Diana outlines some practical ways to make your business finances easier.

1. Getting paid:
Make it easier for clients to pay. Have software that have a link to paypal or stride, etc, to send the money straight to you.
Tip: send a quote with a bank details included.
Tip: you can negotiate with Paypal and price match with Stripe fees.

2. Keep your records on point.
How much are you bringing in and how much are you spending?
Use apps for tracking driving miles, and for organising receipts. Systems like Xero integrate with accounting software.
Keep an invoice for every business expense you have, for FIVE years.

3. Separate your business money from your personal money.
Set up different accounts now, and be stress free later.

Tip: Have two business bank accounts.

Have a second business account to save money for your tax and/or GST.
Tip: You can pre-pay the ATO. They will take your money sooner.

4. Sales.
Be confident with your pricing. Think about your ideal client and how much it costs you to provide the service that your clients need. You will have direct costs that you can’t run your business without. You must charge this amount, plus more.

Tip: Rule of threes: a third of your fees should cover direct cost, a third should cover your time/wages and a third should cover admin or reinvesting money back into your business to grow it.

5. Your sales mix.
You don’t want your income to be dependent on only one service. Diversify and future proof your business.

6. Tax Deductions.
If you weren’t running the business would you be spending the money? If the answer is no, then you can claim it.

Tip: You can claim your membership to TCCS as a tax deduction.

7. Savings.
Plan for the future and save for things like tax, GST, and unexpected life events.
If you have savings, you have choice and freedom.

Tip: Save a minimum of 25% for tax.

Do you take your super contributions from your savings?

Do ‘Profit First’. KT pays herself a set wage each week and out of that comes her super. Consider your super an employment cost.

Changes for small business since the last election:

  • Small business asset write off went up to $30,000. You can claim it the year that you bought it.
  • Middle income and low income tax offsets are coming down.

Q. For sole traders, do I take money for tax from my business account or personal account?
A. Business account.
10% out for GST.
25% out for tax
Then your profit. 1% (rainy day money/buffer)
50% your pay
25% expenses.

This doesn’t add up. So take these numbers as a guide. Do what works for you.

Do I have to hang a shingle out the front of my house because I have a separate entrance to my home office?
Standard home office deduction. Once you claim your mortgage interest off your tax, you will have to pay capital gains tax if you sell.

What is BAS?
Business Activity Statement. If you’ve registered for GST, once a quarter you must report how much GST you’ve earnt, then reconcile it against everything you’ve bought. You also have to pay your tax every 3 months, instead of once a year.

What is a good resource to learn about doing your own BAS?
KT says: Pay someone to do your BAS.
You can look at the Xero website for resources.

Category: Money

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