5 steps to success at tax time
Tax compliance is one of the biggest burdens small businesses face – it goes with the territory, but can you lessen the load?
It’s a necessary evil, as the day you decide to start your own business is the same day that you sign up to meet a number of obligations with various government departments, including the Australian Taxation Office (ATO).
Just like any other business, each of these government departments have their own terms and conditions (T&Cs) and it is assumed that you are going to acknowledge and accept these T&Cs.
The burden is the same for all businesses, but what makes a company either bear the load successfully or collapse under the weight of it is how they set themselves up to meet their obligations.
When I talk to the businesses which have managed to meet their obligations in a less ‘taxing’ manner, they’ve managed to set up systems with the right people to help them.
Once they sort these two things out, tax compliance becomes second-nature.
So, how did they manage to free themselves from the disorganisation, the mad-dash to be compliant, the gathering of information at the last minute and the uncertainty of liability?
There are five key things business who succeed do that those who don’t… don’t.
1. They understand exactly what their obligations are
Don’t leave this until you see your accountant at the end of the year (ask what income you need to declare and what expenses will be tax deductible).
2. They talk to their accountants about compliance
They ask their accountants what the most efficient and cost-effective ways of meeting their compliance needs are.
That may be outsourcing things that you don’t have time to do, or investing in cloud accounting options such as MYOB to help take the guesswork out of compliance.
3. They have systems in place
They have systems in place where they do things on a regular basis to make sure they’re not chasing things up in the last minute.
We’re talking things like filing receipt, regularly sending invoices, chasing up clients that owe them money and doing bookkeeping on a regular basis.
4. They monitor on an ongoing basis and quarantine
They monitor their profitability and keep track of ATO obligations.
Then they regularly set aside money from their account to meet these obligations.
The clever ones even open up a separate bank account and transfer their ‘obligation money’ weekly so when time comes to make the payment, they feel everything’s under control.
5. They surround themselves with great advice
Good business leaders do this anyhow, but surrounding yourself with good advisors and companies you feel support you on your business journey is key.
Not only are they a great source of advice, but they can become a font of wisdom for business owners.
With the right advice, there’s no such thing as a stupid question.
A lot of businesses fall down when it comes to compliance because they don’t ask questions – and part of that is feeling dumb for asking what you may perceive as a basic question.
Most advisors love sharing their knowledge with their clients and getting the basics right will certainly help you achieve success.
The golden rule
Those are five habits of successful and compliant businesses, but a favourite saying of mine is “The way you start will be the way you finish”.
So, for those starting a business, I urge you to put meeting your ATO obligations as close to top of mind as you can.
For those businesses that are not happy with this area of their business, could I urge you to turn over a new leaf as we approach the new financial year?