Navigating your finances
- tips from a veteran tradie April marks the start of a new financial year in New Zealand; a year we hope to navigate with more clarity than the one just passed. If tackling the financial specifics of the year wasn’t already a timely and complex process, considering the wage subsidies and changing legislations enforced as a result of the pandemic can be that much more confusing. However, mastering money and making the end of financial year reporting a more seamless process doesn’t have to feel so out of reach. Seeking advice from a professional, staying on top of changing regulations and leveraging the right platforms will help business owners avoid the
typical pitfalls that many fall victim to when trying to navigate the world of tax. For those organising finances this year, here are a few common pitfalls to be mindful of.
The secret behind GST It’s not uncommon for small businesses to overlook the role they play in collecting taxes. The nearly unavoidable GST known as a consumption tax, is one that the end user is entitled to pay, with the role for businesses simply being to collect it and pass it on. However, for small business owners with tight cash flow, it’s easy to see that money as their own. A great way to avoid the mix up is by creating a bank account for solely transfering GST money into. Typically, GST over the past year will be pretty consistent, making it easy to work out a weekly sum that can be put into the GST account each week. This will ensure that there’s always GST on hand to pay when it’s due.
It’s not uncommon for small businesses to overlook the role they play in collecting taxes. The nearly unavoidable GST - known as a consumption tax - is one that the end user is entitled to pay, with the role for businesses simply being to collect it and pass it on. However, for small business owners with tight cash flow, it’s easy to see that money as their own.
PAYE and Holiday obligations Pay-as-you-earn (PAYE) tax and employee holiday pay are can easily be calculated incorrectly, causing serious implications by the end of the financial year. This is, in large part, due to the fact that this money is considered part of an employee’s wage. If paid incorrectly, it can be classified as theft. Similar to creating a ‘GST-only’ account, a good way to stay on top of PAYE and holiday obligations is to work with an accountant to put the necessary funds away each pay cycle. These funds will account for employees’ paid days off work including annual leave, public holidays, and sick days. Given the large margin for error, more companies are opting to outsource their payroll to reliable online platforms to ensure this is taken care of properly.
Prioritise regular invoicing EOFY is a great time to reflect on the overall reporting processes used in the previous year, and strategise on how best to approach the new year ahead. A large part of this might lie within the overall cash collection and invoicing process. This holds especially true for small businesses in the trades sector.
Dan Pollard, Founder, Fergus
such as GST organisation and holiday and PAYE planning, much easier to stay on top of. Tax management for small businesses is no easy feat, and has the potential to become quite complicated when factoring in the changing government subsidies, employee wages and business requirements. However, organising finances more proactively throughout the year can prove beneficial in the long-term. That mindset, coupled with the right tools and financial experts will ensure that business owners aren’t entirely overwhelmed by the time tax season rolls around. About Dan Pollard, founder of Fergusjob management software for trades and service businesses Plumber turned tech entrepreneur, Dan launched Fergus in 2014. Having done the hard yards as a plumber for over 20 years, Dan was determined to come up with an easier way to manage the end-to-end operations of his trades business.
As a rule of thumb, it is crucial to ensure that invoicing is completed on a daily basis. This will make the rest of the financial logistics,
www.elevatemagazine.co.nz
11
