Article from Philip McKibbin of Risk Management Magazine

The Institute of Public Accountants is urging businesses to use registered BAS agents, to avoid unnecessary penalties and interest. Many Australian businesses currently rely on unregistered agents, increasing their exposure to risk.

“BAS services must be provided by registered practitioners,” said Andrew Conway, the institute’s Chief Executive Officer. “There are only 14,000 registered professionals servicing Australian businesses. There are more that 2.4 million businesses in Australia, therefore clearly Australian businesses will be engaging the services of unregistered people.”

Under section 25-5 of the Income Tax Assessment Act 1997, taxpayers are able to apply for the cost of a tax agent completing their tax return – but similar provisions are not made for businesses using the services of registered agents for BAS reports.

Using unregistered tax agents brings certain risks, as the agent you use might not have the qualifications required of registered agents – or sufficient experience. Many unregistered agents do not have professional indemnity insurance, either.

Conway was critical of the Tax and Services Act, saying it does not do enough to encourage businesses to use registered tax agents. Although it imposes penalties for anyone offering BAS services without registering with the Tax Practitioner Board, it “does little to encourage small businesses to engage only with registered BAS agents.”

He said that if small businesses were encouraged to deal only with registered tax agents, regulation itself would receive encouragement. “We recommend deductibility for the costs of registered BAS agent services and an amnesty for illegal operators to come forward and seek BAS agent registration,” he said.

Jaguar is a Registered BAS Agent. Contact us if you have any concerns with your BAS/GST obligations or the completion of your returns to the ATO.

From LinkedIn Today Dec-7-2012

ACCOUNTANTS are the most trusted business advisor, following a breakdown in honesty between companies and their bank managers.

A fifth (21%) of businesses say they are more open and honest with their accountants than their bank managers, according to a Sage Omnibus survey of more than 1,000 of its customers.

Exactly half, 50%, of those surveyed believe their accountant provides the most valuable business advice, with 4% believing this to be the case with friends, 2% family, and bank managers sloping in at 2%, alongside solicitors 2%.

The latest statistic is indicative of the detachment of business owners with their banks. Honesty is also the best policy, with 15% of small business owners also claiming they are more honest with their accountant than even friends, family or spouse.

About 44% turn to their accountants first for business advice, 21% to the internet and 18% to business groups or Chamber of Commerce associations.

Jim Scott, Managing Director of Sage Accountants Division UK, said: “Accountants have played a key role in the success of many businesses, but it is in challenging times that the value they bring really comes to the fore. More business owners than ever are turning to accountants for guidance as the regulatory landscape evolves, and the fact that over one in seven are more honest with their accountant than they are with their nearest and dearest underlines just how valued their counsel and advice really is.

“Businesses that view accountants more as trusted partners and less as mere service providers when accounts need to be filed are also better placed to make the most of new technologies, including cloud-based software and mobile apps that provide access to up-to-the-minute information anytime, anywhere.”

By Patrick Stafford from SmartCompany on Jan-30-2013

An accounting body is calling on the government to crack down on the number of businesses using dodgy bookkeepers, saying SMEs are at risk of facing huge penalties if they don’t start using tax agents registered under new laws.

The warning comes after a similar red flag was raised by tax experts when a BAS (Business Activity Statement) agent was fined $40,000 for lodging returns without a licence.

Tony Greco, tax counsel at the Insitute of Public Accountants, told SmartCompany this morning there are potentially thousands of businesses using bookkeepers who are not registered. Laws introduced in 2010 mandate all agents operate under a license.

“At the moment there are only 14,000 registered bookkeepers, but how many small businesses are there? Over one million? So by deduction you would say there are quite a few operating outside the system,” Greco says.

“But how many?”

He says businesses face a number of risks by using a non-registered bookkeeper, including a fine of up to $27,500, alongside the possibility the agent could be missing some essential information.

“I use the analogy of a plumber. You never say you’ll use an unlicenced plumber, because he or she may not know what they’re doing.”

“But with bookkeeping, the same analogy doesn’t work because the system hasn’t been put in place long enough, and they aren’t aware of the consequences of not using someone who isn’t registered.”

Greco’s proposal is to make certain deductions only available to registered bookkeepers, who would have to prove their registration during a filing.

“The system works so you can’t claim tax agent service deductions unless it’s being prepared by a tax agent. It would be doing almost the same thing here.”

Greco says the IPA will be putting forward its proposal to the Tax Practitioners’ Board today – and says there’s no reason why the government shouldn’t adopt the plan for the 2013 budget.

“There’s no downside here. It generates revenue and improves the integrity of the system.”

By Kevin Stansfield from Action Coach on Apr-29-2009

http://www.actioncoach.com/6-Key-Areas-to-Help-With-Financial-Mastery-in-Your-Small-Business?pressid=1026

I often get this question: “What is the most common mistake business owners make when they are growing their business?”

While I could say it is not setting goals, planning their time or doing enough sales and marketing, the true factor must be the lack of financial understanding.

Businesses go bust because they run out of money. Even the most badly run business will survive if it has a constant supply of cash. I have come across businesses run by people who have never taken a penny out of it for themselves – relying instead on investments, family or, worse still – borrowings to fund their personal life. The worrying thing is that they have no idea of their financial status so they continue doing the same old thing.

Even good businesses that make profits can fall prey to Cashflow problems when they start to over trade. Overtrading is where the sales of a company are increasing but the money from the sales comes in slower than the money goes out to pay the suppliers. When the money runs out the business cannot continue even though it has plenty of sales.

Not all factors are a result of the business itself. We are currently in a time when our customers are finding it tough and if they are unable to continue they may well leave us with an unpaid (bad) debt that can have a serious impact on our own business.

The final factor is that the business model does not actually work. The overheads are too high, the profit margin on each product / service is not enough, the systems are inefficient and teams are underperforming.

So how can we reduce the risk of our business failing because of these factors? Well the simple truth is that we need to know our numbers!

Take the sporting analogy – any sport will do – let’s take golf as a simple example. If you do not know how to score how can you play the game? If you think it is a race, then you would be timing yourself, if you thought it was 2 points for a drive on the fairway and 10 for knocking it in the hole then you would not be able to compare yourself to everybody else who might be scoring it differently.

Also can you imagine how dull a sport would be if you did not keep score? How would you know if you were improving or identify your weaknesses or compare yourself to the competition, or even know if you had actually won anything?

Keith Cunningham, the author of “Keys to the Vault,” says: “If you do not understand your financials, you should not be in the game of business.” I am not saying you need to be a financial wizard, but you must know the basics and be able to ask the important questions that will affect the course of your business.

If you have a real problem with numbers then employ someone you can trust to help you. Not understanding the rules is no excuse when you are playing the game.

There are 6 key items you need to understand and look at on a regular basis – at least monthly.

(For some businesses, this could be more often such as weekly or even daily.)

1. Profit & Loss account – Key to monitoring your sales, costs, and profit margins for the period.

2. Balance Sheet – A snap shot of the business showing where the money invested in the business is at any point in time.

3. Cashflow Forecast – A week-by-week projection of the flow of cash in and out of the business.

4. Aged Debtors & Creditors – How much you are owed and owe and how many days they are outstanding.

5. Budget – Prepared once a year and reviewed monthly, to ensure that costs are kept in check and sales are meeting targets.

6. Key Performance Indicators (KPIs) – KPI’s that are specific to your business are the pulse that tell you how fit you are. They can cover any aspect of the business from the number of leads coming in, the rate of conversion into customers, right through to wastage and down time.

When you first start learning about your financials, it can be hard and confusing, but it is no different than learning a new language. You can put in the effort, read about it, take lessons, exams etc.

Or you can dive right in, speak to people who talk the language, use what you learn daily and pick it up that way. But remember the old adage still applies, “the more you learn the more you earn.”

There should be no embarrassment going to ask for help to understand your financials – after all if you did not know the rules of golf, you would have no problem asking somebody for help learning them.

The only embarrassment is if your business fails because you misread your score.

FAILURE to chase up overdue payments could lead South Australian small businesses on a path to financial ruin, warns Suncorp Bank.

Research by Dun & Bradstreet shows the typical 30-day invoice payment period blew out to more than 53 days in the June quarter.

This result was worse than that recorded during the height of the global financial crisis.

Suncorp Bank regional general manager for SA Michael Goynich said small to medium enterprises simply weren’t chasing up cash hard enough.

“Cash flow is the single biggest contributor to a small business failing,” Mr Goynich said.

“More than 80 per cent of businesses are likely to fail due to cash flow and working capital pressures rather than poor sales.”

As more firms drag their heels when it comes to bill payment, more SMEs face financial strain.

“Unlike large corporates, most SMEs don’t have the luxury of having bundles of cash available to meet shortfalls due to late payments owed to them,” Mr Goynich said.

“Some are seriously struggling to keep their heads above water.”

One suggestion to improve payment punctuality was to offer discounts.

“Incentivise early payment by offering clients discount for payments received within seven days,” he said.

“However, when it comes to your own finances hold off paying bills until the end of the payment period unless discounts are offered and you’re able to take advantage of them. This will help to encourage a healthy long-term cash flow.”

Suncorp also said that SMEs could avoid cash flow problems by doing things such as:

SPENDING money to make money. Meet with an accountant or financial adviser to work on a business plan.

GIVING clients different payment options. Consider Eftpos, direct deposit and BPAY to ensure customers are reliable and pay on time.

CONSIDERING invoice financing. This allows SMEs to draw down against the value of an invoice within 24 hours of it being issued.

EVALUATING inventory regularly. Look at your stock turnover rate.

Mr Goynich said SMEs should also perform monthly reviews of cash flow and working capital.

“This will enable you to source more cash if required,” he said.

“An accountant can also help develop an accurate working capital plan. We know the number one priority for our 100,000 small business customers is to maintain sufficient working capital to fund growth.”

Article by Alexandra Economou from AdelaideNow

http://www.adelaidenow.com.au/business/sa-business-journal/chasing-cashflow-a-critical-issue-for-small-businesses/story-e6fredel-1226459213377