The single largest contributor to the failure of small businesses is financial mismanagement, and Australia’s growing legion of side hustlers could be at risk if they don’t take care.
Speaking to nestegg, H&R Block director of tax communications Mark Chapman explained that this financial mismanagement can take many forms, from failing to keep track of cash flow to forgetting to register for GST.
“While a lack of cash flow is indeed the number one business killer, there are simple ways to get on top of it,” he said.
For those looking for a place to start, he recommended engaging a tax professional to put together a business activity statement (BAS).
“Your BAS is a vital part of meeting your compliance requirements with the ATO and is a legal mandate,” Mr Chapman said.
“The exercise of completing a BAS, alongside a professional, forces SMBs to focus on the financial side of the business — to grapple with sales, purchases and cash flow.”
In terms of specific advice, Mr Chapman also warned small business owners not to bury their head in the sand when it comes to record-keeping.
“Keep your books and records up to date and the BAS process will be straightforward and you’ll have the necessary oversight of the financial side of your business,” he said.
Mr Chapman added that neglecting your bookkeeping duties can have an adversarial effect for SMBs that extends far beyond meeting your tax obligations.
“Not only will you struggle to complete your BAS, you also won’t understand your business’s profitability and its cash flow position,” he said.
Finally, Mr Chapman reminded SMB owners and side hustlers that lodging their BAS is a legal mandate.
He warned that failing to lodge your BAS by the 28 October deadline can incur financial penalties that range from as little as $222 and as much as $1,110.
Now more than ever, Mr Chapman said that small businesses should make sure they can have a trusted partner to rely on when it comes to their various legal and tax obligations.
“There are a plethora of services available to ensure SMBs, start-ups and sole traders have financial reassurance, continue to upskill, and that they get the best possible outcome, not only at tax time, but throughout the year,” he said.
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