Has your small business been hit with a cash flow curveball, experienced a recent budget blowout or had the ATO making enquiries? Whilst the Wilson Pateras team hope that this isn’t the case, we understand that in small business mistakes can happen – and they sometimes have costly repercussions. Our advice? Avoid them all together. How? Read on!
In this month’s blog, we’re in conversation with Wilson Pateras’ small business expert, Nick Street (Principal). Nick helpfully unpacks the three most common mistakes that small businesses make and how best to avoid them (with the help of Wilson Pateras’ professional accounting team, of course!).
Mistake 1 – Selecting the wrong structure
One of the first mistakes a small business may make is to establish their business within an inappropriate tax structure. This mistake can increase tax exposure for your business and may place your personal assets at risk. Selecting the wrong tax structure for your small business can also make it challenging to distribute profits or withdraw cash from the business in a tax effective manner.
Wilson Pateras will ensure you are trading under the most appropriate structure for your business. We’ll undertake a detailed review of your requirements and tailor the most appropriate structure suitable to your business, to effectively minimize your tax exposure and provide appropriate asset protection.
Mistake 2 – Failing to budget for tax and employee liabilities
One of the biggest pitfalls we see in small business is failure to prepare for the ongoing tax and employee obligations – these include GST, superannuation, PAYG withholding, income tax and payroll tax. We find that once a business falls behind with their taxes – and comes under the ATO’s spotlight – it can become quite an expensive and stressful exercise to get back on top of things.
Wilson Pateras can monitor a business’s finances establish budgets and set up ongoing payment reminders aligned with obligation calendars. This will ensure that your small business always has the cash necessary to meet its taxation and employee obligations.
Tax planning plays a big role in keeping tax affairs in order. Our tax planning exercise (which Wilson Pateras complete in May and June each year) assists our clients to identify their tax responsibilities and allows us to put a plan in place to effectively manage them.
Mistake 3 – Underestimating the requirement for working capital
Many small businesses underestimate the need for working capital – only once a business has been running for a period of time do they realise their mistake. If working capital is low, a business may struggle to grow. Conversely, if working capital is too high, you may not be appropriately utilizing your cash – so a solid understanding of working capital requirements is required.
Wilson Pateras can assist your business with several strategies to build working capital. We can help you to obtain finance (both short and long-term) – and to better understand the different funding products that are available to small business.
At Wilson Pateras, experience has taught us that engaging an accountant from day one is the key to business success. Regular conversation with an accountant you trust will ensure your small business will manage its tax responsibilities and employee obligations in any weather! Learn more here.