Now that Single Touch Payroll (STP) has been live for over half a year, we wanted to know – from the perspective of small business owners themselves – how the system is benefitting businesses.
Dynamic Business has covered the roll out of Single Touch Payroll extensively, including a podcast with the ATO’s Jason Lucchese last November, where we talked about how it will affect small businesses for the better.
With anything, there will be pros and cons, with the most notable con perhaps being the time and energy spent on reading up on STP and how to use a new system. However the ATO seems to have plenty of resources to help you with this, such as this flowchart, and we have shared top tips and info along the way too.
We see this as a great opportunity to reflect and case study some small businesses across a series, seeing what STP looks like for them as well as learning what they do and how they do it – picking up some inspo along the way!
Our first case study centres around Energy Culture, which is an award-winning sustainable energy business.
While only a small team of four, their commitment to providing homes and businesses with sustainable energy in a decentralised energy network is making waves.
However, being a team of four means employees are required to do more than they’re used to, including owner Joe Edginton.
From electrical work to managing HR, Joe’s time is stretched across the business, but one area where he has felt most challenged has been in managing finances.
Thanks to the introduction of STP, Energy Culture has managed to transition from the early days of writing cheques for employees to submitting payroll digitally. This has not only made the task of managing finances easier, but it’s given Joe and his team much-needed time back in their days.
We spoke to founder Joe about his business and the introduction of STP, as well as popular small business accounting software Xero’s Small Business Advocate, Angus Capel on how Xero is managing the changes for its clients.
When were you founded, why, and how have things changed since day one?
I started my electrical contracting business 12 years ago, and the business has grown and evolved significantly since then.
The biggest change was our rebrand in 2012 to make sustainability our guiding principle. Sustainability is something I’d always been passionate about. Growing up in the country in the United Kingdom, I felt close-knit with the environment around me. When we decided to move to Australia, the natural environment in Sydney was a big drawcard as I wanted my family to live an active, outdoor lifestyle. I started to realise the carbon footprint businesses had – and still have – was impacting on the environment in a big way. As a business owner, I wanted to make a difference and this was the impetus behind Energy Culture.
We help residential and commercial clients to reduce energy consumption by providing electrical and solar panel services in the Northern Beaches of Sydney.
We support our customers with their energy usage in a sustainable manner – all of our products are environmentally and socially responsible. Even our workmanship has been designed to use fewer resources, but with products that last the distance.
With the growing demand for renewable energy in Australia, we’ve grown from a one-person show to a team of four and received industry recognition for our continued sustainability efforts. In 2018, we won the Northern Beaches Council Sustainability Award and were named one of Anthill’s Top 100 companies.
What are the main challenges you face regularly as a small business owner, with just a team of four?
I come from a technical background as a qualified electrician, so when it comes to running the day-to-day of the business, I’ve had to learn a lot along the way.
It’s things like people management, customer relationship management and payroll that are the most difficult to oversee while trying to carry on with client work.
Being able to do all of these things seamlessly and worry-free has been a big challenge. But with time and experience, we’ve learnt that cloud-based tools can support us with all of these functions. From CRM to payroll, these tools have helped us to better track and manage our key business functions, so I can spend more time doing the work I love.
Is it yourself that manages the payroll and finances single-handedly?
Starting off the business, it was me (with the support of my wife) managing payroll and finances. In the early days, managing payroll was manual and time-consuming. We even had to handwrite all staff payslips and go to the bank to issue them.
Today, the entire process is so much easier. I still manage payroll, but rather than having to write out cheques by hand, we use Xero. With the support of our accountant cross-checking everything, we’ve gone from spending hours trying to manage and track payroll, to completing it in only a matter of minutes.
How did you find out about the benefits of STP?
My accountant first told me about STP about a year ago, and at first, I wasn’t sure exactly how it would help the business. But my accountant explained its benefit and I understood the upside. With no more handwritten payslips and PAY-G summaries, it was a change I was more than happy to welcome.
Was the switch over to STP an easy one?
For us, switching over to become STP compliant was seamless as my accountant assisted in the transition process. It was made even easier given we have been using Xero for 8 years.
What’s the biggest help been for you personally in terms of using 1) Single Touch Payroll? and 2) Online accounting software?
The standout benefit of Single Touch Payroll for our business is time saved. Using Xero, we have payroll done for all employees within minutes, but the added step of being able to report this directly to the ATO makes the prospect of tax time so much less stressful.
Leading on from our interview with small business owner Joe, we also wanted to pose a few questions to Angus Capel who is Small Business Advocate at Xero Australia. From their side of things, we wanted to know how they’ve dealt with the change internally, the feedback they see from their small business clients and his thoughts on finance generally for small business owners.
How has Xero been affected by the roll out of STP? How did you ensure you were advising clients correctly and implementing accurately into your service?
At Xero, we often speak about how the introduction of Single Touch Payroll reporting represented the biggest change in small business since the introduction of the GST in Australia in 2000. Small business owners are busy and changes – especially those introduced by the government – can create additional stress and confusion.
To support a smooth transition to a new way of reporting tax and superannuation information, we worked closely with the ATO to ensure small businesses had access to the information they needed to comply with the new law.
We were then able to make it as simple as possible for customers already using Xero to report the required payroll information to the ATO. We also designed an entry-level Payroll Only plan for employers with up to four staff who weren’t using software to manage their payroll.
What has been the general conversation around and feeling towards STP from your small business customers? On the whole negative or on the whole positive?
STP has been the catalyst for many employing businesses to use digital payroll solutions, potentially for the first time. For many small businesses, processing payroll and associated compliance had meant hours poring over spreadsheets outside of business hours. Alleviating the pressure of manual payroll and compliance has been welcomed by many small businesses.
Do you think that payroll and finances is one of the top challenges small businesses owners face, as in Joe’s case?
Finance, as a blanket term, is a major challenge for small business. Some of the biggest pain points include cash flow, getting paid on time and accessing affordable credit.
That’s why the digital journey started by STP compliance is an exciting one. Digital tools are being created to ease the burden of historical small business pain points. Xero’s State of Payroll report found three in four businesses said that digitising payroll freed up time and mental space, allowing them to focus on working on their business.
When it comes to late payments, the small business sector is forced to endure $115 billion in late payments from large businesses each year. However, we know a digital payment solution such as Stripe or PayPal speeds up payment by 55 per cent.