Nobody enjoys life admin, and collating your tax information falls squarely in this category. Many vets view tax tasks as distractions from the day-to-day running of their business, however tax time is a great opportunity for doing some much-needed annual consolidation.
Tax is one of the biggest overheads in your practice so the time you invest in ensuring you don’t pay any more tax than you legally have to will pay dividends.
Using today’s technology and following some simple principles makes the tax process easier to manage for you and your practice, no matter how your business is structured. The following list of tools and tips will enable you to devote more time to your business to work on the important things – such as the next marketing program to help grow your business.
Whether you operate as a sole trader or through a corporate structure, the following will help to improve your planning for tax:
Track business expenses clearly
The advice here is about tracking – in this instance better tracking of daily expenses. Often clients we meet for the first time, do their personal and business banking from the same bank accounts – this is especially the case with credit cards. The biggest hurdle for tax season is deciphering what is business and what is personal. Today, a range of tools are available to assist you work this out faster than by doing a line-by-line audit of a whole year’s bank statements. This can save time for both you and your accountant.
A personal financial management app called Pocketbook (getpocketbook.com) automatically tags a lot of tax-related transactions straight out of the box by connecting to all your bank accounts in one central place. You can then extract this information into an Excel form and provide this to your accountant. The app is free and Australian owned.
Use a cloud-based accounting system
Accounting software has evolved significantly over the past decade. Today, widely used accounting software such as Xero (www.xero.com/au/) are no longer software you need to install on your computer but rather are web based – similar to how Google Docs or Dropbox works.
The beauty of cloud-based accounting is that you are no longer bound to your desk and can access and review your finances at any time. The biggest advantage is your finance team (bookkeeper and accountant) can work remotely to make sure everything is tracking as it should be and have real-time access to your information for BAS lodgements, tax planning and preparation of your year-end accounts and tax returns.
Top features include:
- Automatic bank feeds: automatically feeds in your bank transactions so that you can categorise these into income or expense items. You can also set up bank rules to make this process even quicker.
- Invoicing: you can create professional recurring invoices tailored with your own logo and design.
- Payroll: enables you to calculate the payroll and tax withholding automatically, pay employees and manage payroll taxes.
- Super: allows you to make direct hassle-free super payments.
More importantly, using a cloud-based accounting system ensures your business is Single Touch Payroll compliant with the ATO and can be regularly updated to reflect changes to the tax laws.
Manage your receipts with an app
Another great way to get some quick wins is to stop relying on your shoebox. Use the high definition camera and memory storage features on your mobile phone, to record your paper receipts and bills – many apps available today make this easy. Your phone is with you all the time, so you can be doing this all year long. All you have to do is take a photo and the app will put it into an exportable text format – two apps with this feature are Expensify (www.expensify.com/) and Dext (formerly Receipt Bank) (https://dext.com/au/receipt-bank).
Track your motor vehicle travel smarter
Another thing you might have as a business is a motor vehicle that you use for business trips. Our experience is that record keeping is often difficult to maintain. Again, a number of apps and tools can help to alleviate the pain here. It is important to ensure that the app you are using is ATO compliant. The ATO have a free app that you can use to track your trips – you can download from the iTunes store or on Google Play.
Track your travel and meetings
As a vet you may be required to travel for work, for instance to attend conferences and meetings interstate or overseas. Often, as a sole trader these trips may be extended for personal travel. As a tax rule, the work-related components of these trips may be deducted if the right records are kept. Technology can help make tracking this much easier.
Tripit is a great tool to keep track of itineraries and tickets, as well as being a great tool to help you navigate your journey while you are travelling. The benefit at tax time is that Tripit can be a central repository of all your travel information– amongst it your business travel. All that’s required is to sync with the email you use to book all your travel.
As you can see, the thematic for you and your practice is about tracking. The more you can automatically track and tag along the way, the less work you’ll have to do at tax time and the more time your accounting firm can strategically make a difference to your bottom line from the first hour, rather than spending time reviewing and collating your paperwork.
The result: this saves you time, reduces accounting fees and makes tax time less stressful!
By Thu Nguyen, Chartered Accountant and Manager