Taxes are an unfortunate part of life. No matter how you earn an income or spend your money, you will be taxed along the way. Running a business also necessarily involves taxes, which can become a burden if not managed and planned for effectively. Every business registered for GST needs to lodge a business activity statement with the ATO every quarter. This ensures your business is up to date on any taxes you need to pay, and accurate records are kept. The next due date is February 28th (or a month later if you use a registered accountant) – so it’s timely to get on top of your taxes as soon as possible. Sometimes, depending on the operating conditions and finances of your business, you may be hit with a tax bill that is beyond your ability to pay as due. Even if you’re organised and on top of everything, you might just not have the cash flow when you need it. We’re often asked if debtor finance can be used to pay a tax bill. The answer is ‘yes’ – but let’s take a look at the full picture – here are our best tips to manage your taxes and your tax bill.
Of course, staying organised applies to every area of your business. Whether it’s growing your operations, budgeting your expenses or hiring new staff, you need to know what’s going on now, and what you expect in the future. The same applies to your finances, legal affairs, and your taxes. Staying organised on a weekly basis ensures there are little to no surprises when it comes time to report. If your accounts are up-to-date, you can project what you will owe, to an accurate degree. Enlist the help of a dedicated accounts officer, or a qualified accountant to manage your affairs on an ongoing basis, instead of only when there’s an issue to address.
If you genuinely want to get on top of your taxes for good, you need to do more than just making payments when they are due. Dive deep into your accounts and your tax obligations – is there anything amiss or addressable for next quarter?
- GST accounts. Ensure that your GST current balance (carried on your balance sheet) matches what is recorded on your BAS. Any discrepancies will cause an issue down the track, including a potentially unexpected debt – so manage and address it as you go.
- Bank reconciliations. Do your account balances match what is reported? Any unallocated or mismatched transactions may play havoc when it comes to your taxes. Check regularly to make reconciliations far more straightforward.
- BAS comparables. Are there significant differences between each BAS? If there are, investigate why. It’s most likely down to seasonal variances in your operations, but if something seems amiss, don’t ignore it.
Actively Communicate with the ATO
Tax bills are critical to pay on time. You might be able to get away without paying other creditors or suppliers on time; however, you don’t want to try this same tactic on the ATO. Whether it’s missing your BAS requirements or inability to pay your bills, you need to let the ATO as soon as possible. They will be understanding and work with you to negotiate a solution – they want you to be able to pay without destroying your business. They may offer an instalment plan, allowing you to pay your obligation off over time – although, be careful of any interest and penalties charged along the way.
Can You Use Debtor Finance to Pay Your Tax Bills?
Even if you have negotiated a payment plan with the ATO, paying off a massive tax bill may be daunting, especially when you have other expenses to meet. We often get asked if debtor finance can help – can you use it to pay your tax bill? YES. It is one solution. If you often find your customers pay their invoices late, or you just have a significant accounts receivable balance, debtor finance is an extremely valuable financial tool to free up working capital to use towards your outgoings, including your tax bills. A debtor finance facility allows you to access up to 90% of your outstanding invoice value upfront as cash in your bank account. The remaining amount is paid when your customers pay the invoice – minus a small fee. It gives your business the working capital it needs while allowing you to retain full control of your sales ledger, as well as the relationship with your customer. Better yet, debtor finance is a scalable solution. As your sales (and your taxes) grow, so does your access to funding. It’s also flexible – depending on your facility, you don’t have to finance every customer or invoice, only what you need. TIM Finance helps SMEs source the funds they need to support their current operations, meet their expenses and invest in growth. Get the cash you need and make TIM Finance your partner for flexible business financing today.