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In running the 'Setting up a new small business' course for Challenger TAFE in Perth, I contacted the Australian Taxation Office to see if they had someone who could come along and do a presentation. It was a pleasant surprise to find they readily do presentations for small groups. Not only that but they do regular free presentations to the general public. The presentations are tailor-made for small-business owners and the presenters know their stuff.
Taxation is a highly complex matter. The Tax Office wants you to get it right because it makes their lives so much easier. They also want you to succeed because then they can collect more tax for the Government. It all makes sense. When you are planning your business, the ATO will even give you a free one-on-one consultation to make sure everything is in place. I recommend you take advantage of this service.
Of course, in order to minimise tax, I also recommend you seek
the advice of a qualified accountant prior to
commencing operations. When I set up my business I thought I had to
register for GST. I was wrong. Consequently
I ended up doing far more paperwork than necessary. However, there are
advantages to registering for GST even
if you are under the current threshold of a turnover of $75,000 per
annum. Beware too of the consequences
of exceeding this amount half-way through a financial year. Only a
professional can give you the right advice and a small investment
could save you a lot of money.
One of the main reasons why small businesses fail in the first year is because they run out of money. The main purpose of a well written business plan is to secure finance. The Small Business Development Corporation in Perth has an excellent publication called A Guide for Operating a Small Business in which there is a detailed section on finance. According to the SBDC, the golden rule in negotiating and arranging finance is 'do not use short-term funds for long-term needs and do not use long-term loans for short-term needs'.
Again these are complex issues. Should you purchase or lease equipment? Similarly with premises? What are the risks? Do you have to out your own house on the line as security? Have you told your spouse?
With all these things in mind, if you don't have a bottomless pot of cash to keep your business viable,
seek advice from a professional.
How good are you with figures? Whilst there are sophisticated accounting software products on the market, if you don't know much about accounting, then it might be in your best interests to employ the services of a bookkeeper. Your time would be better spent on actually doing the business you're involved in, looking after your customers, and spending more time on marketing. The last thing you want to do is come home and spend a few hours each night making sure all the numbers are in the right place.
It is a fact too that accurate records have to be kept. You don't want to incur penalties if you do not maintain proper records. The ATO requires businesses to keep records, in writing, in English, for five years.
Budgeting and cashflow planning and management is critical to the success of your operation. Have you decided on the payment terms for your products and services? Who is responsible for collecting debts? Are your forecasts realistic?
Ensure too that you maintain a separate bank account for your business, totally separate for you personal affairs.
Seek advice from a professional from the outset and your life will be so much easier.