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For Australia to become a top 10 digital economy and society by 2030 – Nearmap and Intuit are working to remove roadblocks for SMEs which make up 98% of Australian businesses, making software more accessible through the Nearmap EOFY offer and tax time offers on Intuit QuickBooks.
In partnership with Intuit QuickBooks, Gafar Fadl (General Manager SMB, Nearmap) chats with Tish Bhagwandeen from the Intuit QuickBooks Trainer Writer Network for some tips on how small-medium businesses can plan and prepare for the End of Financial Year (EOFY).
Tish Bhagwandeen: Most of my clients are approaching the new financial year with conservative optimism. Given that tax season is around the corner I am starting to deal with predominantly more tax planning queries, however this is also being very closely linked with looking at cashflow requirements over the next 6-12 months. We are predominantly doing a lot more interest rate sensitivity analysis on cash flow and profitability. Clients are also recognising business diversification is a key element to keep abreast of some of the economic challenges.
Tish: When cash flow is constricted our instinct is always to tighten-up expenses, however you still need to run a viable business and there are only so many expenses you can cut back on without compromising efficiency and customer satisfaction.
I would encourage businesses to take a look at their revenue cycles – in particular the invoicing cycle for clients. In many services industries we tend to do the work and bill on completion or delivery of projects. This model is no longer serving small business owners. Where possible you should implement progress billing and if possible weekly billing cycles. Manual collections are rapidly being phased out as more and more businesses move toward technology platforms that offer automated billing and collections.
Prepaying expenses can be a good way to achieve tax efficiency, however if your cash flow is constricted you may want to move towards a practice of paying suppliers when they are due.
Tish: The loss carry back offset was fundamental in enabling businesses to claw back some of their prior taxes. That strategy helped free-up some cash flow so businesses could continue to invest in growing their operations.
With this coming to an end no doubt many businesses will feel the impact of the increased tax liability. This is really where you want to sit down with your accountant to do some tax planning to fully understand the implications on your cash flow and potential tax liability.
Tish: The instant asset write-off will apply to eligible assets that are first used or installed ready for use between 1 July 2023 and 30 June 2024. It is important to note that assets with a cost above $20,000 will be added to the small business general pool and be depreciated at the prescribed rates.
A huge downfall is businesses making assumptions about the impact that these types of changes have. Very often we see these assumptions leading to incorrect decision-making that can be at the detriment of the business; not having a comprehensive understanding of the ambit of the instant asset write-off could lead businesses to delay investment in technology assets. It is vital that you discuss these changes with your accountant so you can make the right decisions for your business.
Tish: As mentioned earlier, it is vital to discuss these measures with your accountant. Having a comprehensive understanding will help you understand what technology solutions can be implemented, when you can implement them and what is the overall impact on your cash flow especially in terms of efficient tax planning.
One of the key things to bear in mind when thinking about software costs is that whilst it is an investment in your business, these costs can still fall under the ambit of operating expenses and be fully deductible in the year the expense is incurred. This is especially the case when looking at off-the-shelf software solutions.
There may be instances where your business makes a more significant investment in technology and opts to build an in-house solution. In this scenario there will be more specific rules that apply. Depending on your specific circumstances there may be several methods of claiming the tax deduction.
It is important to note if the cost of the asset may fall within the instant asset write-off threshold, which may be more beneficial.
If you are looking for further insights, QuickBooks have put together a range of resources to assist business owners on their EOFY Hub for small businesses.
As you can see there are various methods to claiming deductions, to ascertain what is most beneficial to your business, it’s always best to engage with your accountant.
Tish: The onslaught of economic uncertainty during 2020 was a huge trigger for most business owners to review the appropriateness of their operating structure. The initial driver then was that different operating structures qualified for different levels of funding, this trend of restructuring has continued, however now we are seeing some of the key drivers being business owners assessing their business risk and personal liability; essentially business owners are seeking increased legal separation between themselves and their businesses. Another key driver to this is companies who are looking to restructure their debt or gain access to short-term cash flow funding.
My personal experience with clients is that there is still a large proportion of business owners who are relatively unaware of the implications of various business structures. Accountants are now taking a more active role in advising our clients on how to best restructure their businesses to reduce personal liability and stay within their business risk appetite.
Tish: Temporary full expensing was introduced back in 2020 to encourage businesses to invest in new equipment, machinery, and technology through being able to claim an immediate deduction for the full cost of qualifying depreciable assets, rather than over several years.
I have seen many businesses rapidly move to digitise their businesses with the key objectives of not only being able to stay relevant but also to drive efficiencies and access wider global markets. Temporary full expensing was a good mechanism that enabled businesses to invest in new technology projects. With the imminent reduction in the threshold, most of my clients are bringing projects forward so that they continue to gain tax efficiencies whilst still making vital investment in technology.
Tish: The small business technology boost will be a good mechanism to keep driving businesses towards technology investment to achieve efficiency. The measure was first announced back in March 2022, but only enacted as law on 23 June 2023, meaning businesses with an annual turnover of less than 50 million will be able to claim an additional 20% of the expenditure incurred for the purposes of digitising operations. Some of the eligible expenditures will include depreciating assets, certain IT services, and software-related expenses, including subscriptions to QuickBooks Online and solutions like Nearmap. As always, it’s important to speak to your accountant when making such purchases. While the legislation only supports purchases and subscriptions to technology until 30 June 2023, it’s important to note it has been backdated to 29 March 2022 so small and medium businesses can take advantage of the full benefits.
They can also claim a bonus 20 per cent deduction for eligible expenditure on external training of employees by providers registered in Australia until 30 June 2024.
Tish: The introduction of STP has given the ATO an increased ability to monitor all aspects of payroll compliance. Payroll compliance can become quite onerous for the average business owner, and in recent times I myself have dealt with many clients coming to me to assist with their payroll compliance.
Dealing with various industry awards and payroll compliance can become very complicated quite quickly. We need to constantly use technology to drive efficiencies and having a system like QB Payroll by Employment Hero that has a built-in super clearing portal like Beam as well as automated industry awards becomes imperative.
Tish: Tax returns may not be due until 2024, but small businesses need to begin working with their bookkeeping and accountant partners now, as in coming weeks they need to complete some key items:
Tish: With inflation and interest rates on the rise it’s important to keep a close eye on expenditure. One of the trends that we see close to year-end is businesses tend to accelerate their expenditure to gain tax efficiencies, my advice is don’t incur expenditure at the compromise of cash flow, preserve your capital.
Perform scenario-based forecasting to work out your businesses serenity to interest rate increase. This is where a software solution like QuickBooks becomes vital as it has a built-in cashflow planner specifically aimed at helping with scenario forecasting.
Pay close attention to your internal business trends – are you seeing any changes in client or customer behaviour? – and be proactive in assessing the possible impact on your revenue.
Look for ways to diversify your revenue, understand how technology, such as subscriptions to new software and digital tools, can help you develop a diversified revenue strategy.
Don’t be afraid to investigate new technology, especially AI. Many businesses are still intimidated by the concept of AI and this hinders their ability to drive improvements and efficiencies through technology. With all the incentives mentioned above there has never been a better time to look at technology improvements.
This article was written in partnership with Intuit QuickBooks, by Tish Bhagwandeen, CA, Founder and Director, Infinance Solutions, and member of the Intuit QuickBooks Trainer Writer Network. The advice provided in this interview is general in nature, and it is recommended that small businesses, seek professional advice based on their individual circumstances.
Tish has more than 12 years of financial experience, and an in-depth understanding of business – from managing and growing start-up enterprises to taking care of the daily financial requirements of companies. As a Chartered Accountant, Tish has global experience that spans a variety of industries, having previously worked in the United States and South Africa. After working as a financial auditor she transitioned her career towards that of a Group Financial Controller in the Financial Services sector. After successfully transitioning the company to a sale on the ASX, she has co-founded Infinance Solutions. Tish is all about the numbers and loves working with people and small companies to help them achieve their business goals.
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