A third of small business owners are still keeping their receipts in a shoebox, according to a new survey. If this sounds familiar, these time-saving tips will help you get ahead in the next financial year.
The end of financial year is nearly upon us and for businesses across Australia, this means facing up to tax time reporting obligations. For several years, we have asked thousands of small business owners to share their thoughts on what tax time means to them. Every year (understandably) we hear that it represents a difficult time for them. The amount of time spent processing invoices and reconciling receipts, the stress related to ‘getting it right’ and ensuring reporting is done on time are all concerns that have been voiced. This year, it seems that confusion reigns over what tax concessions small businesses are able to access.
Just 13 percent of Australian small business owners surveyed by American Express this year said they were completely up to speed with the existing tax breaks and concessions for small businesses. This number was slightly higher at 21 percent among those businesses that prepared their tax returns without the help of an accountant. Either way, these figures indicate that the vast majority of Australia’s small businesses might be paying too much tax. Considering that cashflow is one of the biggest concerns for small business owners, missing out on the tax breaks available to them will serve only to exacerbate this issue.
Understanding what your tax obligations are is a must for ensuring accurate reporting, but knowing what concessions are available is just as important. A good place to start is by consulting an expert – your accountant should be able to give you an overview of what rebates and concessions you are legitimately entitled to. Alternatively, the ATO runs a free national seminar program for people who are new to business and covers off topics like this.
Another glaring result from our recent tax time survey was that a lot of small business owners (more than one third) still resort to keeping receipts in a shoebox. This may account for why the majority of business owners admit to having lost receipts for business expenses like petrol and stationery. Ironically, those younger, more tech-savvy business owners are the most likely to store their receipts in a shoebox. While 60 percent of ‘shoeboxers’ are worried about staying on top of their receipts, this compares to just 40 percent of those who log their receipts electronically and 36 percent who use specialist software. In an age where technologies have been developed to help make life easier, these results are surprising and demonstrate that life can be made easier with a little bit of organisation.
As 30 June approaches, tax reporting continues to be a source of stress for the vast majority of small business owners. In fact, most would prefer to be doing something else such as catching up with filing, chasing outstanding invoices or even cleaning out the office fridge.
In terms of specific causes of stress relating to tax reporting, topping the list were:
- Keeping track of all receipts and invoices (43 percent);
- Worrying about inaccurate reporting (41 percent); and
- The amount of time tax reporting takes (35 percent).
A lot of small businesses surveyed did admit to wanting to make some changes to the way they manage their finances going into the new financial year. As many as 44 percent of small business owners said their new financial year resolution is to be more organised in filing their receipts and collating information throughout the year. Other resolutions included improving tax reporting with the assistance of an accountant or business mentor and setting aside more time to complete tax reporting. Even small measures can count – so whether you decide to consult an accountant once a month, or invest in some accounting software, you’re sure to make life easier when tax time comes around in 2013.
There are simple steps that can help ensure that your new financial year resolutions become a reality. Some time-saving tips that will help you get ahead in the next financial year include:
- Keeping on top of receipts and records by entering them into the company’s reporting system regularly. This way, even if you are prone to a bit of ‘shoeboxing’, your systems will be more accommodating of lost receipts.
- If you haven’t already, consider introducing accounting software into your business. This can help minimise the time you spend collating receipts and reconciling them against transactions made.
- Consider the time-saving benefits offered by a business charge card. Some cards can provide a monthly breakdown of expenses on a single statement with ATO approved, GST compliant itemisation. This data can be easily and quickly downloaded into accounting software packages which eliminates the need for manual data entry and receipt itemisation. Some cards have the added advantages of credit-free days (which makes cashflow management easier) and rewards points which can be reinvested into your business.
- Always keep business and personal expenses separate – this will ensure that your personal assets will not be held as insurance against your business activities. Again, instead of having business expenses on a personal credit card, a business charge card can help you keep these separate.
- Speak to an expert – whether you’re stuck knowing what you should be reporting and what you should be claiming, seek advice from an accountant. They will be able to suggest what solutions best suit your business.
Most importantly, stick with it – sometimes it can be easy to start a new financial year off on a good foot but as with all resolutions, good habits can wane. Be sure to continue the year as you started it, staying more organised and seeking the help of experts where you need it. Who knows, next year we might find that tax time has become a whole lot easier for you.