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Thread: David's bookkeeping corner.

  1. #106
    Senior Member glassngrass's Avatar
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    Default 5 reasons why to focus on cashflow

    • Cash is the universal business language; profit is a language of accountants; most people understand cash but few really understand the profit;
    • Profit can’t be spent, only cash can;
    • A profit is not a profit till it’s cash in the bank;
    • Profit can tell lies; cash does not;

    Cash Flow Tells the Real Story.
    Who will ever forget the HIH saga a few years ago; a company collapse involving, fraud, deception and massive losses for policy holders and investors? The really interesting thing about HIH was that in the two years before it collapsed the combined net profit was $164 million; but the operating cash flow showed a deficit in excess of $1 billion! The exact same thing happened to One-Tel, FAI and Harris Scarfe; they all bled to death; proving once again that profit is often a useless figure but cash flow tells the real story.

    If your bookkeeper or accountant can't help you understand cashflow, perhaps it time to consider a change...
    David
    Mr Sparkle Car Spa

  2. #107
    Senior Member glassngrass's Avatar
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    Default A dearth of knowledge among SME’s

    I am constantly amazed at how uninformed many business owners are; simple things like establishing a daily/weekly sales target or knowing how many hours must be sold to cover costs. It seems that most adopt a form of “blue sky” or “hit and hope” planning...or last year plus 10%! During boom times when credit is flowing well this approach may work but in tough, competitive times owners must know what’s going on – plan & monitor progress; when they stray off track they need immediate feedback to get back on track; or change track!
    David
    Mr Sparkle Car Spa

  3. #108
    Senior Member glassngrass's Avatar
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    Default Taxman is Watching Your Bank Application!

    The Tax Office has warned that they can access information provided in finance applications, and compare it against income details reported in tax returns.

    You should ensure you declare all your assessable income in your income tax return.

    1. Taxpayers trying to obtain a loan may be tempted to inflate their income when they fill out a loan application.

    2. As part of its data matching activities, the Tax Office will be cross checking the income that taxpayers disclose on bank loan applications against that disclosed in their tax returns.

    3. Where significant inconsistencies in the reported income levels are identified, the taxpayer may be subject to an audit by the Tax Office.

    4. The Tax Office is continuously enhancing its data matching activities in a bid to identify taxpayers who are evading their tax obligations.

    5. For more information, visit the Tax Office website at www.ato.gov.au
    David
    Mr Sparkle Car Spa

  4. #109
    Senior Member glassngrass's Avatar
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    Default Accountant's fees....

    Some use a budget service that does little more than you would do if lodging yourself.
    Some use a premium service and pay a packet needlessly.
    eg. I used a previous accountant who prepared my own lodgements and personals for around $600. I couldn't see value in them so changed
    Last year I used a Brisbane office. They were great, but that cost me...wait for it...$5,800 !!!

    OMG OMG OMG....I'm still paying this off. I am convinced I have not received value for the cost, and if I had any idea the cost would have been anything like this, I would not have used them.

    Moved to look around, I have discovered a firm that is not only great to work with, but offer a fixed price service (no nasty surprises) with guaranteed 14 day turnaround (or it's FREE).
    One thing that really stands out and especially appeals to me is the ethos "here to serve".

    Rates (personals not included):
    $120+GST for either sole trader, partnership, trust or company with up to $75K turnover.
    $240+GST if turnover up to $200K

    How does this compare this with what you've been paying?

    There are catches. Some include :
    1. They require an MYOB/QuickBooks/Xero/SAASU, etc... data file that complies with their checklists. An approved bookkeeper can make your data file confirm (likely a one-off cost) at standard rates.
    2. You declare you are not trading insolvent, and no staff members are paid 'cash in hand' outside the proper wages system.

    I really believe this firm will give you better value than you've been getting elsewhere.

    As tax time approaches, it's appropriate to consider getting your books in order. This is not meant to be an advert. If you are interested in knowing more about them, shoot us an email.
    David
    Mr Sparkle Car Spa

  5. #110
    Senior Member 4 Gardens's Avatar
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    Default Re: David's bookkeeping corner.

    Hi David,

    Please keep your posts coming. I think we all focus on the job at hand and forget to manage the financials and admin stuff as well as we should.

    As far as data file I use Erecord 6 from the ATO. Is that compatible with the data file you mentioned in your last post?

    Thanks
    Andrew

  6. #111
    Senior Member glassngrass's Avatar
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    Default Re: David's bookkeeping corner.

    eRecord - I don't believe so.
    The ATO are withdrawing support for it at end of this financial year and won't be releasing another version.

    By all means, focus on the job at hand (in the business), but especially ON your business - growing it. Getting a grip on your financials IS important, hoewever this easily distracts most from your focus.

    Software companies have mislead business owners with no bookkeeping training into believing that it's a cinch to mind your own business, and that doing your own books is quicken easy.

    What you really want is up to date information about your cash flow - what bills are pending, and who owes you - especially the later. The longer a debt is left, the less likelihood of getting paid.

    Running any business is a challenge - the most successful businesses delegate non 'core' activities.
    David
    Mr Sparkle Car Spa

  7. #112
    Senior Member glassngrass's Avatar
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    Default Payment options

    other than cash or cheque there's a number of different 'gateways' to recieve payment.
    My preference is bank transfer.

    Do any Indi members accept credit card payments, bPay or direct debit?
    David
    Mr Sparkle Car Spa

  8. #113
    Dedicated Member Cranbourne Lawnmowing's Avatar
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    Default Re: Payment options

    Quote Originally Posted by glassngrass
    other than cash or cheque there's a number of different 'gateways' to recieve payment.
    My preference is bank transfer.

    Do any Indi members accept credit card payments, bPay or direct debit?
    I have a lot of customers that do direct deposit. Most are pretty good but some you end up having to chase.
    Best ones are the ones who have paid in before you have even turned up to do the job

  9. #114
    Senior Member 4 Gardens's Avatar
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    Default Re: David's bookkeeping corner.

    Probably 95% of mine pay by direct deposit. I email an invoice at the end of the day and find they are generally paid that day.
    Andrew

  10. #115
    Senior Member glassngrass's Avatar
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    Exclamation Car Expenses - 2009/10 Cents Per Kilometer Rates

    Are you? - An individual incurring car expenses in relation to your income earning activities?
    At a glance: - The Tax Office has released the Car Expense Cents Per Kilometer Rates for the 2009/10 financial year.
    You should: - Ensure you use the correct rates when making claims for car expenses.

    1. The cents per kilometer rates for 2009/10 for car expenses claimed using the cents per kilometer method have now been released by the Tax Office.
    2. The prescribed rates for the 2009/10 financial year are attached.
    3. The cents per kilometer method should be used by taxpayers who do not claim more than 5000 kilometers for the income producing use of their vehicle during the year.
    4. The rates should also be used when calculating the taxable value of various fringe benefits relating to motor vehicles provided during the Fringe Benefits Tax year ended March 31, 2011.
    5. To find out more about claiming car expenses under the cents per kilometer method, click here.

    Remember: - Ensure you use the correct rate if you plan on making a claim for motor vehicle expenses using the cents per kilometer method.
    Attached Images Attached Images
    David
    Mr Sparkle Car Spa

  11. #116
    Translawner administrator's Avatar
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    Default Re: David's bookkeeping corner.

    Couldnt you sleep 10 to 1 in the mornin

    Please Support The Sponsors www.lawnmowingdirectory.com.au

    As they support this forum




    Carrum downs Dandenong Doveton

  12. #117
    Senior Member glassngrass's Avatar
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    Default Re: David's bookkeeping corner.

    No, couldnt sleep...
    David
    Mr Sparkle Car Spa

  13. #118
    Senior Member 4 Gardens's Avatar
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    Default Re: David's bookkeeping corner.

    Hi David,

    What do you make of the latest talk on tax changes. Any benefits or nasties we should be aware of.

    Watching the news the mining companies have copped it.
    If you employ others super will go up over the next couple of years.

    Andrew

  14. #119
    Senior Member glassngrass's Avatar
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    Default Complexity in the Australian Tax and Transfer System

    http://taxreview.treasury.gov.au/con...mrod_paper.pdf
    Joel Slemrod
    University of Michigan. Conference draft. June 2, 2009

    This makes an interesting read - but don't attempt it if your tired.
    Here's just the summary...


    8. Summing Up
    There’s no secret to achieving a radically simpler tax system. In an individual-based tax system, levy tax liability per person (or adult), and no other personal characteristic or decision. In simple terms, levy a head tax. What’s more, enforce the head tax causally, infrequently assessing whether the head tax liability has been remitted, and promising extremely large penalties on noncompliers, so large that no risk-averse citizen would be tempted to evade. That no modern country has adopted such a tax system suggest that citizens seek something more than the absolutely minimum cost of collection. They seek equity in assigning the burden of government and perhaps in assigning net benefits. Thus we are in the real world of tradeoffs where the simplest tax system is not the best. In this world some complexity can be avoided by settling for rough justice in the assignment of tax burden.
    Simplicity can be gained by relying on a business-based tax system such as one that levies tax proportional to value added, minimal exceptions allowed, and where no information on individuals is needed. This would levy a tax burden that is approximately proportional to individuals’ lifetime income. Even that distribution of burden would be
    33
    unacceptable to many, probably most, citizens due to insufficient progressivity, so that a uniform value-added tax alone would not be appealing.
    Starting from the Australian tax status quo any policy change aimed at simplification will also have efficiency, efficiency, and often political implications. Nevertheless, to an outsider there are several promising avenues toward simplicity. One is to coordinate the measure of well-being used to measure ability-to-pay for tax purposes and deserving-to-receive for transfer purposes. One benefit of this would be to reduce the amount of tax-welfare churning. A second is to unify or harmonize across multiple transfers. A third is to harmonize tax policy across states and between the federal government and the states. Fourth and fifth are to be more willing to accept rough justice and restrict the number of objectives leading to tax expenditures.
    To an outsider interested in a simpler, citizen-centered tax system there are many positive aspects of the Australian tax system. E-filing is widespread and the system has gradually allowed taxpayers to bring in relevant information from third parties, leading to a kind of pre-filling of returns. There are simplified returns for some individuals and businesses. The tax authority seems to be quite comfortable with recognizing the compliance costs of taxation; indeed, in the latest (2006-7) issue of Taxation Statistics, there’s a new chapter on cost of taxation. Recently there was a systematic attempt to improve the readability of the tax code. There is a sense that the tax authority aspires to a relationship to taxpayers characterized by collaboration, trust, and openness.
    Because the costs imposed by tax-and-transfer complexity can be large, the policy choices along this dimension are important. Economic analysis offers only limited guidance about how a country ought to make policy in the face of the tradeoffs this paper highlights. It can, though, clarify the nature of the tradeoffs and expose imprecise reasoning and thereby inform future policy.

    ------------------------

    My take on this is - it's too complicated now, but it's too hard to fix , 'cos what ever is changed there will be winners and losers, and since nobody wants to lose from change, change will be resisted.
    So...we'll stick with an unwieldly and over complicated system to justify the outragous accountants' fees.
    David
    Mr Sparkle Car Spa

  15. #120
    Senior Member glassngrass's Avatar
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    Default TAX - everybody's got a view...what's yours?

    Risky approach to Henry tax report

    by Crispin Hull on January 23, 2010

    THE Government has been holding back the report of the Henry Tax Review for a month now. It is an unusual piece of media-policy-agenda manipulation. The more astonishing thing is that nothing much has leaked from it, except a few pronouncements by Ken Henry himself.

    Taking the cynical view, tax requires much more media and opinion management than most other policies because, as Treasurer Wayne Swan, said a month ago when he received the report, “The one thing you know about tax is that everybody’s got a view.”

    A survey by the “progressive” think tank Per Capita released this week shows just how difficult the Government’s task is. The survey reveals a highly demanding, contradictory, and quite ignorant public. People want a simpler system, but they want more action on evasion and avoidance. They want to pay less tax but want more public services yet they have little idea of how much the Government spends on various items in the Budget.

    For example, on average they think the Government spends about nine times more on foreign aid than it actually spends and more than four times what it does on defence – as a percentage of government spending.

    They think that high-income earners and big business pay too little tax. Even high-income earners think that, though most say that they personally do not pay too little tax.

    So Joe Public thinks the solution is to tax the rich and give more to health and education. And to have a much simpler system.

    It is a recipe for disappointment. The trouble is that there are not enough high income earners for tax increases on them to make much difference. Income earners are distributed in a bell curve with many more in the middle than at the ends. It means that tax cuts for middle income earners affect the government bottom line more and so are harder to give.

    Increasing taxes at the top end has it difficulties. The higher the tax rate the harder people work at avoidance – and the rich have greater access to the advice which they can afford to do it. Very high tax rates can cause businesses to go off-shore.

    The best way to increase tax paid by high income earners is, however, politically out of bounds, that is to increase the GST. When the GST was introduced, opponents said it would make every business a tax collection agency for the Government. Well, what efficient effective tax collectors they are. If the rich want to spend their riches, they at least have to pay the GST, however good they might be at avoiding income tax.

    As for simplicity, you cannot tackle avoidance without a lot of complicated rules.

    Another difficulty for the Government will be to remove all the inefficient subsidies, social-security allowances and tax breaks mainly for people over 60 and self-funded retirees. The Howard-Costello Government introduced many of these and the Rudd Government appears unable politically to do much about them: family allowances; no tax on superannuation pay-outs if you are over 60; the Medicare safety net; the health insurance deduction; and the co-payment for spouse’s superannuation payments. The last three seem to be there to help middle and lower income earners, but they are disproportionately used by the better off.

    Any move to change any of these will result in loud squeals of protest. That is the trouble with changing the tax system: you will inevitably produce some losers who will be likely to change their vote over it – witness the sharp fall in the Coalition vote in the 1998 election after John Howard proposed a GST.

    So far, the Government’s treatment of the Henry Tax Review has been out of character. Usually, Governments allow reviews to go public to test reaction before putting out their response or even draft response.

    They do this to weed out any proposal that gets a toxic reaction from the public. Then the Government can quickly disown the proposal and say it is, after all, just a proposal from an inquiry and not a fixed government position. The Government is not accused of a “backdown” by the media – and we all know that the media likes a good “backdown”.

    Another reason for floating the inquiry’s findings first is to take the news sting out of any contentious proposal. The Howard Government would often let an inquiry propose something, or even propose something in broad terms itself. It would then fob off media concern with “wait for the details”. Yet when the nasty detail was published the Government would say, “This is all old hat and not worth examination.”

    So the Rudd Government’s approach is quite unusual. Its interim response will come at the same time as the publication of the review itself. The response will drown the review.

    It would be unfortunate if the Government prematurely rejected worthwhile proposals through fear of poor reaction. It would have been better to have a wide debate first – not just an ideological fight between the Government and the Opposition, but a debate in which the public, academics, think tanks and commentators take part.

    Often they can point out things not seen by the initial review.

    A month’s jump is not just unfair to the Opposition but also to the public if the Government adopts a position (even if interim) before the proposals are subjected to wider debate.

    You might think it is also a bit unfair on Ken Henry, who has spent 18 month on this review (while still serving as Secretary to the Treasury), to have parts of his review ruled in or out before the public gets a chance to digest his recommendations. But he has stated he is taking the long view.

    He cited the 1975 Asprey tax inquiry. At the time all his significant recommendations were rejected as too hard, yet nearly all of them were put in place in the next two decades: fringe benefits and capital gains taxes, a GST, share dividend imputation and so on.

    Perhaps the real lesson is that the Government should take the tough decisions early. If the Asprey report had been acted on sooner, the Australian economy would have come out of its Rip van Winkle years a lot earlier. Let’s hope we don’t have to wait two decades for the best of the Henry report to be enacted.

    Let’s hope the Government has not used the past month to find excuses not to do the economically sensible because it is politically difficult.
    CRISPIN HULL
    This article was first published in The Canberra Times on 23 January 2010.

    -------------------------
    So, after this mamoth undertaking, seems only a handful of the many dozens of recommendations will be accepted.

    If I was a skeptic I'd say the govt is doing what they wanted to anyhow, but needed to justify it with an expensive study first!
    And what disagrees with your plans - just ignore.

    As far as 'major tax overhaul' goes, it's a bit more like a wet firecracker...
    David
    Mr Sparkle Car Spa

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