Unfortunately many businesses find it hard to keep on top of both current and future tax obligations. This leads them to being in debt to the ATO and the unenviable need to negotiate payment terms.
Part of our role as small business accountants is to act as a barrier or intermediary between the tax office and the small businesses of Australia.
It’s not that we don’t trust the two different interests to get along; it’s more about using our experience and knowledge to protect the best interests of the client.
So why do these debts occur? In most cases it can be contributed to but not necessary the following reasons
- Poor cash flow management
- Using the wrong legal structure
- Accounting for GST on the wrong basis
- Not budgeting for different monthly or seasonal cash flow cycles
- Business owners spending unassigned cash in the bank
- Not utilising accountants or bookkeepers to monitor future tax amounts to be paid
- While it’s rare, these issues can also be caused by “acts of nature”
“The way to keep on top of your obligations is to know what they are and when they are due.”
The only way to keep on top of your obligations is to know what they are and when they are due. And you can only do this by taking up the services of a bookkeeper or accountant from the very start of setting up your small business.
So many of our new clients have waited a year or two before seeking help and ended up paying two years of tax in one year. This is a recipe for disaster and places further cash flow stress on new small businesses that are already running in a very lean state.