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Business Tax Tip – EOFY – How to prepare your year-end accounts – Tips 1-9

images/Business Tax Tips.PNGHere’s how to prepare your year-end accounts to have a good finish for EOFY with the Tips 1-9 to action before 30 June.

1. REVIEW debtors (owe you) and creditors (you owe)

Review your accounts receivable / trade debtors who owe you– who is taking the longest to pay – is debt-collection failing – consider if it is simplest to write off (reverse) the sale (see #2 next) and move on with more Profitable clients and prospects.

Likewise – who do you owe? Can you pay them by the end of year to tidy up your accounts – or, if you are struggling – can you negotiate longer terms to keep things open with suppliers and keep the relationship going?

2. Accounts Receivable – write off BAD DEBTS by 30 June to tidy-up

If you have clients that have closed, or all manner of collection has failed – sometimes it is best to move on and write off those bad debts. Keep looking for better clients! Review all your bad debtors. Write-off all those you think are unlikely to pay to enable a tax deduction this year. We recommend recording this in the minutes/notes of the business after ensuring that all reasonable steps have been taken to recover the debt. Simply raise a credit/reverse invoice at say 15 June date and settle/apply against the original invoice. Be careful – if on accrual BAS reporting you mustn’t DELETE the original invoice – if you are cash reporting, you CAN delete, but keeping it as a record is better in the long-run, in-case you need to refer back, or use the info for another client.

3. DELAY INVOICING sales if too much Profit (seek tax agent advice)

Most businesses are taxed on income when it is invoiced (accrual). Some small businesses may be taxed only when income is received (cash basis). Income from construction contracts is generally taxed when progress payments are invoiced or received. If you are making a good profit (which is good if you want to sell) and want to reduce business tax, it may help to delay invoicing the June work until July, after 30 June - talk to your tax advisor for your situation.

4. Pre-pay EXPENSES to reduce too much Profit (if appropriate) (to reduce profit)

Prepaying certain expenses such as rent, repairs and office supplies before year end can reduce your current year tax liability. If payments are due early next financial year, a pre-payment may entitle you to the tax benefit much earlier. The rules differ depending on the type of entity so please call your tax agent, if you would like more clarification.

5. STOCKTAKE and/or sell off old stock

Trading stock should be reviewed before 30 June, either by a physical count or from a perpetual stock record system. Small Business Entities can be exempt from conducting a yearly stock take if the value of stock has moved by less than $5,000 during the year. Tax is paid on the value of stock at the end of the financial year so consider selling or disposing of slow-moving stock so that it is not included in the count.

6. Pay quarterly/monthly SUPER earlier (to reduce profit)

Super Guarantee contributions must be paid before 30 June to qualify for a tax deduction in THIS financial year. You might consider bringing forward the June quarter contribution payments. We recommend allowing plenty of time for it to reach the super funds (5-14 days some funds require).

7. Get more from your DIRECTOR’s BONUS – Seek tax advice (to reduce profit)

If you are expecting a pre-30 June bonus, you may be able to sacrifice your pre-tax salary or bonus into super rather than receive it as cash. As with the deductible contributions, this could reduce tax on your salary or bonus by up to 34%, and will allow you to take advantage of the contribution caps that apply in this financial year. Once your money is invested in super, the tax going in is only 15% and also, tax on earnings is capped at 15%, which may compare favourably to investments outside, held in your own name.

8. Pre-pay investment LOAN INTEREST for deduction (to reduce profit)

If you have (or are considering establishing) a geared investment portfolio, you can pre-pay 12 months’ interest on your investment loan and claim the cost as a tax deduction in the current financial year.  This can assist to manage cashflow more efficiently, and potentially reduce your income tax liability this financial year.

9. Pre-pay income protection PREMIUMS for deductions (to reduce profit)

If you are employed or self-employed, income protection insurance provides peace of mind about the security of your income in the event you are unable to work due to illness or injury. Premiums for this insurance are generally tax deductible; prepaying your annual premium prior to 30 June will allow you to claim a full year of cover in advance as a tax deduction.

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Email This email address is being protected from spambots. You need JavaScript enabled to view it. or call 0407 361 596 Australia

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Business Tips – Don’t give away business with TOO much free advice – tricks to watch!

images/Business Tips Free Advice.JPG

Tony Featherstone, a specialist writer on small business and entrepreneurs at Sydney Morning Herald, wrote an interesting article with ideas about how not to give away TOO much FREE advice, in Stop giving away Free Advice.

A small business owner I know has a simple rule: The “clock” starts the minute a prospective client seeks his advice. There are no exploratory meetings or proposals provided to clients – just a flat fee for an introductory meeting. Every minute of this time is paid for, no matter how small the enquiry.

I’m sure many business owners wish they had a similar policy. Especially those who are “milked” by prospective clients who seek their advice under the pretense of possible work.

It usually goes like this: The pretend client calls asking for your views on an issue. After getting your ideas and contacts, he or she suggests you submit a proposal detailing a path of action. You spend hours or days on the proposal and the pretend client walks away with thousands of dollars of free ideas, intellectual property and advice. You have been milked, good and proper.

Knowing when you are being used – and how to avoid it – is critical in small business. If time is your most valuable asset, you cannot afford to give away ideas and advice for free.

Yes, it’s a fine line: You have to give some ideas to excite the client and get the work, but not so many that you unwittingly become free labour. I’ve learned the hard way that it pays to be more judicious in how you give time to potential clients – and to better vet those seeking your advice.

Here are seven signs your business is be being milked for free work:

1. The “size” card

Entrepreneurs’ number-one weapon for getting free advice. They tell you about their multi-million-dollar revenue and previous successes to excite you about their potential as a client. Then they do nothing with your proposal – other than steal the ideas. Beware any clients who try to sell the size of their business to you: Real clients know their enterprise speaks for itself.

2. The “I’d value your input” phone call 

Here, pretend clients play for your ego by commenting on a previous piece of work, or suggesting your ideas and opinions would add greatly to their project. Some even have the gall to say “I wanted to reach out to you” to get your views, as though they are doing you a favour.

3. The lunch

Remember that Seinfeld episode where one of Jerry’s antagonists argues that “soup is not a meal”? It’s a bit like that when a pretend client invites you to lunch, expecting all your best ideas and help in return. You wonder why you gave away two hours of free work for a $50 lunch, and now feel obligated to provide further help. Better to have a quick coffee with unknown prospective clients, or keep it to an initial phone call.

4. So-and-so recommended I call you

Another classic milking tactic. They drop a big name, flatter your ego and try to get as much free advice as they can. Half the time, the person who “recommended” you mentioned your name in passing, but the pretend client happily leverages off somebody else’s network and reputation to get time with you. My advice: ask the client how he or she knows the person who recommended you.

5. Sounds great, can you put it in a proposal?

How many small business owners have wasted tens of thousands of dollars writing proposals that go nowhere? The potential client wants you to supply a plan, but positions the request as a “proposal”, knowing that’s much harder to charge for. Ask the client for a proposal specification before supplying your ideas, so that he or she does some work as well. Never submit an open-ended proposal where you supply a range of ideas about what could be done, and far too much unpaid work. Keep it short and specific.

6. Can I mention I spoke to you?

Another common trick of pretend clients. They email or cold call for advice, ask if you know anybody else who might help, and if they can mention they spoke to you. Sharing your network with trusted contacts, or helping genuine people, is worthy; giving aways your network to pretend clients who are milking your business – and don’t have contacts of their own – is dumb. Keep your contacts close to your chest until you feel more comfortable with the prospective client.

7. Who needs details?

The classic give-away of pretend clients. They go blank when you ask them what sort of budget will be applied to the project. They have no process or timeframe for choosing the proposal. They take forever to reply to your proposal, claiming they have been too “busy”. They hint at money being available, but never want to talk about dollars when the free ideas are coming thick and fast from you.

SOURCE SMH - Stop giving away Free Advice..

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Email This email address is being protected from spambots. You need JavaScript enabled to view it. or call 0407 361 596 Australia
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