To preserve continuing financial health and the success of their business, business owners must keep track of their finances. Even in a time of tighter cash flow constraints and increased supply cost challenges, accounting is crucial for tradespeople. Effective bookkeeping and accounting procedures will help you stay organised, monitor your progress, and lower your tax obligations all year round. This blog will offer a how-to on accounting for tradies in Hobart, along with our top advice for bookkeeping and accounting in the construction sector.
1. Make Use Of Online Accounting SoftwareHaving a reliable system in place to keep track of and record your financial records is the first and most crucial stage in accounting for a tradesperson. Numerous significant advantages come from maintaining accurate financial records, including maximising tax deductions, controlling cash flow, and monitoring business performance.
Online accounting software is the most straightforward way to accomplish this. Business owners now find it much simpler to manage their accounting and to complete duties like invoicing, tracking expenses, and determining profit and loss thanks to platforms like the one we use, Xero. For people who don't feel comfortable using spreadsheets or are searching for an automated solution, these programmes can be extremely useful.
2. Maintain A Separate Business Bank AccountMaintaining responsibility and organising your finances need to have separate business and personal bank accounts. This will not only make things easier for your accountant during tax season, but it will also help you stay on budget and keep thorough records of any expenses that may be deducted from your income.
Combining personal and business money is one of the biggest mistakes we see tradespeople make, which makes it challenging to assess your company's success and effectively manage cash flow. We advise utilising a business card for work-related spending and keeping proper logs when using personal items for work to ensure that your company and personal receipts remain distinct.
3. Keep A Tight Eye On Your Financial FlowThe main danger to small firms is ineffective cash flow management. Businesses in the construction sector, which are prone to fluctuating supply costs and payment delays, should pay particular attention to this.
Even some of Australia's largest construction companies have recently had cash flow issues, which is a crucial reminder of the need to regularly plan, organise, and monitor your cash flow.
Making and sticking to an efficient budget, organising your accounts payable and receivable, and enlisting the aid of a knowledgeable business accountant are some of the best ways to maintain a healthy cash flow.
4. Commence Tax PlanningOne of the most crucial responsibilities of an accountant is tax planning, which is also one of the finest strategies to reduce your overall expenses and liabilities. Before the end of the fiscal year, you can reduce your tax liability and improve your cash flow by putting a few tax preparation tactics into place.
For tradespeople, an efficient tax planning method is to buy supplies and equipment before June 30 while deferring the issuance of invoices until the next fiscal year. In this article, we've also provided a tonne of additional fantastic tax planning ideas for you to use.
We also strongly advise saving aside sufficient funds each pay period to fulfil anticipated tax obligations and prevent getting hit with a hefty tax bill. Working with an accountant to determine and plan your future tax instalments months is an effective and stress-free way to budget for taxes.
5. Compile A List Of Your Auto ExpensesAs a tradesperson, you'll probably need a vehicle to conduct day-to-day business. When doing this, you'll frequently have to drive long distances between locations, clients, and suppliers. It pays to be systematic when trying to maximise the tax benefits offered for your automobile.
A logbook is probably the best way to maximise your vehicle tax savings if you use your car frequently for business. The logbook must be filled out manually or electronically and must be kept for 12 consecutive weeks. You must include information on your car's mileage, how much of it is for business, and any other vehicle-related costs you incurred during this period if you want to maximise your vehicle deductions.
A cents-per-kilometre method is an additional option for maintaining a logbook. This entails figuring out how many miles you travelled while performing your job and claiming a deduction at a predetermined rate for each mile. However, this approach only permits a maximum claim of 5000km per car, so tradesmen who drive a lot may lose out on possible tax savings.
The following are additional car expenses you should note:
- Petrol
- Repairs and upkeep
- Insurance
- Vehicle registration
- Vehicle depreciation
Make careful to keep track of every expenditure that is directly tied to generating income. As a tradesperson, this can mean investing in things like safety gear, tools, licenses, self-education, and transportation costs. While online accounting tools like Xero will make it simple to record and keep receipts for these transactions, you can also get the job done with a simple spreadsheet.
7. Work with An AccountantManaging your bookkeeping will become an increasing burden on your work life as your job increases and your finances get more complicated. Effective bookkeeping techniques can also significantly reduce tax costs, maximise earnings, and minimise expenses. Employing a dependable accountant or bookkeeper will assist you in managing your company's finances and provide you with professional guidance when you need it most. Contact an accountant for a free consultation if you need assistance with tax compliance, bookkeeping, tax planning, or anything else.
Business owners must set up a trustworthy accounting system. In the end, any time you set aside to manage your accounts is time that is taken away from using the tools and from generating income. Allowing technology to manage your accounting will save you tax.