Axia Accounts Bookkeeping

Bookkeeping and tax services

Business Thought For The Day

THIS A HUGE MINDSET BREAKTHROUGH and one of my favourites.
 
From my research, Stephen Covey first coined “…begin with the end in mind”. What does this mean exactly?
 
Well, during my time as a business coach at Kinetic for over 11 years now I was amazed to see so few business owners having any specific plans for growth. It was always, “…it would be great to get our turnover to X figure”. Being non-specific and not detailed as a plan, it was often never achieved for them.
 
It then became one of my most important tasks to help them define achievable business goals with a concrete, well-detailed plan to get there.
 
Being almost the new year you can certainly take Ryan Allis and Stephen Covey’s advice to begin 2017 with the “end in mind”!
bookkeeping business thought of the day

Is It Better To Void Or Delete An Invoice?

Okay so either you have a problem with a particular invoice, either it’s:

  • A duplicate invoice
  • An invoice that will not be paid by the customer (for various reasons) or
  • You chose to cancel the invoice (you gave the service or product to the customer instead of them paying it)

As it is good business practice to keep a complete record of all transactions, invoices (and their numbers) should also be retained.  Because of this,  it’s better to void invoices instead of deleting them.

If you delete the invoice then someone at some point will say “What happened to invoice #1234?”.

If they were able to lookup invoice #1234 and see that it has been voided, preferably with a note to say why it was voided, that’s better than having a completely missing record.

If you’ve already received payment against that invoice, don’t void the invoice. Instead, issue a credit memo or a refund to adjust the transaction.

Owner’s Drawings: How To Pay Yourself As The Business Owner

There are three main ways a business owner can be paid:

1) Draw from the business bank account. This is treated as a loan and interest needs to be paid back to the business.
2) Draw from the business bank account in the form of shareholder dividends. The business owner then pays tax on the dividends.
3) Get paid as an employee of the business, like any other employee.

A good article can be found here on:

http://www.intuit.com.au/r/money/paying-yourself-a-salary-will-pay-off/

Option 1 (as above) – “In Australia, this strategy is viewed as the shareholder taking a loan against the company and results in the ‘loan’ being treated as unfranked dividends. The shareholder pays tax on the amounts withdrawn at their applicable tax rate. Find out more about unfranked dividends on the ATO’s website. Drawing up a formal loan agreement will help you avoid this pesky unfranked dividend situation, but you’ll have to pay interest back to your company and you’ll still pay tax on the cash – just over a longer period.”

Option 2 (as above) – “… shareholder dividends, which means you’ll need to declare the dividend as income and pay tax on the gross value of the dividend at its tax bracket. A franking credit can also decrease the tax payable on dividends by 30%. However, extra tax may be payable on benefits, such as the Medicare levy, depending on which marginal tax rate the owner is paying. In the event the owner ends up paying an income tax bill (instead of having their tax paid through the company), they have to pay PAYG instalments tax.”

One Simple, Zero-Cost Way To Improve Your Business Cashflow!

Zero cost – How can that be?

Here’s how a new automation feature will give you a great business cashflow boost.

One of the most important accounts procedures which is crucial to most businesses (except retail) is to get your invoices out on time.

For example, you do a job today which ideally means your invoice should go out today.

Or maybe you bill clients a set fee every month where your invoices need to go out on time too.

Late invoicing

You may offer 7 or 14 days terms with you which means payment will be delayed up to that amount of time so invoicing late puts more strain on your cash-flow position.

Moral of the story – invoice on the same day.

Okay, we get it – but why is this a problem?

Answer: Our time!

We have the best intentions to invoice on the day but we often have other constraints on our time.

Well, if you’re not using this already, there is a great solution if you invoice frequent fixed amounts to some of your clients.

Automatic invoicing

So, say for example you have a number of clients that you invoice on the 1st of every month.

I actually have 16 such clients. It takes one and half hours a month to create the invoices and email them to each client.

My bookkeeper used to do this at a cost to me for $75 per month + gst.  And they would have to come in on the 1st of every month.

Now with automatic invoicing available in most cloud-based accounting packages like MYOB, Xero and Quickbooks I am able to automate the creation and sending of these emails.

Xero repeating invoice example

(Above is how you setup automatic invoicing in Xero called a “repeating invoice”)

Quickbooks reoccuring invoice example

(Above is how you setup automatic invoicing in Quickbooks called a “recurring invoice”)

Overall, here are the benefits of implementing automatic invoicing:

  • One and half hours saved each month for a cost of $75 p/m + gst or $900 +gst annual saving
  • No need for my bookkeeper to come in on a set day every month
  • Improves my business cashflow as the invoices go out on-time.

If you have fixed client billing you can do this too.

This may include these services:

  • Monthly maintenance programs (cleaning services, gardening, website services, etc)
  • Software subscriptions
  • Training programs (fixed monthly fees)
  • Regular licencing fees
  • Payment plans
  • Rent for property (as a landlord)
  • And so on.

By the way, this is a cloud accounting software benefit as the automatic invoicing occurs in the background even if you don’t log in or go to the office.

Ask your bookkeeper to set this up for you or call us at Axia Accounts and one of our mobile bookkeepers can assist with this.

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