New technology needs to stop changing everything.

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New technology promises the world and often falls short. Many would unfortunately understand this truth. Attempting to implement new technology for a small business, let alone a large multi-entity group is no mean feat. It’s through simplifying, consolidating and standardising that you unlock performance indicators and enable growth.

Legacy software and different accounting systems can prevent many projects from even getting off the ground. With success rate expectations looking unenticing once a project has started. Boston Consulting Group estimates that close to 70% of digital transformation projects don’t meet desired outcomes.

So, is it the salesperson’s fault for over-promising?

Is it the software’s usability that leads to these failures?

Or is it group controllers and individual businesses that are to blame for poor implementation?

All can be the cause of a failed technology project; however, this is only one side of the coin.

The strategy of many new technologies is to create new environments, processes, and skill requirements. This doesn’t need to be the case, especially for established businesses.

Using a new technology that works within your existing structures and changes elements only where necessary, can greatly reduce the risk of implementation or adoption failure, whilst unlocking the performance and growth opportunities lying hidden within your group.

Simplify & Consolidate

Look for technology that simplifies and consolidates your current technology suite during implementation. Businesses often jump at new functionality and reporting without considering the often already overloaded technology stack imposed on staff or customers.

Harvard Business Review reports that on average, workers toggle between software up to 1,200 times per day. People have a limit to the range of tools and technology they can reasonably be expected to use. So, utilise technology that creates a simpler suite for reduced complexity.

Technology that creates a streamlined communication process or a single point for workflow and project updates will go a long way in understanding differing work occurring across your business whilst also helping reduce the technology strain customers and staff experience.

Standardise

If left to their own devices, employees and franchise group members will create an ever-growing array of processes. Having the full view of your business or group, controllers need to utilise this vision in conjunction with technology to guide franchisees into a consistent ‘one best way’ approach.

It’s not enough to use a workflow platform that still requires high levels of customisation. Standardised and prescribed processes enabled through technology create opportunity for group wide performance monitoring and benchmarking. With the reporting tools enabled through standardisation, improvements will be jumping right out of your financial reports.

Standardisation can assist many areas within your groups structure, but none more so than the Chart of Accounts. Anyone who has spied the financial reports of individual franchisees will unfortunately know that each report will almost read as if it is a different language. Available technology can solve this without creating new systems and enforcing changes to account structures. This technology standardises this labyrinth of data with mapping logic to create standardised financial data that group operators can leverage for clear overview and insight of their performance.

When combined, these technology attributes unlock growth

A simplified technology suite and unified workflow management structure will allow you to identify pain points hindering your staff or members and reduce workload requirements.

Standardised processes and workflows will guide members to use the ‘one best way’, whilst also creating consistency within your groups data.

Incredibly powerful reporting tools are then able to use this simplified and standardised data to create live performance scorecards and groupwide benchmarks. The roadmap for performance and growth is already paved within the fabric of your group’s operations and data. It’s heightened performance monitoring of leading and lagging indicators which will surface growth opportunities.

What does a complimentary technology stack look like?

The golden question.

Working with many business structures and groups, we at Visory know firsthand that each situation is different. That being said, certain structures are better than others, and this is an example of one which exhibits all of the attributes mentioned above.

To capture and track financial data. Enabling automations and integrations with key software.

  1. KeyPay – To capture payroll information, provide award rate interpretations and again, integrate with key software.
  2. Visory – Provide standardised workflows and simplified communication to deliver complete bookkeeping and payroll support. Integrating with both Xero and KeyPay, so that business owners don’t have to access either software.
  3. Visory Insights – Combine simplified and standardised data from across your group to create customised live performance scorecards and benchmarking.

Three integrated software to manage an entire back office, and the need to only access one of these as a business operator. As a group, the benefits of such a unified and efficient software stack are astronomical, with the growth opportunities identified in clear reporting and benchmarks almost being secondary to the workflow efficiencies realised across your entire group.

Everything You Should Know About PAYG Instalments

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Pay As You Go (PAYG) tax instalments might seem somewhat self-explanatory. However, there are key points to know, especially if you’re new to the system. If you’ve just started your business, managing PAYG instalments means you’ve truly started on your growth journey. 

The Australian Tax Office (ATO) has different methods that taxpayers can use to pay their annual taxes. The PAYG scheme was enacted to create regular tax instalments for entities that meet certain criteria. The result of this is more manageable and controlled tax payments, rather than one, often scary tax bill due at the end of the financial year. 

If you’re interested in knowing more about PAYG, we’ll cover what PAYG instalments are, how they work, and other common questions.

What Are PAYG Instalments? 

PAYG instalments are payments you make on taxes for investment and business income. In other words, if you run a business or invest and make more than the annual income threshold, you’ll need to account for PAYG. 

Depending on your entity structure, the thresholds for automatic entry into the PAYG scheme vary. 

How PAYG Instalments Work

You’ll usually pay PAYG instalments quarterly. By paying them on a quarterly basis, you avoid potentially owing a large lump sum after lodging your tax return. They can also help you plan ahead, budget for tax costs, and manage your cash flow better.

Even though you send regular payments through the PAYG system, you’ll still need to lodge your annual income tax return by the end of every financial year.

PAYG Instalments vs. PAYG Withholding

There are two types of PAYG tax payment methods—instalments and withholding. For tax purposes, it is important to understand the differences between PAYG instalments vs. PAYG withholding

  • PAYG Withholding (or PAYG-W) – an employer withholds an employee’s tax and pays the tax directly to the Australian Tax Office on behalf of the employee or contractor. 
  • PAYG Instalment (or PAYG-I) – commonly a sole trader or business owner makes quarterly payments to the ATO based on their business or investment income. 

A business that has income withholding obligations must do the following:

  • Register with ATO for PAYG withholding
  • Withhold a certain percentage of employees’ and contractors’ wages
  • Pay the withheld amount to ATO and lodge activity statements
  • Provide payment salaries summary to all payees by 14 July of each year
  • Submit an annual PAYG withholding payment summary to ATO by 14 August of each year

You’ll need to register online through the ATO to set up PAYG withholding. Keep in mind that PAYG withholding is not the same as payroll tax, which varies by state. For payroll tax, you’ll want to check the revenue office for your location.

PAYG Instalments – How To Pay Them 

There are two ways in which you can pay the PAYG instalments: 

  • Automatic entry after meeting the entry threshold
  • Voluntary entry before ATO mandates it

The two methods have the same end goal, reducing the tax bill by the end of the financial year. 

Automatic Entry

You may be automatically subject to PAYG instalments if you exceed an income threshold. The ATO will send you a notice that you have been enrolled in PAYG. They may also state how much you need to pay, and the dates you should lodge your tax returns.

The ATO determines entry thresholds depending on the information an individual reported in their latest tax return. The instalment income is the main factor that ATO considers. 

Instalment income is the gross business and investment income, excluding goods and services tax (GST) and capital gains.

An individual or trust will automatically be added to the PAYG instalments system if they meet the following:

  • A notional tax of $500 or more
  • Tax payable of $1,000 or more on their latest notice of assessment
  • Instalment income of $4,000 or more on the latest tax return

The ATO automatically enrolls a company or super fund if it: 

  • Is the head company of a consolidated group
  • Has instalment income of $2 million or more from its latest tax return 
  • Has notional tax of $500 or more

Voluntary Entry

Voluntary entry is when you sign up for PAYG before the ATO enrolls you automatically. 

An individual can plan ahead and enroll in PAYG instalments before meeting the ATO thresholds. Voluntary entry is good for sole traders or firms who anticipate a huge profit or are new to business. Enrolling voluntarily may help a business or investor plan their income tax payment and budgets beforehand.

You can enter voluntarily through the following ways:

  • A phone call to the ATO on 13 28 66
  • Online through myGov for sole traders
  • A registered tax or business activity statement (BAS) agent

How to Estimate PAYG instalments 

The amount you pay in instalments will depend on your income. The ATO will use the latest lodged tax return to calculate a company’s or individual’s PAYG instalment rate. To calculate this, the ATO uses the instalment rate calculation below.

  • (Estimated (notional) tax ÷ instalment income) × 100.

If the calculated rate is more than the highest income tax rate for your entity type, the ATO may reduce your rate. Below are the ATO’s reasonable instalment rates by entity type:

  • Individuals and sole traders – 55%
  • Small firms and trusts – 55%
  • Superannuation funds and self-managed superannuation funds – 45%
  • Corporate tax entities – 30%

Contact Visory Today

PAYG instalments, withholding, payroll taxes and more can be a lot to navigate and manage without expert help. Many businesses choose to outsource payroll and bookkeeping to free up their time for other tasks. 

Our team at Visory can help you prepare for taxes and manage your bookkeeping. We are a team of expert bookkeepers who can help you with everything from payroll and bookkeeping to accounts receivable. Contact us today to find out how we can help you.

 

How Much Can You Claim for Laundry and Clothing?

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It’s a question we’ve all asked in our lives when doing our first tax return. Looking down the list of tax deductible expenses your eyes are instantly drawn to it—Uniform & Laundry Expenses. If you’re living at home, you’re most likely outsourcing your laundry to your parents. But as most of us have done, you really want to know if you can claim anything to maximise your return.

Luckily the answer is yes in many circumstances. In Australia, you can get a tax deduction for work clothing and laundry expenses. However, it has to meet particular requirements to qualify as work-related clothing. It can be difficult to navigate all the guidelines, so we commonly get questions like: 

  • Can I claim work uniforms on taxes? 
  • How much can I claim for laundry expenses? 
  • Is dry cleaning and clothing repair deductible? 

In this guide, we’ll dive into work-related clothing and laundry expenses. We’ll also outline what qualifies for a deduction, how much you can claim for laundry, and more. 

What Can You Claim as a Laundry Expense? 

For taxation purposes, clothing and laundry expenses refer to the cost of buying, repairing, and cleaning work-related gear (garments and footwear). 

According to the Australian Taxation Office (ATO), you can claim any expenses you incur to clean specific work clothing. Mainly, the deduction includes the cost of washing, drying, and ironing the clothes. However, the expense is not allowable if the employer launders the clothes for you or reimburses for the cost incurred.

The amount you can claim depends on whether you launder the clothes at home, at a laundromat, or at the dry cleaner (see later section for more details). In addition, any repair costs for the eligible gear are part of the deduction. 

Types of Clothing You Can Claim

While taxation laws allow deductions for various categories of work-related attire, any conventional or everyday clothing you wear to work does not qualify for the laundry deduction. 

Work clothing that may be eligible falls into four categories.

  • Occupation-specific clothing
  • Protective clothing
  • Compulsory uniforms
  • Non-compulsory uniforms

Occupation-Specific Clothing

Occupation-specific clothing refers to work attire that specifically identifies you with a particular profession. These are mainly distinct uniforms that employees would not wear in everyday situations other than their jobs. 

For instance, let’s say your business’ dress policy requires employees to don navy blue suits and light blue shirts and blouses. You cannot claim the cost of purchase and maintenance as a tax deduction under occupation-specific clothing since the attire can be worn in multiple professions. 

However, a nurse or doctor who wears scrubs may claim laundry expenses since they are unique to their occupation. (They may also be able to claim non-slip shoes as protective clothing.)

Examples of Occupation-Specific Clothing

  • Chequered pants of a chef
  • Judge’s robe
  • Nurse and doctor scrubs 

Generally, any dresses, jackets, blouses, skirts, pants, and other items of clothing that are worn distinctly by members of a specific profession could qualify.

Protective clothing

Protective clothing is any attire worn during work to protect you from risks (injuries, illnesses, etc.) or protect the clothes from damage. In other words, the nature of your work requires you to wear them. According to the ATO, the items must have protective features and functions to qualify for deductions. 

However, they must not be everyday wear. Even if they have protective features and can be used for everyday wear, you cannot claim laundry expenses on them. For example, a building site worker who wears a long-sleeved shirt to protect their arms from abrasions, may not claim the shirt.

Examples of Protective Clothing 

  • Fire-resistant clothing
  • Aprons
  • Sun protection clothing
  • Smocks
  • Safety-colored vests
  • Non-slip nurse’s shoes
  • Overalls
  • Boiler suit
  • Safety boots
  • Goggles

Compulsory Work Uniform

Compulsory work uniform refers to attire that is mandatory to wear while on duty. Often your employer has a clearly defined work policy in place, making it mandatory for you to wear the particular attire while on duty.

The ATO classifies compulsory work uniform as attire that is:

  • Specific to your organisation 
  • Used to identify the products or services your organisation offers

However, if your employer requires you to wear a certain type of clothing, which can double up as conventional clothing, you cannot claim expenses. Unbranded black pants and white shirts worn by hotel staff would not qualify as an expense.

Examples of compulsory work uniforms

  • Police officers’ uniform
  • Military personnel uniform
  • Airline staff uniform
  • Nurses’ uniform
  • Embroidered supermarket staff uniform

Non-Compulsory Work Uniform

Non-compulsory work uniform refers to employee work gear that’s not mandatory to wear at work. Most non-compulsory work uniforms do not qualify for a deduction, with one exception.

To qualify for laundry expense deduction, the employer must register the design with the Textile, Clothing and Footwear (TCF) Corporatewear Register. Some key elements required for registration include identifiers, patterns and colours. 

Example of Non-Compulsory Work Uniform

  • A bus company registered employee uniform that’s not compulsory for the employees to wear to work

Note that you cannot claim a single item, like a jacket. The clothing must be a complete outfit such as a:

  • Dress
  • Skirt and blouse
  • Trouser and shirt
  • Suit 

How Much Can You Claim for Laundry?

As earlier mentioned, if your employer does your laundry, you cannot claim the expense. The same applies if they reimburse for the cost you incur. 

However, if you did the laundry either at home, at the laundromat, or dry cleaner, you can make the deductions against your taxable income as follows:

At Home Laundry

  • $1 per load (eligible clothing)
  • 50c per load (if the load contains eligible clothing plus personal items)

At Laundromat

  • $1 per load (eligible clothing)
  • 50c per load (if the load contains eligible clothing plus personal items)

Dry Cleaning and Repairs

  • The entire expense paid

Note that the deductions are allowable even if an employer pays you a laundry allowance.

How to Claim Laundry Expenses

To claim laundry expense on your tax return, the ATO requires you to provide evidence of the expense if it exceeds $150 per year.

If you’re doing the laundry at home, you should keep a diary of the number of loads you washed during the year. But if you took the laundry for dry cleaning, you should provide a record of the receipts and invoices. However, you can claim the expense without supplying evidence if the amount is less than $150. 

For the repairs or dry-cleaning service, the record should contain the following details;

  • Name of the service provider
  • Repair/laundry date
  • Details of the item repaired or laundered
  • Amount paid for the service

The ATO allows you to claim laundry expenses for eligible work-related clothing. They categorise the eligible items into occupation-specific clothing, protective clothing, compulsory work uniforms, and registered non-compulsory work uniform.

If you’re doing the laundry at home or the laundromat, you can claim $1 per load or $ 50c if you launder the clothing alongside other items. 

For repairs and dry cleaning, you can claim the entire expense. To qualify for the deduction, you must provide evidence of the costs if they exceed $150 per year.

Visory can help you maintain your business records and have them organised and ready when it comes time to lodge your taxes. Contact us today and learn how we can help get your books in order.

7 Signs It’s Time to Hire a Virtual CFO

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As your organisation grows, so does the complexity of your accounting needs. Your bookkeeping spreadsheets will give way to complicated balance sheets and accounts receivable reports. A Chief Financial Officer (CFO) doesn’t handle day-to-day reporting, but they can use your reports to develop an overall strategy and look for growth opportunities. 

A virtual CFO works off-site. They can help you manage costs, look for ways to bring in new business, and analyse financial strengths and weaknesses. And a virtual CFO does it all without needing to be a full-time employee. You can benefit from a CFO’s knowledge at a fraction of the cost when you go virtual. 

7 Signs Your Business Needs to Hire a Virtual CFO

Are you ready to bring a CFO on board? Here are some signs you’re ready to hire a virtual CFO part-time. 

1. Your business is growing quickly

Your business is growing quickly – and faster than you anticipated. Your bookkeeper is there to help you process payroll and manage your bank reconciliations, but what about strategy? A CFO can analyse your industry and make recommendations about how quickly to scale and when to hire new employees. A fast-growing business needs someone to head up the financial department. You can do this more affordably by using a part-time CFO who calls in via video conference when you need a face-to-face.

2. Your financial needs are changing

If your finances are becoming more complex and time consuming, you need additional financial insight. A CFO can figure out where you might be wasting money, savvy ways to grow the company’s value, and more. As your needs change, a virtual CFO can be there on an as-needed basis to hold your hand and offer meaningful advice. 

3. You lack detailed financial knowledge

Let’s be honest. You know your products and services like the back of your hand. How to track cash flow? You’re not an expert. Luckily, you don’t have to be. A virtual CFO will have a level of expertise that surpasses yours. With their assistance, you can make more confident decisions, especially about the big picture of your organisation’s finances. 

4. You Want to Improve the ROI of Your Bookkeeping Efforts

If you’ve already been staying current with your bookkeeping, but you need help identifying opportunities in your financial records, a virtual CFO can help. Many businesses could benefit from hiring a virtual CFO to identify growth opportunities to maximise profits and find new revenue sources.

5. You want to outsource and automate

Financial processes can be more efficient with outside help. If you know you’re ready to outsource some of your essential tasks, starting with a CFO is a good idea. Once your new financial expert tells you where you can cut costs and where you should spend, you’ll have a better idea of what else could be outsourced. 

Your CFO can also help you streamline processes, including automated reports. Did you know many accounting programs can automatically pull data from your business’ banking account every month? Your CFO will sort it out for you. 

Read More: Your Guide for Finding the Best Bookkeeping Service

6. You want to maximise your CFO ROI

When you hire a virtual CFO, you’re getting all the expertise of a seasoned executive without the hefty price tag. Your virtual CFO will have access to a broad network of investors, executives and other useful connections. All of this without having to clear out an office in your building.

Your return on investment, or ROI, can be significantly higher when you go virtual. Many virtual CFOs are willing to operate on a more flexible, part-time basis, and you don’t have to provide the same full-time benefits or equipment that you typically do with permanent employees. 

7. You need improved financial reporting

Accurate documents are necessary to keep your finances in the black. Accounts payable reports, bank account reconciliations, and your general ledger are difficult to juggle. If one of them hits the floor, so could your strategy. If your current reporting schedule is a little helter skelter, your new CFO can transform your financial processes. While your bookkeeper will implement new processes, your CFO can help do everything from vetting accounting software to analysing reports. 

Is it time to explore virtual employees? An off-site CFO and online bookkeeping both help you make your accounting department more efficient. The return on investment is impressive. Visory’s bookkeeping service can set you up for success, by keeping your finances organised so that a virtual CFO can have an impact right away.

5 Reasons Why Your Startup Should Use an Outsourced Bookkeeping Service

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You’ve been doing your own books since you opened your business. And you’ve been doing a stand-up job, if you do say so yourself. But this strategy can’t last forever. You’re probably starting to realise that you don’t have the time required to look after your bookkeeping by yourself as your business grows. Not only do you want to be ready for tax season, but you want your books to be in the best shape possible to help with cashflow management and strategic planning. 

The bottom line is your startup needs bookkeeping help once it gets off the ground. If you’re not ready to hire someone full-time, you have two main options. You can hire someone in-house on a part-time basis or use an outsourced bookkeeping service. An outsourced professional gives you full-time access to financial help without having to pay a full-time salary. 

5 Reasons to Use an Outsourced Bookkeeping Service

1. Outsourced bookkeeping helps you optimise your resources

Keeping a general ledger, learning to manage payroll, and preparing financial reports are all time-consuming. These tasks will eventually require a tremendous amount of precious resources (and the people doing them are usually handling other essential business tasks as well). Once you have more than five employees, experience accelerated growth, and/or decide to add extra products, staff, or services—it often makes sense to enlist some bookkeeping expertise. 

An outsourced bookkeeping service can help free up time in your organisation. And more time means more focus on activities that can help you grow, such as marketing, business development, and other essential growth-related activities. 

2. Outsourcing your books makes scaling more realistic

As you grow, deciding to outsource bookkeeping and accounting can help you take on new financial challenges or accounting practices. If you need to hire more full-time staff, for instance, having more bookkeeping help on call means you won’t miss a payroll period. You can also take on additional reports regarding your financial health. These reports, in turn, help you identify areas of potential growth and scale upward at the most advantageous rate. An outsourced expert can also implement double-entry bookkeeping or more complex reporting styles that are required for large companies. 

A startup business has a meeting to discuss finances..

Photo by Cherrydeck

3. Outsourcing your bookkeeping puts you in touch with experts

You know your vision for your business, you know your product or service, and you can recite your elevator pitch on demand. What you may not know is how to implement best practices for bookkeeping in your industry. Many startups are filling a niche category in the market, making your finances all the more unique. A qualified outsourced bookkeeping service does the vetting for you, so you don’t have to worry about enlisting the wrong person. 

An outsourced bookkeeping service can connect you with a financial expert who knows the best way to scale up in your industry, and which government reports you need to lodge at the end of the year. They can create a bookkeeping system that meets all your needs. 

4. Outside help with accounting helps to keep you tax compliant

Small businesses and large businesses have differing tax reporting requirements, depending on their annual income and structure. And it can be difficult to get it right. Some taxes are administered by the Australian Taxation Office or New Zealand’s Department of Inland Revenue, while others depend on the state where you operate. An outsourced bookkeeping expert will best know what reports you are required to lodge and when the deadlines are. 

5. Outsourced bookkeeping services get you ready for investors

Before an outside investor takes a chance on becoming a stakeholder, they will want to see detailed financial information. Everything from your current debts to your cash flow can help investors make an informed decision. Outsourced bookkeepers ensure your books are up to par and can take care of the reporting and insights needed to be investor ready. 

Many startups fail within the first five years of operation. If you want to make it, accurate bookkeeping is an essential undertaking. An outsourced bookkeeping service helps you connect with an industry expert, scale responsibly, remain tax compliant, and more. At Visory, we handle accounting needs for businesses that are growing from a small business to a more thriving enterprise. You will have full access to statements and reports around the clock. You can even choose a dedicated bookkeeper who will become a trusted member of your team. In short, Visory is your secret weapon to business growth. 

Bookkeeping Basics: The types of bookkeeping accounts every business owner should know

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As a business owner, you’re the top expert on your company’s products and services. An expert on controlling a balance sheet? Umm… not so much. Yet, knowing the back office like the back of your hand is essential to running a thriving organisation. Understanding types of bookkeeping accounts and tax timetables help you better plan for business growth. 

Is the language of the back office a bit daunting? Don’t be scared off. Learn the basics of bookkeeping terms and various methods of accounting. Once you better understand your accounting practices, you can become an expert on your business’s financial health.  

Basics of bookkeeping

Even creative executives should know basic practices. Budgets for social media, marketing, and advertising will be informed by available funds, after all! You’ll hear these fundamental buzzwords in any bookkeeping meeting worth its salt. Here is what they mean. 

  • Accounts payable – Your accounts payable includes any amounts owed to a supplier or other business. If you have received a good or service but not yet paid for it, your supplier’s invoice goes into your accounts payable. 
  • Accounts receivable – These are invoices that reflect money owed to your business. In short: unpaid bills from customers or clients. 
  • Assets – Assets include a combination of your accounts receivable, property and equipment owned by your company, product inventory, and liquid funds. 
  • Liabilities – Your liabilities combine accounts payable with other debts like bank loans, outstanding payroll, and credit card balances. 
  • Revenue – This term relates specifically to the money your company makes from its goods and services. 
  • Expenses – Your expenses are more than what it costs to run your business and sell your goods and services. This factors in everything from utilities and cleaning costs to salaries and insurance. 

Photo by Mikhail Nilov from Pexels

Types of bookkeeping accounts

There are various types of bookkeeping accounts and ways to calculate your taxable revenue. The way you record transactions and manage debits and credits often varies depending on your organisation’s annual income and the complexity of your expenses. Here are the most common types of accounting any executive needs to be familiar with. 

  • Cash basis accounting – Under this accounting scheme, you only record a transaction when the cash actually trades hands. Cash basis accounting is ideal for small businesses. 
  • Accrual basis accounting – When your business uses accrual basis accounting, you record a transaction when the service is complete — even if you haven’t been paid yet. 
  • Single-entry bookkeeping – In single-entry bookkeeping, you only record each transaction once. For instance, if you make a sale of $100, you only record it as revenue of $100 when using the single-entry system. 
  • Double-entry bookkeeping – When you implement a double-entry bookkeeping system, each transaction is recorded twice. For instance, when you make a sale of $100, you note it once as $100 revenue and once as $100 in lost inventory. Double-entry bookkeeping balances your credits and debits. 

Other bookkeeping terms you need to know

  • Cash flow – Cash basis accounting is the best way to track cash flow accurately, but any accounting scheme must track how much cash is coming in and out of your business. 
  • Cost of goods sold (COGS) – This term relates to the total cost of producing your products, including materials, labour, and other overheads. 
  • Owners’ equity – If you calculate total assets and subtract the total liabilities, you can calculate the value of your ownership. 
  • Balance sheet – A balance sheet lists assets, liabilities, and owner’s equity. It provides a snapshot of your financial health at any time and a look at your net assets.  
  • Manual bookkeeping – Manual bookkeeping are records kept in paper form. The Australian Taxation Office recommends keeping your records for five years. 
  • Cloud bookkeeping – Electronic records are usually produced using bookkeeping software. You’ll also want to keep these records for at least five years. 

Running your business can often remove you from the day-to-day accounting processes of your organisation. But knowing your way around a balance sheet helps you track growth and know when it’s time to scale. When you enlist Visory as a bookkeeping service, you have access to a trusted team of bookkeepers who will do the heavy lifting of record keeping. If you don’t know your way around a general ledger, we’ll show you the way. 

Preparing Your Business for EOFY 2021

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Let’s be honest: Preparing for the end of the financial year (EOFY) makes your brain hurt. Tax time is simply a pain in your you-know-what. Between unexpected tax bills and finding out your books are less organised than you thought—unpleasant surprises seem to be around every corner. Even if all goes well, the process is still laborious. 

EOFY prep can require catch up bookkeeping when you’re not up to date — filling information gaps for your accountant and looking for lost receipts. Switching to real-time bookkeeping and oversight sets you up to have better reporting for FY 22. Good bookkeeping can equal less tax and a smoother compliance process. Visory can help. 

5 ways to prepare your business for EOFY

In Australia, with EOFY  just around the corner, your business has the chance for a fresh start on July 1 each year. Here are five tips for keeping your headaches to a minimum. 

Organise your records

The best way to make EOFY painless is good record keeping. Ideally, you’ll do this throughout the year. However, if you’re scrambling this year because COVID turned some things upside down, it’s not too late to organise your paperwork. Make sure you hit these key points:

  • Write down all due dates. Lodging your tax returns and records late can result in fines or make your taxes incomplete. 
  • Gather receipts. To be prepared for EOFY, you will need everything from sales records, credit card statements, bank statements and receipts. Anything you tracked in accounts payable or accounts receivable will need to be reconciled and reported. 
  • Organise employee records. You’ll also need to find your records for all wages paid and current superannuation details. PAYG payment summaries, too, because these reports must be lodged at the end of the financial year. 
  • Reconcile bank statements. Most banks will provide records of each transaction. Make sure you have a full report for all business bank accounts on hand as you prepare your end of year financial reports. 
  • Balance the general ledger. Has your ledger been kept up to date? This tracks each transaction by category and will inform your available deductions, as well as help to reveal the overall health of your organisation’s finances. It must be up to date by EOFY. 

Plan deductions and concessions

Many businesses reduce their taxes by claiming deductions and concessions. You might be surprised at how many aspects of your business qualify for a deduction — especially for small businesses. Things like office equipment, motor vehicle expenses, rental property costs, and travel expenses are commonly deducted from your assessable income. 

Ensuring your accounting software is up to date and accurate helps you ensure you won’t miss a deduction. Also, if you’re working with a professional, make sure they are working with the latest software and that their personal licence is up to date. 

Make a compliance checklist

EOFY requirements extend beyond lodging your tax returns. In fact, businesses across Australia have unique compliance needs depending on their size, revenue, and entity type. Do any of these compliance requirements apply to your business?

  • Public Sector entities must prepare financial end-of-year statements in accordance with the Public Governance, Performance and Accountability Act 2013. For more information about the standard parameters document and more, check out this list of compliance-related documents for commonwealth entities. 
  • Media holders in Australia with foreign stakeholders must meet very specific compliance reporting. 
  • Most business entities are required to lodge at least some government reports at EOFY. Section 292 of the Corporations Act 2001 (Corporations Act) outlines more specifically what is required of various entities. This includes public entities, all disclosing companies, and some small proprietary companies. 

Write off bad debts

Writing off bad debts (unpaid invoices, for instance) can be considered a tax deduction. Gather all uncollectible invoices and other extensions of credit and have them ready for reporting. This clears the slate of unrecoverable money owed to your business’ that are owed to your company moving into the new financial year. 

Create a plan for next year

If your EOFY was a pain this time around, you don’t have to simply do it all again next year. With the aid of professional bookkeeping services, you won’t feel the full burden of the necessary reports and tax lodgements. So make a plan now for how you will switch to real-time bookkeeping and reporting moving forward. 

Visory is here to help with catch-up record keeping, payroll and insights, and ongoing internal finance support. Be ready for the next EOFY by partnering with a trusted team of experts now. 

Cash vs. accrual accounting: What’s best for your business?

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There are two primary accounting methods: cash and accrual accounting. The accounting method you choose will affect many aspects of your business, including how you report on business income and expenses. 

Small organisations can choose between accrual and cash basis accounting. However, publicly traded companies must use accrual. 

Additionally, once your business revenue reaches $10 million, you’ll need to use accrual accounting and calculate your goods and services tax (GST). Small businesses with large inventories may also benefit from it.

Let’s talk more about cash vs. accrual accounting and how to get help if you don’t know how to make the change. 

Table of contents

  • What is accrual basis accounting?
  • How does accrual accounting work?
  • What is cash basis accounting?
  • How cash basis accounting works
  • What are the main differences between accrual and cash basis accounting?
  • Accrual accounting or cash: Which one is best for my business?

What is accrual accounting?

With accrual accounting, you track your income and expenses when they take place, regardless of when you pay bills or receive payments. For example, you’d record an invoice when you send it, even if your client hasn’t paid yet. 

Accrual accounting uses a double-entry system, meaning that you track twice, once for debits and another for credits. Double-entry can help prevent fraud and give you a more realistic view of your cash flow. 

Organisations of any size can use it. It provides a more complete financial picture, even when you don’t get paid right away for your products or services.

Here are the key pros and cons of the accrual accounting method:

Pros  Cons
It’s helpful when tracking a variety of accounts and large amounts of revenue and expenses.  It’s more complicated because you have to track actual cash on hand plus outstanding income and costs. 
Making financial projects and planning for the future is easier. Financial reports may need adjustments for as-yet-unpaid amounts when discussing current balances.
By logging cash flow with double entries, it’s simpler to catch mistakes or fraud. Bookkeeping and accounting may be more time-consuming.
It meets acceptable accounting practices and is the standard for public companies.  You could end up paying taxes on income that clients and customers haven’t paid you yet.

How does accrual accounting work? 

Accrual-based accounting is an accounting method that tracks all outstanding credits and debts as if they have already happened. 

If you complete a service, you report it as though you’ve already been paid in your books. Then you debit any invoice totals even if you have not cut a cheque yet. You can see all of your transactions—including long-term, future ones—in one place.

What is cash basis accounting?

Businesses that have an aggregate turnover of less than $10 million may use cash basis accounting to calculate goods and services tax (GST). 

Your internal finance team will only include transactions in tax reporting when money changes hands. In other words, when you make a sale, you don’t have to record revenue until you actually get paid. 

Regardless of annual GST, approved government schools, charitable institutions, and gift-deductible entities can use cash basis.

Here are some pros and cons to consider: 

Pros Cons
It works best for small companies that don’t have long payment cycles. Cash basis accounting can’t show you the debts that are outstanding, and accounts receivable payments that you haven’t settled. 
Cash accounting helps you track cash flow and determine what is in your bank accounts. You may not be prepared for incoming invoices from vendors or suppliers.
It’s simple because you only record transactions at the time they occur. Not all businesses can use cash accounting. 

How cash basis accounting works

With cash basis, you only track transactions when they happen. Each time your company makes a profit, you add to your total revenue. 

When you receive an invoice, you subtract. What it can’t show you is upcoming debts. These may include monthly accounts receivable cheques or recurring bills. 

What are the main differences between cash and accrual basis accounting?

Cash vs. accrual accounting differs primarily in the way you keep records and detail your cash flow. 

It’s easier to track with cash accounting because you only track funds when they come in and go out. However, it doesn’t show the full picture of your financial health. Your cash flow may look favourable, but you could have thousands in unpaid costs that are not readily visible. 

Accrual is more complex but also gives you a more accurate picture of your finances. You’re not tracking only actual funds, but also expected income and costs. If you have a floor installation business, for instance, you would report the project when it’s done — even if the final invoice is outstanding.

Cash or accrual accounting: Which is best for your business?

Either method works for small businesses, but large businesses should stick with accrual. Your internal finance team may need an online bookkeeping service to help with accrual accounting. 

When to use cash basis accounting When to use accrual accounting
You have a simple revenue stream with little time between invoices and payments You have complex revenue and cash flow
You value short-term cash flow over long-term projections You need to know your cash flow total including future projections
You generate less than $10 million a year You generate more than $10 million a year

Small businesses can choose between the two accounting methods. Larger companies must use accrual basis accounting in Australia by law. But even if you don’t meet the mandatory threshold, you might want to switch to accrual to get a better picture of your business finances.

Connect with Visory today, and our team of internal finance experts will get to know your business and which accounting method is right for you. You’ll partner with a team dedicated to your accounting needs and be able to access your books in real-time.

 

CFO Services: When Your Business Needs a Finance Expert (and How Visory Can Help)

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As your business graduates from a small operation to an organisation with a full back office, you’ll need to hire new financial experts. Growing your business requires careful planning and forecasting. But, what if you’re not quite ready to pay the salary of a Chief Financial Officer (CFO)? That’s where virtual CFO services come in handy.  

A part-time, remote CFO leads your team onward and upward without eating up your back office budget. You can even use a virtual CFO to attract a potential buyer if you want to position your company to be acquired. Let Visory help you determine when you need a CFO and how to leverage CFO services to expand your business. 

What is a CFO and what do they do?

A CFO plays a vital role in any growing company. In fact, enterprise businesses absolutely need this position to scale and succeed. This is because a CFO goes above and beyond daily accounting duties. While your accountant is running payroll and keeping the general ledger in line, your CFO is taking a bird’s eye view of your organisation. 

Your CFO may handle business strategy, budget modelling, and reports for stakeholders. A Chief Financial Officer also takes on the tasks of advising executive boards, managing cash flow, and forecasting the revenue of the product pipeline. In other words, a CFO is responsible for big picture financial decisions and projections. The best CFOs can spot a financial windfall possibility and also catch an upcoming revenue fall before it happens. 

How CFO services can help your business

CFO services can do what a day-to-day bookkeeper or accountant may not have the time or experience to do — tackle the overall financial health of your organisation and help strategise for the future. 

It’s also worth noting that company directors in Australia, including CFOs, have a duty of care and diligence under both general law and the Corporations Act 2001. You want to have an experienced leader in this role. 

Here are some ways adding a virtual CFO service to your business can help push your business to the next level. 

  • Expert reporting. Your directors may be called upon to file reports to the Australian Securities and Investments Commission (ASIC). Having a CFO on hand makes this process easier. The CFO will have enough knowledge of your company’s finances to declare that your company can pay its debts, has a culture of accurate financial reporting, and is in compliance with any government standards. 
  • Internal management. Other financial team members, including accountants, often fall under the leadership of the CFO. Having this position filled means other executive members can free up their time instead of tracking the moves of the finance department. 
  • Strategic advice. An experienced CFO knows how to grow the financial health of a company. You have an in-house financial advisor at all times. Your CFO will make sense of financial information and use your books to define business goals, opportunities, growth rate. 
  • Capital management. When you need to raise capital, just having a CFO helps you look more stable. Even a team of outsourced CFO services is an advantage. Your CFO will present a compelling financial picture to lure in potential investors and lenders. 

Advantages of outsourcing a CFO

When you want to scale your business fast, virtual CFO services are a cost-effective solution. You won’t have to budget for a competitive full-time CFO salary (or benefits) to access the expert strategy a CFO can offer. 

Visory services are an extension of your business. Bringing a virtual CFO into the squad isn’t like having a vendor — your finance expert will understand your industry inside and out and become a trusted team member. Outsourcing your CFO to a virtual service also means you save the time and expense of interviewing candidates. As a result, you can drive your business and remain competitive without taking a month or more to hire the perfect full-time CFO. 

Financial growth is challenging in the best of conditions. A CFO can help you resolve any bumps in the road and offer their experience. An outsourced CFO becomes a member of your financial team without the cost of a full-time salary, which can be music to the ears of small-to-medium size businesses. For those businesses which are on the road to becoming an enterprise-level company, a virtual CFO is often a secret to success. Contact Visory today to learn more about how a virtual team can help businesses of almost any size reach the next level. 

Do I Need a Bookkeeper, an Accountant, or Both?

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As a small business grows into a medium- or large-sized operation, it may no longer make sense for the founder to balance the books. Imagine a time-starved back office employee trying to itemise and code transactions. With what time? While office managers can fill some of the gaps, a bookkeeper or an accountant must eventually be welcomed into the fold. 

The terms bookkeeper and accountant are often used interchangeably, but in fact, they are not one and the same. The educational requirements, daily schedule, and specific skills of these two roles can overlap but are not synonymous. Let’s look at why accountants and bookkeepers can each help your business–and how to tell if you need a bookkeeper or an accountant. 

What does a bookkeeper do?

Bookkeepers are responsible for the day-to-day record keeping of your business’s money. The duties of a bookkeeper can include documenting financial transactions, posting credits and debits to a balance sheet, processing payroll, generating invoices, and merging accounts. The bookkeeper may also stay on top of the vital records required by the Australian Tax Office (ATO) or New Zealand’s Inland Revenue Department (IRD). 

In short, bookkeepers create the financial records that an accountant can later analyse and use to create more complex reports or file full tax returns. A bookkeeper is the first stage in the accounting process. They benefit your business by tackling daily financial records that must be accurate in order to create useful reports later. 

Who is a bookkeeper? Some bookkeepers are trained by their employers, but other bookkeepers learn their skills by getting a Certificate in Accounting and Bookkeeping and registering to become a BAS Agent. You may want to hire a bookkeeper if you have a tax accountant but need someone to handle your office’s in-house financial records at medium-sized companies. 

What do accountants do?

Not only will an accountant use the records that a bookkeeper created, but they will also crunch the numbers on their own reports. Their work tends to be more senior level and they may even advise the company regarding high-level company decisions. As a result, the salary of an accountant can be nearly double that of a bookkeeper. 

The typical role of an accountant encompasses things like prepping for taxes, preparing financial statements, plotting the growth of your business, verifying that the company’s finances are government compliant, examining revenue and recommending budgets, resolving accounting discrepancies, and setting up accounting processes. When you’re deciding between a bookkeeper or an accountant, you know you’re ready for a full-time accountant if you have the need for financial analysis and advice regarding the impact of financial decisions. 

An accountant may have a Diploma of Accounting or another advanced degree. Many businesses can get by with one in-house accountant, but you may need the expertise of a whole team as you grow and scale. 

When you need both an accountant and a bookkeeper

OK, but when might you need both a bookkeeper and an accountant? There are some benefits to having both roles working side by side. The separation of duties may help you remain compliant with government reporting and provide a built-in cross-checking system. The books recorded by the bookkeeper will be double-checked by the accountant. This can eliminate some mistakes. 

A complicated tax structure may also call for both roles. You want one professional to keep an accurate general ledger and track daily expenditures (the bookkeeper) and another to analyse the books, look for available tax credits, and prepare tax reports (the accountant). If your business is growing and in search of investors, having both a bookkeeper and an accountant also strengthens the financial picture of your growing organisation. 

Do you need a bookkeeper or an accountant, or both? Bookkeeping services keep your day-to-day financial tasks done on time. You’ll never miss payroll again. Meanwhile, an accountant offers more robust analysis and internal financing advice. Larger companies probably need both. Bookkeeping services keep you running smoothly in the present day and accountants make sure the future remains stable. 

If you need a team of financial experts to keep your company’s ship upright, contact Visory. Our virtual teams are tailored to the expertise you need and we can tackle bookkeeping and accounting projects large and small. We’ll become such a part of your team you’ll want to invite us to the holiday party (after we tell you if that can be expensed).