Below we've answered some FAQs on accounting services for small businesses. Contact us if we can help further
How do I set up Xero accounting software?
So you've done your research on Xero, and want to get started on the amazing piece of bookkeeping software that can revolutionise the way you conduct your business. But how do you set up your Xero accounting software? You visit your accountant. The setup is crucial, as any mistakes made here may flow on for over a year before the errors are identified, so taking the time to do it right becomes of utmost importance in the running of your business.
Questions you need to be asking yourself, before you set it up include;
- What do I want my invoices to look like?
- What expenses am I likely to have in running the business, and do they have GST?
- How do I set up my employees, so their payments can be tracked, and superannuation paid?
- How do I set up customers, and suppliers?
- How do I chase money outstanding to the business?
- How do I link everything to my bank accounts?
- How do I access reports?
- Who is going to be responsible for updating bookkeeping records?
Xero’s business help centre, have very useful data on all of the above, and as long as you are willing to watch, and take notes, you can get through all of the above. If you feel comfortable going down that path, you can find what you need by starting here.
It’s very important to gather everything that Xero asks for, before you start, as the process cannot be completed without all information.
We also strongly suggest that either just before you set it all up, you consult your accountant to go through the setup of GST, to eliminate errors on your quarterly BAS.
If you have any problems with setting up your Xero account, Carbon have a team of accountants here to assist you and are able to ensure you are set up and ready to go from day one.
Click here to see what Carbon and Xero can do.
What makes a good accountant for a small business
The role of an accountant for your business is one of the most important. While on this subject, it is important that an accountants role is defined as it has unfortunately changed significantly over time and not necessarily for the best. Back in the early days, the accountant was everything for your business. He understood your business completely and was involved in a lot of your day to day decisions that helped shape the future look and feel of your business. Discussions around cashflow, potential acquisitions & even new product/service lines that your business was looking at would not happen without the accountant being present and offering some input into the discussion.
Unfortunately, today’s accountant has turned into a “compliance officer” who seems to be purely there to lodge your end of year tax returns and speak to you once a year. Further to this, most business owners are too scared to talk to their accountant in fear of being hit with a bill for a phone call or simply just not being able to get hold of them when they need to with return calls happening up to three weeks after the request was put through.
What should you expect from your accountant:
Timely lodgement of your end of year financials and tax returns are unfortunately a necessary evil and even if you think you don’t need an accountant, the benefits of having a professional take care of all this for you can significantly improve the tax result as well as take the stresses away from tax time.
On top of this, there are lots of areas that your accountant should be able to help with when required. That isn’t to suggest you need to use them all, but ideally have them available for when your business needs them:
- Structure planning & setup (including helping to build a business plan)
- Internal system processes
- Bookkeeping and tracking day to day data
- Tax Planning
- Business advisory (this can take many forms)
How to evaluate an accountant
- Your business will go through many phases and a good accountant can help you steer through these phases. So what should you look for?
Someone you can relate to:
- If you don’t feel a connection to your accountant, then they aren’t for you
- You need to be able to speak to them confidently & openly, so if you don’t have this relationship straight away then it is likely not to happen.
- If you are expecting that they will help take you to the next level, ask for a resume.
- If they have never been involved in a company that has done this (either their own OR at a board style level) then they may night bring the value you need.
Someone you understand:
- Tax & Accounting is already complicated enough, the last thing you need is someone that makes it more complicated.
- If you find someone that can put your accounting requirements into words you understand, then you are onto a winner.
Where to find the right accountant
There are multiple avenues to find the right accountant, but like anything sometimes they work and sometimes they don’t. Here are some of the most common areas and how successful it is likely to be:
Google searches & reviews:
- The plus side to finding an accountant online shows that they have an online presence & they are proactive in growing their image
- A lot of accountants (even still) don’t have an online presence & if you are wanting advice to grow your business, would this person suit you.
Referrals from colleagues whose business has done what you want to do:
- There is a lot to be said about this as the accountant has typically just been on this journey will the business owner.
- Typically, people don’t share who their advisors are, so you might need to ask this one on one to get the information you want from them.
Accountants who are changing with the environment:
- Platforms such as Xero (bookkeeping software) have “accounting partners” for accountants who are familiar with their products and even rank them into silver, gold and Platinum.
- If you are wanting to use a certain type of software, it always makes sense to use this to “shortlist” some of your options.
The meet and greet:
- Typically, you would have used the above to short list a handful of potential candidates.
- The next step is to meet with them and start the evaluation process (above) to find who is the right one for you.
Carbon have a dedicated team of accountants ready to assist you with your business needs.
Why not give us a call to see if we'd be a good fit? Call Carbon on 08 6444 6645
What do I need to know about hiring an accountant?
Size of accounting business - There really isn’t a preference on the size of an accounting firm as there are pros and cons for both. The type of experience they have in the industry is just one of a myriad of factors that is considered when hiring a new accountant.
Accessibility - When taking on an accountant to assist your business, it is important to make sure there is always a point of contact to answer any queries in a timely manner. At Carbon, we have a large team of accountants, who are supported by client liaison managers to ensure queries can be dealt with in times when accountants are in meetings. We use online accounting software Xero, plus have a dedicated client portal, which allows clients to access their account data anytime, on any device, in any location.
Experience - How long has the accountant been successfully operating?
Qualifications - Aside from this tertiary qualifications in accounting and tax as a bare minimum, you should look for an accountant who has developed their skills by gaining either a CA (chartered accountant) or CPA (certified practicing accountant). With the ever-changing landscape of the legislation in accounting and tax, it is important that accountants are willing to keep abreast of the changes that are made every year.
Personality - Finally the last aspect of hiring an accountant will be based on their personality and their fit within the organisation. Are they a good fit for your business and can you work with them to increase the success of your business? It's best to talk to a couple of accountants to see who would be most suitable for your business.
Cost - The cost of an accountant can vary significantly depending on what services you require them to carry out. It's a good idea to speak to several to get an idea of pricing. Don't always go for the cheapest; the advice and work done by accountant can have a huge affect on the performance of your business. An upfront saving of $1000 could result in missing out on $10,000 if you are not given the right advice. At Carbon, we discuss all of our fees upfront, so there are no surprises.
Seven qualities you want in your accountant
It’s a question often asked, do I need to have a specific tax accountant?
A good accountant should be able to answer your questions, and guide you throughout the course of your business’ life. So picking the right one is just as important as picking the right business partner.
A good accountant:
- Doesn’t need to have all the answers on hand. However, they should know where to look. They should be able to tell you tax or other government incentives, that could allow your business to thrive.
- Be completely transparent. You understand your fee structure, and never feel surprised by an accounting bill.
- Act in your best interests, even when you don’t always like the answers.
- Explain to you why you can, and why you can’t do certain things when submitting paperwork to the ATO, or ASIC.
- Be available when you need them. Everyone gets busy, but a good accountant will at least be able to get back to you in a timely manner (not weeks later)
- Has the ability to do more than lodge a tax return. Can advise you on how to grow your business, or achieve your goals.
- Promotes, and engages in conversation more than once a year, therefore understanding you and your goals in life.
But why settle for a good accountant, when you can have a great one. Contact Carbon to find one that will work with you.
Where do I go for support about Xero accounting software?
Being relatively new and innovative, users of Xero will have queries from time to time as they get acclimated to the software. It is a game changer within the accounting/bookkeeping software space and looks to create efficiencies where older, dated accounting packages have failed to deliver. However once the resistance to change subsides users will see a vast improvement on the processes with this accounting package.
Advantages such as:
- Real time profit and loss and balance sheet
- Accessibility from any device that has internet - unlike older packages which require you to be in front of a computer
- Invoicing and Bank reconciliations from the palm of your hand
Xero also provides a tremendous amount of support which can be found on the following link
If your queries cannot be answered on this page – you can contact our office on 08 6444 6645
Our office is one of a handful of platinum partners within Australia so we are best placed to help you with any of your Xero accounting queries.
What are the advantages of being a sole trader?
Self-employed vs employee
People often ask, “what are the advantages of being a sole trader?” Is it worth it to be your own boss?
When comparing it to being an employee, some of the benefits include;
- Relative easy to set up and run for smaller business owners
- Set up costs are very low (when compared to other structures)
- Likely to be eligible to small business tax concessions.
- You control of your day to day affairs.
- Increased ability to claim business related deductions for business related items.
But, there are limitations to going down this path. If you are trying to build more than just a replacement for the income you would have earned as an employee, you would need to be open to other structures. Whilst the cost of setting up and maintaining other structures would be higher, the tax benefit often outweighs that cost.
If you would like to know more, contact our specialists at Carbon to have a free consultation with regard to setting you up for business success.
How much will an accountant cost?
This is a tricky question as the services that you demand from your accountant (or even the services that they might offer) will be different from accountant to accountant.
What you really want:
- Fixed fee service where you know what you’re paying well before you receive the bill
- No surprise bills randomly during the year for simple discussions or queries
- An understanding of what work fits outside the scope of your normal fee
- The opportunity to add more services to your fee when you need them, not before
- The opportunity to “dial down” services when you don’t need them
The above sounds very much like common sense, but unfortunately it isn’t always & the industry has been built on time sheet billing rather than fixed fees. It should be the requirement of the accountant to increase efficiencies internally in order to keep your accounting work on budget, not the other way around.
I want to set up my own business. What should I do?
Your first point of call before setting up a business should be to find an accountant that can help you. They will be your “go to” person to make sure you have set things up correctly and have engaged the right people along your journey.
Things to take into consideration:
- Getting setup in the right trading structure from day one. You don’t want to have to worry about this again once you are up and running
- Setting up your internal systems and accounting package based on the business you want be in the future, not the business you are now
- Make sure your insurances are all in place and you are covered for the industry you are in
- Build your business plan. This doesn’t need to be a huge document, a one page document of what you want to achieve is good enough for a lot of people
- Make small goals that will help you achieve the big goals. Without them, the big goals appear too far away and you don’t have anything to guide you
What is capital gains tax (CGT)?
A capital gain or loss is the difference between the cost of an asset and the sales proceeds you received when you dispose or sell the asset. You pay tax on your capital gains as it forms part of your income in your tax return. If you make a capital loss, you can’t claim it against your other income but you can use it to reduce a capital gain in the same year. If your capital losses exceed your capital gains in an income year, you can generally carry forward the loss and deduct it against capital gains made in future years. All assets acquired acquired from 20th September 1985 are subject to CGT unless specifically excluded. Most personal assets are exempt from CGT including your home, car and most personal use assets such as furniture. CGT also doesn’t apply to depreciating assets such as business equipment.
What is a company tax return?
As business’ grow, individuals often look to set up various structures to own the business. A company is often setup for your larger business’. With a company comes a few more responsibilities. As a company is separate from its owners, there is the need to lodge a separate return for the company.
Income and expenses are calculated for the company, with the major difference being the tax rates applied.
They are taxed at flat rates:
- 28.5% for your smaller trading companies
- 30% for any other company
This is all calculated through the submission of your company tax return. The degree of separation between the owners of the company, and the company itself does have other advantages, such as a layer of protection between the personal assets of the owners, and the dealings of the company itself. If you would like to know more about whether a company is right for you, contact our team at Carbon Accountants, where we tailor business structures to your needs.
I want to close my business: What should I do?
Depending on your trading structure will depend on the steps required in order to close your business.
Some of the key things to remember when closing down a business are:
- Irrelevant of how far into the tax year you are, you will still need to lodge a tax return (final return) for the business after 30 June. This means keep your records in good order even after you have closed the business.
- You should cancel your tax registrations (GST, PAYG, etc) straight away once you have stopped trading so you don’t keep having BAS’s issued from the tax office.
- Structures such as companies are registered with ASIC as well, so until they are formally closed, you may still be incurring ASIC fees.
- NOTE: your structure may have benefits such as tax losses in it which will be completely lost if closed, it is worth checking with your accountant prior to closing to make sure there is not a better use for this tax entity.
When should I register for GST?
It’s mandatory to register for GST once your annual revenue exceeds $75,000 or is likely to exceed it. However, you have the option to voluntarily register before this time. Things to consider – the volume of your expenses that contain GST, compliance costs (you’ll need to lodge quarterly BAS) and if you see the business growing.
What deductions can I claim on my tax return?
Work or business related car expenses – either keep a log book for 12 weeks and determine your business percentage. You then get to claim this percentage of all your car expenses. Alternatively use the cents per km method – this is to a maximum of 5,000km. You don’t need to keep a logbook but do need to be able to justify the kms claimed.
What can I claim for my home office expenses if I run my business from home?
Deductions that you may be able to claim if you run your business from home include:
1. Utilities such as gas and electricity – the portion relating to the space you use for business
2. Work related phone costs
3. Decline in value (depreciation) of office plant and equipment such as desks, chairs and computers
4. Decline in value (depreciation) of curtains, carpets and light fittings (if you have a dedicated work area)
5. Occupancy expenses such as rent, mortgage, interest, insurance and rates (only if you have a completely dedicated and transformed area of your home that is used in your business. An office space does not qualify for this).
What car related expenses can I claim in my tax return?
If you have kept a log book for a consecutive 12 weeks you can claim the business or work related portion of all car related expenses. These include: fuel, repairs and maintenance, insurance, registration, decline in value etcIf you have not kept a log book and are using the cents per km method, you get a flat rate of 66c per kilometre up to 5,000km.
What travel expenses can I claim in my tax return?
As an employee you can claim the cost of travel in the course of performing your duties as an employee.
You can claim a deduction for overnight travel expenses if:
- Your employer requires you to travel to a worksite to perform work
- You have to sleep away from home overnight in the course of performing that work
- You are not living away from home.
Overnight travel expenses include meals, accommodation and incidental expenses.
You can't claim a deduction for the travel expenses you incur if:
- Your employer reimburses your expenses or provides the relevant accommodation, meals or incidentals
- You get a job that results in you having to incur travel expenses because you choose not to relocate.
Is my mobile phone and internet cost deductible on my tax return?
It is if you have to use it for work or business purposes. You can only claim the proportion of costs that relate to work or business. The ATO suggests keep a 4 week diary of calls/phone use, to determine a reasonable estimate of your business or work related percentage.
Can I claim uniform and laundry for my work clothes?
You may be able to claim costs to buy, repair or clean work or business clothing. However to be able to do so the clothing must be:
- A compulsory uniform
- A single item of distinctive clothing (such a jumper, shirt or tie with the employer’s logo) if it is compulsory to wear
- A non-compulsory corporate uniform if you employer has registered the design with AusIndustry
- Protective clothing and footwear.
Generally, items that are available to the public to buy (corporate suits, black pants etc) are not deductible, even if your employer requires you to wear them. Only branded items of clothing are claimable.
What other work-related expenses can I claim?
Other things that you may be able to claim include:
- Tools, Equipment & other assets – if you use these for your work you may be able to claim the cost. Any private use needs to be apportioned. If the item costs less than $300, and isn’t part of a set, you can claim the cost outright. If it is more than $300 it will need to be depreciated.
- Printing, stationary etc – if you need to purchase these for your work, and are not reimbursed, then you can claim the cost.
- Union or Membership fees – if these relate to your employment then they are deductible
- Books, periodicals and digital information – things such as online subscriptions, electronic published materials, ebooks etc – if they related to your employment you can claim the deduction
- Self education expenses – Are deductible when the course you undertake leads to a formal qualification and meets the following conditions.
The course must have a sufficient connection to your current work activities as an employee and:
- Maintain or improve the specific skills or knowledge you require in your current work activities or
- Result in, or is likely to result in, an increase in your income from your current work activities.
You cannot claim a deduction for self-education expenses for a course that does not have a sufficient connection to your current work activities even though it:
- Might be generally related to it, or
- Enables you to get new employment.
Is child care deductible in my tax return?
Child care is not a deductible expense