If you’ve been thinking of buying new equipment or a new vehicle for the business, now might be the time to do it. The instant asset write-off cost limit of $150K has been replaced by a new “temporary full expensing” measure (TFE) which effectively means you can fully deduct the cost of most assets, no matter how much they cost. This measure is in place to provide immediate tax relief and assist cash flow.
Who & what is eligible?
Businesses with an aggregated turnover of less than $5 billion.
Assets purchased and/or installed between 7:30 pm on 6 October and 30 June 2023.
Commercial vehicles, vans, buses and motorcycles.
Who/what is not eligible?
Fancy a new car?
Cars costing more than $59,136 (they can only be depreciated up to this amount).
Assets allocated to a low-value pool or a software development pool.
Certain primary production assets (water facilities, fencing, horticultural plants or fodder storage assets), unless you are a small business entity that chooses to apply the simplified depreciation rules to these assets.
Buildings and other capital works.
Assets that will never be located in Australia, or will not be used principally in Australia for the principal purpose of carrying on a business.
If your entity has an aggregated turnover of $50 million or more, you cannot TFE the cost of assets that are secondhand or that you purchased or installed prior to 7:30 pm on 6th October 2020.
While TFE sounds good on paper, it is imperative that you get advice from your tax agent or accountant about TFE and how it may impact your tax situation, especially if it results in creating a loss. As we are BAS Agents, we cannot advise you about this so please do speak to your tax advisor if you think you would like to use the TFE measure for your business.
In this blog, I am going to share a cash flow spreadsheet that I use in my business. This is my very “simple cash flowtool”. It’s not a forecast per se (but could be made into one), rather, it’s a reality check tool for your business, that tells you exactly how much you have to spend, as opposed to how much you think you have to spend!
We’ve all looked at our bank balance when it’s healthy and started having visions of new clothes, holidays and nights out etc. However, as business owners, we also know that we have business (and personal) costs that must be paid for before any of those enticing dollars can find their way into our pockets. Below is a list of those costs included in the spreadsheet. You may have different costs or extra ones – feel free to amend the list to suit your needs.
General expenses (operating costs)
Wages, superannuation and PAYG withholding
GST
PAYG income tax and/or previous years’ income tax repayments
Loans and credit card payments
Previous’ month/quarter BAS
Your own sundry spending (your drawings or director loan amounts)
How does the spreadsheet/tool work?This tool asks you to review a prior period such as last week, fortnight, month, quarter or year. For the purposes of the tool, we call these periods your “focus periods”. Before you begin using the tool, it is a good idea to choose your focus period. Of course, you can change the period type later as needed, but to begin the process, just choose one period of interest.
In summary, the spreadsheet is split into two sections. The first section takes your opening bank balance at the start of your focus period, adds any income from sales, deducts your operating costs and deducts the required minimum bank balance (that amount you know you need to leave in the bank for running costs). The result provided is the balance available for spending or saving as at the end of the focus period i.e. how much you have at your disposal TODAY. Here is an example of what section one looks like – the cells highlighted in green show your available balance:
You could decide to transfer some funds to savings, pay down debt, buy something special, give employees a bonus, buy new equipment – the choice is yours. While this information about available funds is extremely useful, our tool goes a step further!
The second section in the spreadsheet takes today’s available balance as above, then adds back any future income and deducts future bill or liability payments.
The final result is called your “true cash flow figure“, and is a more accurate representation of your financial position. Note the difference between the result in section one and that of section two in our example above! The true cash flow figure is less than half of the available funds as at the end of the focus period. This is often the case because section two takes all future cash transactions into account, whereas the figure in section one only looks at the here and now. Don’t get me wrong, knowing your available spending balance as of today is still necessary, however, in order to understand your true cash position, it is important to include all future spending/income. Doing this will ensure that you don’t inadvertently spend dollars that really should be saved for the long term.
Now that you can see your “true cash flow figure” you will be able to make a more informed decision about how much is really available for spending (or saving) today. Of course, if your figure is low or even negative, then perhaps you need to review your situation and work out why this is happening. Whatever the outcome, this tool will provide you with a snapshot of your overall financial position. One important aspect to note is that for this tool to work properly, your accounts need to be up to date. As a minimum, ensure that your bank accounts are reconciled up to the end of your focus period prior to using this tool.
I suggest running this cash flow tool on a regular basis to assist you in controlling and understanding your business finances. If you need assistance to use this tool or would like us to prepare it for you, please get in touch to discuss.
Getting started with the cash flow tool
Open the spreadsheet which is shared below. There are 3 tabs in the spreadsheet. The first tab of the spreadsheet is an example of how the tool works and includes notes and instructions. The second tab is a single-period cash flow to look at one focus period only e.g. one week, one month etc. The third tab is a multi-period tool that allows you to look at several periods at once. Follow the instructions provided in the first tab and then enter the figures as required into either the single or multi-period tab.
I hope you find this spreadsheet tool useful. Let me know if you have any questions about it or have some suggestions about how to improve it, by leaving your comments below.
This year we are making some changes to our internal processes. As part of those changes, we recently moved to a new job management system called Clickup. The app allows for a lot of innovation and creativity in regards to business operations, including the ability to automate many processes. We have only just begun our journey with Clickup but are already very impressed. Our first “automation creation” via Clickup is a new way for clients to send us job requests.
We have created a form in Clickup which asks clients what their job request is about and it allows for document uploads too – here is a screenshot of the form:
Once submitted, the form is automatically turned into a task inside the client’s folder in Clickup. Clickup then notifies us that the job has been created. The due date supplied by client on the form is marked as the due date in the task by Clickup. Any documents supplied by the client are added to the task too. There is nothing for us to do here (except the job itself, of course!). Automation is a wonderful thing!
We have advised clients to add the link for the job request form to their favourites list for quick access at any time. We also put the form link into our email signature to give clients an alternative way to find the link quickly. Hopefully, the use of this new form will reduce the number of emails between us and our clients (and who doesn’t want less email clutter?). We may even investigate the idea of putting a button on our website for request submission…..who knows!
The Job Request form is the start of a few new processes coming out this year. I’ll blog about this as we go along.
Do you do something similar to the above with your clients? Does it work well? Do you use Clickup for your business? Let us know by commenting below.
As a BAS Agent, of course I understand how BAS lodgement works [or you would hope that I do lol!] Sometimes I forget that what is old hat for me, can be confusing to my clients or even present as completely new information. Yesterday a client asked me why his monthly instalment activity statement for September hadn’t yet been lodged. The simple answer is that it’s not due yet, something that I thought he understood – apparently not! This has prompted me to write this blog – 5 BAS lodgement facts in 5 minutes. Yep, it will only take you 5 minutes to read this blog which I recommend you do if you don’t understand the mechanics of BAS lodgement.
My last blog was all about the new “Netflix Tax” and was really just an informational blog outlining what, how and when etc. In this blog, I want to look at the tax from a bookkeeper’s perspective and provide a real “from the trenches” viewpoint. All is not what it seems with the Netflix Tax!
This blog is going to be more of a brain dump! I’m not entirely sure what’s going to come out of this one but here goes! So here’s some background on what’s been floating around in my head of late:
The past two years have seen enormous growth in my little bookkeeping business for which I am very grateful. We are doing so well in fact, that I now feel that it’s time to give something back to the community to show my gratitude. So for the past few months, I have been wondering about my options for “giving back”. Being so busy now in the practice, it’s not really possible for me to give of my time per SE so I have been looking at some alternatives. Something I am playing with (currently only in my head!) is a donation of a percentage of our profits. The way I am thinking this might work is described below.
We like to think that we’re doing a pretty good job at being a paperless office. We only print when we absolutely have to, all client files are saved electronically and any paper documents we receive, are scanned to pdf and then recycled. This system works well but the problem is, we started it many years after our business began. In the early years, we did print everything and all client files were kept in hard copy format. Therefore, as paperless as we are now, we still have cupboards full of client data from prior years. Recently, we decided that it was time to get rid of the clutter!
If you use your bank’s credit and debit card merchant facilities to accept payment from your clients and you on-charge the bank’s fees for use of these facilities, you need to take note of this blog!
There are several tools you can use that will allow you to share your documents with us. Your location (and ours) isn’t a problem as most tools will allow you to share your data remotely. Here is a list of tools you can use:
Our last blog looked at engagement letters and why they are important for our clients (and for us!). The final part of the process when creating an engagement letter for clients is the signing of the document. The client needs to sign the letter and we also need to sign it. In days gone by, we would draft the letter, send it via email to the client and request signature. The client would then have to print out the letter, sign it, scan it and then email or mail it back to us. We would then do the same and email/mail back to the client for record-keeping purposes. This process was both time consuming and convoluted. You’ll be glad to hear that we don’t do this any more! We use a much better system which is completely cloud-based. We use Adobe Sign. No more paper and no more scanning (and no more snail mail). Here’s how it works.
