in your business accounts, and, for tax purposes, you cannot claim back the GST paid. The expenses are not tax deductible for the client portion of the cost. Only some of the total cost can be claimed as a tax deduction, and only if your business is registered for Fringe Benefits Tax (FBT).

If your bookkeeper is not alerting you of these issues, or if you doing perform your own bookkeeping and are having trouble, MUBS can help and ease the stress. This will result in better efficiency and most likely end up costing you less in the long run. Feel free to contact us and let us help you to improve your business.

Nov 15

Effective debt collecting

Posted by Mitch Uzelac at Friday, November 15, 2013

One of the trickier jobs for a bookkeeper or business owner to master is effective debt collecting. If you’re not assertive or outgoing, then phoning up people and demanding payment can be quite a daunting task.
Here are five quick ways to be more confident and effective at chasing debts.

1. Write a credit policy

If you haven’t got this far, this is definitely the place to start. Before you start to chase money, you need to draw up a clear set of rules that your customers are expected to follow. Your credit policy should include trading terms you offer your customers, how often you send statements and at what point the debt gets passed to a debt collecting agency. Your credit policy should then be included as part of your contract or credit application that all customers need to sign and agree on.

2. Don’t waste time

Dun & Bradstreet are specialists in debt collection with over 160 years in the business. They published some very interesting facts:

  • 6.2% of debts that are 1 month overdue never pay
  • 26.4% of debts that are 3 months overdue never pay
  • 42.2% of debts that are 6 months overdue never pay

The statistics tell the story: the longer a debt is outstanding, the less likely it will be paid. So don’t wait or take the ‘soft’ option… chase those debts! It will give you more stress and cost you a lot more if you put it off.

3. Get on the phone

Phone calls are far more effective than sending reminder letters. Your initial phone call should be polite, aiming to build rapport with the business owner or account manager. Being polite doesn’t mean you can’t be straight to the point though. Ask if the payment will be sent immediately. If the answer is ‘no’, ask why not – and don’t interrupt their response. If they are genuinely having a tough month, don’t just let them ‘pay you when they can’ be a solution. For example, say something like, “How about you pay half this week and the remainder in 14 days?”.

4. Don’t buy into excuses

If they say that they have lost the invoice, email them a copy within the hour and phone them back to confirm they have received it. If there is some kind of delay in the system, ask them to look into it today and let them know that you will be calling them tomorrow to find out the details. These techniques will keep the person you are dealing with be accountable for what they say they will do.

5. Confirm the commitments in writing

Before hanging up, try to ensure you have gained a commitment from the debtor to pay a specific amount by an agreed timeframe. As soon as the phone call is over, email them thanking them for the commitment they made and confirming the agreement in writing. This documents the agreement and, if there are issues down the track, both parties have everything that was agreed to in writing. That way, you avoid the “he said, she said”.

6. Get Debtor Daddy to do the chasing for you

If you want to remove yourself from the debt collecting process and automate it, let Debtor Daddy do the work for you. Debtor Daddy is a tool that works with Xero to keep you on top of your debt recovery. There are two plans to choose from, both of which come with a 30-day free trial.