7 Common Xero Set-Up Errors

Xero was founded in a Wellington studio apartment by Rod Drury and his personal accountant when they felt that traditional desktop accounting software had become outdated and decided to create a modern cloud-based product. Xero‘s global headquarters are still located in Wellington. [Source: Wikipedia]

Xero has quickly become very popular for bookkeeping and accounting. It is ideal for small business owners who require something that is easy to use. Not only that, Xero has an extensive online library of training resources, videos and tutorials.

Having said all of the above, a newbie to Xero may find it daunting to  set it up and use it initially. Here are 7 common mistakes our firm encounters when we are engaged to tidy up incomplete Xero set-up are:

  • Incorrect set up of chart of accounts.
  • Incorrect tax rates for various expense accounts eg. ASIC fees and bank fees are GST-free.
  • Not setting up bank feeds for all bank accounts. Paypal accounts are commonly forgotten.
  • Not using bank rules for repetitive transactions.
  • Errors in inventory set-up, eg. not tracking inventory.
  • Wrong selection of financial settings eg. ‘accruals basis’ instead of ‘cash basis’ for BAS.
  • Incomplete set up of employee details for Pay Runs

 

Fortiz Bookkeeping partners are certified Xero advisors who can assist you with set-up of Xero for your business and train you on how to use Xero. Contact us for assistance today. 

Segregation of Duties

In a large business, it is typical to have a n accounting department which provides timely and accurate financial reports, where internal controls are put into place to ensure accurate financial records and to protect a business from fraud. However, smaller businesses which have fewer employers who wear a few hats, are more susceptible to employee fraud.

A simple process to reduce the risk of fraud is known as segregation of duties (or separation of duties. It involves ensuring that it is not one person who fulfills ALL bookkeeping or accounting functions. The payables and receivables processes must be split among a few staff to deter fraud and errors. This introduces a system of checks and balances into the business.

If the same person handles payment of invoices and recording the transactions, that person will find it easier to misappropriate money and then record numbers that cover up that misappropriation. That person may create a fake bill, then pay the bill while actually pocketing the funds themselves. They then record a payment to the vendor in their books, which covers their tracks.

However, when duties are separated such that one person processes the financial transaction and another records that transaction), it reduces the probability of fraud occurring. This is because 2 staff will have to collaborate to perpetrate the theft which substantially decreases the likelihood of that happening.

 

Download our eBook for more tips on how to reduce the risk of fraud in your business. If you need assistance with bookkeeping or anything else relating to numbers, contact us for assistance today. 

What You Need to Know about Single Touch Payroll

Single Touch Payroll (STP) requires businesses to report payments, such as, salaries and wages, pay as you go (PAYG) withholding taxes and superannuation information to the ATO, as and when they pay their employees.

STP is only a reporting mechanism, it will not affect the way payroll process and delivery to employees – but under the new system, employers will have to authorise STP reports to ATO.

This can be done through existing payroll software ( Such as Xero, QBO, MYOB). Payroll Software providers have updated their products to match this requirement of ATO.

What Hasn’t Changed

Payroll cycle will not change. Employers can still pay employees weekly, fortnightly or monthly.

Payment due date for PAYG withholding and super contributions will not change. However, businesses can choose to pay earlier.

Businesses are still required to submit Business Activity Statements (BAS).

Payroll staff must know about STP and ensure that:

  • Employees are paid correctly
  • Employees’ super entitlements are calculated correctly
  • Overpayments are addressed correctly

Accurate records including names, addresses, date of birth, etc. are maintained.

 

If you need assistance with payroll, single touch payroll or anything else relating to bookkeeping and numbers, contact us today. We can help you to become STP-ready before 1 July 2019!

7 Bookkeeping Mistakes Businesses Should Avoid

It may be daunting as a small business owner, looking forward and not knowing what the future can bring. Many new businesses fail for simple reasons such as erroneous bookkeeping or inadequacies in budgeting, cashflow forecasting and financial management.

These are avoidable by taking simple steps and being smart with your finances. Here are some mistakes that you should avoid as a business owner.

1. Choosing to DIY bookkeeping

Unless you’re willing to put a lot of time and effort into maintaining your own books for your business, it might be better off for you to outsource your bookkeeping to a professional bookkeeper. Outsourcing your bookkeeping to a skilled bookkeeper will free up time for you to focus on your business.

A skilled bookkeeper can also go the extra mile and provide help with your financial planning or optimise the use of your bookkeeping software.

Maintaining your own books often results in errors which will take up time and money to fix further down the road.

2. Not recording and keeping receipts of expenses

 Don’t forget to keep record and receipts of small purchases, even those under $75 dollars.

Over time, the ATO may come looking for proof of these expenses when you make claims, so better to stay safe than sorry. Additionally, beware when making business purchases out of your own pocket because it’s easy to lose track of these.

Remember: When in doubt, keep the receipts!

There are plenty of apps and software which make it easy to scan and keep the receipts. Just ask your bookkeeper for suggestions.

3. Lack of communication with your bookkeeper, whether they are internal or external

Whether you have a bookkeeper as an employee or have outsourced the work to a bookkeeping/accounting firm, make sure you constantly communicate with them. Bookkeepers can only work with the data that you provide them. If you fail to mention expenses or payments for regularly used services, you may have serious issues later on. They need to know the ins and outs to be able to maintain your books for you.

4. Forgetting to reconcile bank statements

Reconciling bank statements is a simple task that involves comparing your bank statements and books to make sure the numbers add up. This will allow you know whether you have a hole in your records or whether you need to give your bank a phone call. Reconciling bank statements is a simple way to make sure you avoid mistakes with your account records.

5. Not having a backup of records

Cloud accounting software (eg. Xero) and cloud storage (eg. Dropbox and Google Drive) are backed up regularly by the service provider. However if you are maintaining records on your local drive, it’ll be a good idea back up your data regularly to avoid issues if your computer system crashes.

6. Mis-categorising your employees

Be aware of your employee types when filing for your taxes. Your responsibilities are different depending on whether a person is an employee or non-employee, such as a freelancer or a contractor. Be sure.

7. Combining personal and business spendings

A common recommendation for business owners is to set up a separate back account for your business. This way you can easily access information you need when you prepare your tax return. Having a separate account from your personal one will also help you to easily prepare a business management strategy when you see how your financial needs and profits line up.

 

Bookkeeping and finance management is a time consuming and often a frustrating part of business ownership. But it is ultimately essential if you want to succeed in your industry. Our team here at Fortiz Bookkeeping are friendly, passionate, and most of all, skilled bookkeepers. We would love to work with you to make sure you avoid these little mistakes and we’ll ensure your books are in tip top shape to help you succeed with your finances. Contact us today!

Benefits of Lodging Your Business Activity Statements (BAS) with a Registered BAS Agent

If you are running a small business and you’ve registered for an ABN (Australian Business Number) and for GST, then you might already know what a Business Activity Statement is. BAS forms are issued by the ATO and are sent to you automatically. You must lodge forms by the indicated due date and then make necessary payments to the ATO.

These payments may include some or all of the following:
* Goods and services tax (GST)
* Pay as you go (PAYG) instalments
* PAYG withholding tax
* Fringe benefits tax (FBT) instalments
* Wine equalisation tax (WET)
* Fuel tax credits

Lodging your BAS requires you to track your business income and expenses regularly and can be stressful for many business owners. So here are some reasons why it might be beneficial for your business to hire an agent to lodge your BAS for you.

Safe Harbour Provisions

A registered agent can act as a safe harbour for you when it’s BAS time. Thanks to safe harbour provisions, you as a client will not be at fault if your agent makes a mistake on your BAS claim. But if you make an error, you may be penalised and this may include more fines for you to pay.

Under safe harbour provisions, you are protected from these risks.

Required Code of Conduct

The Tax Practitioners Board (or the TPB) is the national board for ensuring that firms providing tax services to the public act according to a certain code of conduct. This means honesty and integrity in their services and full knowledge in BAS responsibilities and taxation laws. The TPB has got your back. If you have any problems with a hired agent, you can always call the TPB.

Strict Registration Requirements

Not just anyone can be a BAS agent. BAS agents have strict registration requirements which are outlined by the TPB. These include higher education, completion of specific courses on GST and BAS, and a minimum of 1,400 hours of experience in the past 4 years. If you work with a registered agent, you can be reassured that they tick all of these required boxes and that you are working with someone trustworthy and knowledgeable.

Continuing Professional Education

BAS agents are obliged to continue their education while they work. The TPB requires them to undertake CPE activities totalling 45 hours every three years in order for them to renew their registration with the TPB. This means hard work and dedication in order to keep their knowledge up to date.

Just a handful of CPE activities include:
* Completing tertiary courses
* Presenting research papers and presentations
* Attending seminars, workshops, and conferences
* Attendance to activities structured by the ATO and tax organisations

Continuing professional education means that BAS agents working with you are never behind on their knowledge on BAS and tax obligations and other important elements of your business.

More importantly, Fortiz Bookkeeping staff are CPAs, which means they have to fulfil 120 hours of CPE activities every 3 years, which is well in excess of TPB’s requirements.

Lodgement Date Privileges

Last but not the least, registered agents have extended due dates for BAS lodgement. If you lodge your own then you have to lodge and pay by the due date, but your BAS Agent gets extra time, which allows them more time to work with you and get your lodgement right.

If you need assistance with your quarterly or monthly BAS lodgements, contact our registered BAS agents here at Fortiz Bookkeeping regarding our fixed monthly fee packages. We can take the stress out of your hands, which frees up your time so that you can focus on running your business.

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