Issue 3 - Summer Edition
Welcome to the Summer edition of Jarvis Accounting Solutions newsletter.
Trading Hours over the Holiday Period
My office will be closing down from 5.00pm on Tuesday 22 December 2009 and will reopen on Monday 18 January 2010. However, if you urgently require my help; you can still email me with your request and contact details or phone me on 027 383 2652 and leave a message.
At Jarvis Accounting Solutions we wish you and your family a safe and joyous time over the holiday period.
In my first newsletter I highlighted the need for business owners to plan for the future and spoke about forecasting income and expenses for the next twelve months.
This helps you to plan what resources/staffing you require. It also, helps identify those months things might be slow so you can put some strategies in place to rectify these down periods.
In the second newsletter, I continued the series and spoke of the importance that as a business owner you have a system in place to regularly review your actual results versus your targets.
Important to have relevant information so you can identify issues early and rectify them now not twelve months down the track when too late.
So you have been tracking your target's against actual results and you notice that you have been making a profit but lack cash in the bank.
Common scenario for new business and those growing but how to rectify?
There are three areas to assess and in this edition we will look at the most important.
Accounts Receivable also called Debtors (Customers you sold goods to). Main problem here is the cash sits in your customer's bank account until they pay you.
What are the common problems that stop Customers paying?
- You have no terms and conditions.
- You have not set credit limits for Customers.
- Failure to invoice on a timely basis.
- Failure to follow up invoices with a statement.
- Do not have a system to prepare detailed Debtors' Aged Analysis on a monthly basis.
- Failure to contact any Debtor who is beyond your stated terms of trade.
- Failure to stop supply of goods or services immediately when accounts are overdue.
- Failure to take early action for recovery.
What can we do to rectify this?
- Have terms and conditions for supply and advise all Customer's of these.
- Complete credit checks of Customers.
- Set credit limits for Customers and adhere to them.
- Have penalties for late payments included in term and conditions and enforce them.
- Invoice on a timely basis, as soon as can.
- Follow up an invoice with a statement.
- Have a system to prepare detailed Debtors' Aged Analysis on a monthly basis.
- Contact any Debtor who is beyond your stated terms of trade immediately.
- Stop supply of goods or services immediately when accounts are overdue and let the customer know and future purchases will be cash sales only until outstanding invoices paid.
- Key is to take early action for recovery
What we need to ensure happens is the cash in the customer's bank account is paid to your bank account as soon as possible after the job completed or good sold and we need good systems in place for that to happen.
I end by giving you something to think about, is it worth keeping a customer who buys goods or a service off you (remember goods you already paid for or time spent providing the service) but they do not pay you or accrue a large debt you may or may not get paid for?
Need to recover a debt I recommend you talk with your lawyer.
General TipDuring the holiday season;
- Avoid the madness.
- Take time to consider the true meaning of Christmas, not the commercialised version.
- Take time to recharge and spend quality time with family.
Buying an item off trade me or a private individual?
If you are, as long as you keep a record of the following details you can claim GST on this expenditure (called second hands good claim);
- Description of item purchased
- Amount paid.
- Date paid.
- Name of person.
If the person is in business and just not registered for GST, sorry, you cannot claim GST on the purchase.
You may have heard in the media or at the pub the rules surrounding the purchase of that rental property or that subdivision you were contemplating may now be taxable.
Yes the rules have changed and more people will be associated with the following listed below and therefore may be subject to tax on sale of a rental property;
- Traders in property, buys and sells for profit.
- Dealer in land.
- Property Developer.
However, before you get carried away, each case needs to be evaluated based on the facts particular to your circumstances.
In summary, the thrust of the new law is to widen the association between people who deal in property and those who hold property for long term investment.
Previously you were able to set up structures to keep these activities separate so your Trading activity would not taint your Rental activity. The new rules change this for properties bought after October 2009 and that you hold for less than 10 years, they may become subject to tax on Capital gains (profits).
However, if you not engaged in any of the above activities and when looking at your facts we find you not associated to anyone that is and your intention in buying the property is long term rental investment, you will not be taxed on the capital gains.
If you think you are affected and I have not already contacted you, please call me to discuss your particular circumstances.