One of the biggest challenges facing small businesses is the dreaded cash flow headache.
Often, the key reason small businesses go under in the early years is that they simply don’t have the ability to make sure they have enough cash on hand to cover upcoming bills.
Small business owners can find themselves injecting personal funds to meet outgoings or becoming very “creative” with moving money around including using provisional tax, GST or even PAYE to pay bills.
Luckily, AIM can help small business owners take one cash flow headache off their plates.
The Accounting Income Method (AIM) is a great way to help by paying your provisional tax as you go instead of in one lump sum.
Unlike other provisional tax methods, which use your previous year’s revenue to estimate your profit and tax liability, AIM bases your provisional tax calculation on your businesses’ actual earnings.
That means you only pay provisional tax if your business makes a profit, and you receive a refund straight away if you make a loss.
It also aligns your provisional tax with your GST filing frequency, so that you stay up to date with payments in the same period you recognise the revenue.
This helps keep you current and avoids any surprises or lump sum payments.
AIM works through your online accounting software to take the guess work out of calculating provisional tax.
It calculates income tax based on your actual earnings in the current income year, and then submits your Statement of Activity directly from your software to the Inland Revenue.
MYOB Essentials and AccountRight are two of the only online solutions that are AIM-capable now.
You don’t need to enrol or register to use AIM.
Simply submit your Statement of Activity (SOA) on your first due date through MYOB Essentials and this will indicate to Inland Revenue that you have chosen AIM for the 2019 income year.
NOTE: You must elect to use AIM by submitting your first SOA before the first provisional tax due date. If you miss this deadline, you’ll not be able to use AIM until the new financial year.