Success is in the Cashflow.

Studies suggest that the failure to plan cash flow is one of the leading causes of small business failure.

To this end, a cash flow forecast is a crucial cash management tool for operating your business effectively.

Specifically, a cash flow forecast tracks the sources and amounts of cash coming into and out of your business over a given period. It enables you to foresee peaks and troughs of cash amounts held by your business, and therefore whether you have sufficient cash on hand to fund your debts at a particular time.

Keep in mind that sales figures can change all the time depending on:

  • your customer base and how quickly they pay you
  • changes in the economy such as interest rates and unemployment rates
  • what your competitors are doing

Moreover, it alerts you to when you may need to take action – by discounting stock or getting an overdraft, for example – to ensure your business has sufficient cash to meets its needs. On the other hand, it also allows you to see when you have large cash surpluses, which may indicate that you have borrowed too much, or you have money that ought to be invested.In practical terms, a cash flow forecast can also:

■make your business less vulnerable to external events in the economy, such as interest rate or super rises

■reduce your reliance on external funding

■improve your credit rating

■assist in the planning and re-allocation of resources, and

■help you to recognise the factors that have a major impact on your profitability.

At this point, a distinction should be drawn between budgets and cash flow forecasts. While budgets are designed to predict how viable a business will be over a given period, unlike cashflow forecasts, they include non-cash items, such as depreciation and outstanding creditors.

By contrast, cash flow forecast focus on the cash position of a business at a given period. Non-cash items do not feature. In short, while budgets will give you the profit position, cash flow forecasts will give you the cash position. Cash flow forecasting can be used by, and be of great assistance to, the following entities:

■business owners

■start-up business

■financiers

■creditors

A cash flow forecast is usually prepared for either the coming quarter or the coming year. Whether you choose to divide the forecast up into weekly or monthly segments will generally depend on when most of your fixed costs arise (such as salaries, for example).

When forecasting overheads, usually a forecast will list:

■receipts

■payments

■excess receipts over payments (with negative figures displayed in brackets)

■opening balance

■closing bank balance.

When you are making forecasts, it is important to use realistic estimates. This will usually involve looking at last year’s results and combining them with economic growth, and other factors unique to your line of business.

If you have any questions regarding your cash flow forecast – de Kretser is here for you.

Need more information?
If you need help creating an overview of your cashflow and how it will greatly benefit your overall business approach, we are here to help, so please contact us for further information.

We look forward to working with you.

T: +61 3 9550 6900

E:admin@dekretser.com.au

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A Guide to Record Keeping: ATO Requirements and Best Practices

Keeping good business records is a crucial part of running your business. Records can help evaluate and assess business growth and progress over a specific period of time. Tracking records may also indicate how well a business is performing or what changes can be made to increase business success. Keeping good records can help you:

  • Comply with your tax and superannuation obligations
  • Gain a greater insight into the financial health of your business, enabling you to make informed decisions
  • Manage your cashflow
  • Demonstrate your financial position to prospective lenders, and also potential buyers of your business
ATO REQUIREMENTS

The ATO requires that business owners:

  • Keep most records for five years from when you obtained the records, or completed the transactions or acts that they relate to – whichever is the later
  • Be able to show the ATO records if needed or on demand
  • Have their records in English or be able to be easily converted to English.
DIGITAL RECORDS

The ATO is reminding business owners that you can keep your records (paper/hard copies) digitally. The ATO accepts images of business paper records saved on a digital storage medium, provided the digital copies are true and clear reproductions of the original paper records and meet the standard record keeping requirements. Once you have saved an image of your original paper records, you don’t have to keep the paper records unless a particular law or regulation requires you to.

However, if you enter information (for example, supplier information, date, amount and GST) from digital or paper records into your accounting software, you still need to keep a copy of the actual record, either digitally or on paper. Some accounting software packages may do both your accounting as well as your record keeping.

STORAGE OPTIONS

1. Cloud

If you use cloud storage, either through your accounting software or through a separate service provider, eg, Google Drive, Microsoft Onedrive or Dropbox, ensure:

  • The record storage meets the record-keeping requirements
  • To download a complete copy of any records stored in the cloud before you change software provider and lose access to them.

2. E-invoicing

Regardless of your E-Invoicing software or system, your business is responsible for determining the best option for storing business transaction data.

Business owners should:

  • Ensure that your process meets the record-keeping requirements
  • Discuss your options with your software provider
  • Talk to your business adviser, if necessary.
DIGITAL ADVANTAGES

As the ATO point out, there are many advantages to keeping your records digitally. If, for example, you use a commercially-available software package, it may help you:

  1. Keep track of business income, expenses and assets as well as calculate depreciation
  2. Streamline your accounting practices and save time so you can focus on your business
  3. Automatically calculate wages, tax, super and other amounts, including:
  • Develop summaries and reports for GST, income tax, fringe benefits tax (FBT) and taxable payments reporting system (TPRS), as required
  • Be prepared to lodge your tax and super obligations, including your tax return, business activity statements (BAS) and taxable payments annual report (TPAR) if you are a business that is required to
  • Send some information to the ATO online (if the package meets ATO requirements), for example, your activity statement
  • Meet your legal Single Touch Payroll (STP) reporting obligations 

Most importantly, the ATO recommends to back up records using cloud storage to keep your records safe from flood, fire or theft.

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This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to
know. Should you require further information on any of the topics covered, please contact us via the details below.

T: +61 3 9550 6900 E:admin@dekretser.com.au