Accounting Software | Eclat

When is a business a business?

The ATO applies many tests to determine if a commercial activity constitutes a business or is merely the pursuit of a hobby or is only of personal interest.

The importance of such determination is in claiming deductions. The tax act allows a deduction for all losses and outgoings to the extent to which they:

• Are incurred in gaining or producing assessable income

Or

• Are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income

Areas of consideration in the classification of a business include:

• profitability
• size
• effort
• maintenance of records.

Profits from a business are added to all other taxable income of the taxpayer for the purpose of income tax assessment.

Usually a loss incurred by a business is deducted from all other taxable income of the taxpayer for the purpose of income tax assessment, but if the assessable income of the business is less than $20,000 any loss is considered to be from ‘non-commercial business activities’ and as such is not immediately deductible and can only by carried forward to be offset against future profits of the business. This requirement can be by-passed if the business can satisfy the real property test ($500,000); or other assets test ($100,000); or profits test (three years including the current year out of the last five years resulting in a profit). Oh, and it doesn’t apply to an individual carrying on a primary production business or a professional arts business if income from other sources is less than $40,000.

Passive activities such as rental property investment do not constitute a business.

A business is required to register with the ATO for an Australian Business Number (ABN), and if income exceeds $50,000 per annum must register for GST. If an invoice is presented to another business and an ABN is not quoted the payer business must withhold 48.5% of the invoice amount and remit it to the ATO.

Can a business register for GST if its turnover is less than $50,000?

The answer is yes it can, and it makes sense to register when the business benefits from the GST it can claim back from the tax office. For example the business may provide tax exempt goods or services so no GST will be paid to the tax office but if registered can claim back the GST paid on business related expenditure.

Sometimes a business will find that a larger business it is dealing with will insist on GST registration. If you want to have commercial dealings with them, and for the sake of expediency and a long term relationship you may decide to register even though it falls below the turnover threshold of $50,000.

If a business is not registered for GST it cannot charge GST on the invoices it issues.

If it is not registered but is required to be registered, a business is liable to pay to the tax office one eleventh of the value of invoices issued.

If registered for GST a business is required to maintain sufficient records to enable the preparation of the business activity statement (BAS) and the income tax return. To prepare the BAS records must be kept inclusive of GST. To prepare an income tax return the business must maintain records exclusive of GST.

If the business is not registered for GST no BAS is required and the records required to prepare the income tax return must be recorded inclusive of GST.

In order to prepare income tax returns you need to be aware of generally accepted accounting principles to properly separate operating applications from capital applications. Then you need to know whether or not you are required to report on a cash basis or an accruals basis.

Compliance work is not easy, so even if you have a small number of transactions it may be advisable to use a suitable software package rather than struggling to comply with the above.

A suitable software package is one that helps and not one that hinders.

Thank you Dene Charlesworth for your question.

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.

 

Almost every small business owner is reliant on a professional accounting firm for the production of financial reports and advice, so it is important for those small business owners to be aware of the situation in the accounting industry.

In Australia the ATO, the accounting associations and others have indentified a clear and present need to reduce the volume of compliance work being carried out by accountants in public practice. If not there will be serious consequences due to the questionable sustainability of the profession. Compliance work is unattractive and younger folk are not committing to the public accounting profession. The profession is facing a serious skills shortage. And this problem is about to be exacerbated when within the next four or so years the baby boomer accountants start to retire in large numbers.

Already the number of skilled accounting personnel is diminishing while at the same time the number of small businesses is growing. Some accounting firms are telling their less profitable clients to go away, and are closing their doors to new clients. As these discarded businesses join the new businesses clamouring for accounting services, the smaller accounting firms will react by increasing their fees to reflect the demand for their services.

It is blatantly obvious that accounting related activities cannot continue to rely on increasingly expensive labour. Some forward thinking firms forsee the looming scarcity of skilled labour have chosen to outsource to overeas accounting firms (notably in Malaysia, India and the Philippines).

Overseas outsourcing happens in a number of ways. Promoters engage overseas specialists and on-sell the labour services to firms in Australia. The fees charged to the Australian firm is not usually at a cost below the cost to provide the service in-house, but it is of value to the firm with a growing number of vacant desks, or the firm that wants to contract in physical size but retain or grow the services it provides.

In other situations firms engage direct with counterparts overseas and take advantage of the low cost to add to the bottom line. Value to the firm is a newfound pool of labour and increased profits. Cost to the firm is a possible increased exposure to professional negligence if overseas service providers fail to maintain Australian credentials and a possible loss of status for failure to ‘buy Australian’.

The focus still is on skilled labour quantities. At eclat we see the urgent need to change from a reliance on skilled labour for processing to an unskilled labour force (the business owner) aided by smart technology. Reducing the effort the professional accounting industry applies to compliance activities will make way for the high level skills the industry can apply to business clients in the form of financial advice. This in turn will enhance the remuneration of the industry professionals and attract graduates to work that appeals.

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.

Once upon a time when it was suggested that a business keep two sets of books, the suggestion was usually accompanied by sniggering and much tut-tutting. Nowadays the sniggers have diminished. As today it is essential to keep 2 sets of books; one set up to do your Business Activity Statement (BAS) which must be reported GST inclusive.  The other set up is for your financial reports and income tax returns which must be reported GST exclusive.

If you are processing financial records manually, they will need to be processed twice. Computers need to do the  same, but with appropriate software coding can process the task rapidly from a single entry. So even with relatively few transactions to process, it may be advantageous to use a computer coupled with suitable accounting software.

At eclat our development focus centres on the efficient production of reliable, relevant reports. Ease of use and understanding are key ingredients to efficient processing, so the software has been made easy to use and is easily understood by the person to use it. This means that every program is set up exclusively for the customer so it therefore cannot be put into a box and sold through a retailer.

Making the eclat accounting software easy to understand and easy to use reduces the effort your accounting firm needs to apply checking and rectifying your work. Remember that waste audits within accountancy firms show the largest generator of waste is the rectification of work performed by small business. Reduced workload for your accountant should result in reduced accounting fees for you! But more importantly it frees up valuable time for your accountant to advise you on your business development.

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.

“There are risks and costs to a programme of action. But they are far less than the long range risks and costs of comfortable inaction.”
John F Kennedy

JFK’s statement was dramatised to me in a book I recently found of interest; Charles H. Ford’s ‘Think Smart, Move Fast’. I’d like to share some of the information that is relevant to you as a business owner. In particular, when it comes to the decision making process.

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Businesses move ahead only by making decisions relative to new ideas.

The Decision Making Process:

1. Establish the subject (new idea)
2. Analyse the potential benefits
3. Analyse the problems and potential risks of implementation
4. Develop solutions to problems of implementation and steps to minimise potential risks
5. Make a final decision based on potential benefits of Step no. 2 versus costs of step no. 4

Positive and Negative Predispositions:

Predispositions towards new ideas are either positively or negatively charged, and most businesses are by nature somewhat negatively charged. This can be explained in part by the comforting sense that by not adopting a new idea, the status quo remains and with it little perceptible immediate risk.

Negativism is dangerous and can destroy the growth potential of the business, and in extreme instances can destroy the business itself.

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A major ingredient to decision making is relevant information. And relevant information needs to be current!

It should be the role of accounting to gather and cost the information and present an understandable and current report to the decision maker. For the life of me I cannot understand the relevance of comparing this year’s $sales against last year’s $sales as a business performance indicator! So many factors can impact on the variance. It could be a change in selling price, change in product mix, change in foreign exchange rates, loss of customers, loss of suppliers, a tragedy in the industry, and on and on it goes. Performance analysis must look at quantities as well as financial figures and must be compared against budget.

If you are ambitious and want your business to move ahead, you must look ahead and work with an accountant who is prepared to move ahead with you.

Remember that Step 5 in Chales H. Ford’s Decision Making Process compares benefit against cost. This is the crux of the decision. Cost refers not only to dollars spent, but also to lost opportunities as a result of actioning a decision. If the benefit from the decision fails to meet expectation then the action needs to be reviewed and a decision made as to whether or not to continue.

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.

Seriously consider the following questions:

Have you contributed to the additional tax and penalties collected by the ATO?
Are you likely to?
Is your reporting to the ATO accurate?

Obviously, given the collections by the ATO as a result of their active compliance (the good old ‘audit’), there is a lot of incorrect reporting.

The ATO annual report for 2004/2005 reported that as a result of audit activity micro businesses were assessed an additional $1.4 billion in taxes plus $254 million in penalties and interest. Of this, GST contributed additional tax of $506 million plus $62 million in penalties!

How would your business cashflow cope with an unexpected bill for additional tax and interest?

I am sure that the ATO will be quite happy for the status quo to remain! That way the government can continue to report massive surpluses without being accused of overtaxing!

Being a small business owner you probably have enough challenges. You don’t need to innocently add to your tax bill and thus reduce the cash surpluses you have worked so hard to garner.

Be diligent in your record keeping - and I honestly believe eclat can help you to do this. It’s not just the easiest to use accounting software for small business, it also helps you to accurately record your transactions and ensure your GST compliance.

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.

How embarrassing is must have been for those people who told Inventors that their vision was impossible.

Consider what was said about manned flight: “It’s impossible! If God had wanted man to fly he would have given us wings!”

Then there was the engineer who told Henry Ford, “It’s impossible to build a V8 motor.”

And of course, there’s my favorite; when The Boston Post stated, ‘well-informed people know it is impossible to transmit the voice over wires and that were it possible to do so, the thing would be of no practical value.’

Although in illustrious company, it is disappointing to hear from an accountant (who has never seen the eclat accounting software) refusing an opportunity to review the program with “It’s impossible for any accounting software to do what you say your program can do.”

Rather than become frustrated I force myself to remember what Winston Churchill said: “A pessimist sees difficulty in every opportunity; An optimist sees opportunity in every difficulty.”

We are all working hard enough as it is. Now it’s time to find smarter ways to do our work. This means we must be continually vigilant of opportunities as they present themselves. We will never find improvement if we don’t keep pushing the boundaries. That is what human endeavour is all about.

I am extremely optimistic that the eclat Accounting Software will overcome the challenges within the accounting industry and the frustrations you may have when processing your BAS and GST.

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.

Standard Accounts Procedure in Small Business:

1. Purchase accounting software
2. Don’t understand software
3. Undertake expensive tutoring or pay a bookkeeper to use the software
4. Pay an accountant to go through it all again for corrections…

What is wrong with this picture?!

One of the major concerns small business owners face is the costs associated with the processing and reporting for BAS, GST and Income Tax.

Doesn’t this mean we should be looking for alternatives? The current method is in desperate need of a make over.

Being a professional accountant with forty years experience in this industry I have seen first-hand the frustrations business owners experience. Eclat.bos Accounting Software is my contribution to solving the problems of keeping small business accounts and generating reports.

Like all business owners, I am faced with the issue of how to get my product in front of my target audience. My initial strategy was encouraging fellow accounting firms to introduce their clients to eclat. I spoke with over 100 accounting firms and the following few excerpts are representative of all:

Opinion of eclat: “Simplistic, very easy to use”
Will you introduce your clients to eclat? “No”

Opinion of eclat: “We found eclat quite user friendly… it has potential for a lot of the clients out there who are currently using MYOB but are making quite a hash of it…”
Will you introduce your clients to eclat? “No”

Opinion of eclat: “I believe the software has definite advantages in its simplicity of data entry over its competitors, and I am sure clients will be pleased with these functions.”
Will you introduce your clients to eclat? “No”

Hmmm, I wonder why?

Especially when all of the business owners who have taken the offer of a free trial have gone on to purchase the eclat cashbook!

The following is representative of the feelings of eclat customers:

Opinion of eclat: “If a dunce like me can use it, anybody can use it.”
Business: Caravan Park

Opinion of eclat: “I’m kicking myself for not starting with eclat sooner; it is just so easy.”
Business: Builder

Opinion of eclat: “I was wasting a lot of time and a lot of money and I wasn’t getting anywhere. All that changed when I changed to eclat. It truly has made my accounting process stree free, cost efficient and time efficient, and I will never go back.”
Business: Consultant

This displays a serious anomaly between accountants and small businesses when it comes to eclat.

Accountants see the advantages of eclat but do not wish to tell their clients about it. Because it is not in the accountant’s best interests! Eclat could result in the accountant losing potential income when they need to re-do your work.

Due to the non support of the accounting firms I have set up an online accounting service to provide support for businesses using eclat. Eclat software has been designed to easily transfer data and reports via the internet.

Eclat is the right accounting software for our times and is the most advanced of its kind in the world, not just Australia.

It is my vision to bring to micro and small businesses throughout the world, efficiencies in transaction processing and reporting through the usage of eclat smart technology.

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.

Frequently I am asked how the eclat Accounting Software differs from MYOB, Quickbooks and the like.

The best explanation I can give is that other brands require you to have both bookkeeping knowledge and GST knowledge to successfuly process data. And unfortunately, if you don’t have this knowledge, expensive human resources are needed to make the corrections - usually in the office of your accountant.

Did you know that in accounting practices valuable man hours are wasted rectifying work carried out by clients who use traditional Accounting Software?

To overcome this costly exercise businesses need to become super efficient with their transaction processing. This can only happen by using either smart people or smart technology. The most time and cost efficient way of the two is smart technology.

After reviewing the eclat accounting software, a senior researcher made a succinct observation. He said, “Other brands require the user to bend to match the software, whereas eclat bends the software to match the user.”

Translation: Competing brands expect you as their customer to study bookkeeping and GST legislation as well as learn to use their product, and if you don’t have the time for that, hire the services of a so-called ‘expert’. But eclat products have ’smarts’ built into the software so that the software reacts to data input and does the thinking for you.

It’s a little like dining at an Asian Restaurant. If you aren’t trained in the use of chopsticks then you will struggle to use them. MYOB and other software packages are software chopsticks. You are expected to study the art of chopsticks, or have an expert who knows how to use them come in and feed you.

Eclat is the fork… allowing you to savour your delicious meal quickly, neatly, and most importantly, stress free.

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.

The demands placed on small business operators are many. And one of your key responsibilities is to maintain accounting records to ensure you comply with the demands of the government, banks and other interested parties.

To achieve this do you have knowledge of generally accepted accounting principles and GST legislation?

Because if you don’t, you are at risk of:

* Exposure to additional tax and penalties
* Exposure to higher accounting fees
* Limited accounting services
* Delays in reporting and outdated reports
* Limited information for business planning
* Limited support to analyse business performance

And even when using MYOB, Quickbooks, or any of the many accounting software packages available, the risks still remain!

Imagine if you had smart accounting software with built in knowledge to help you report correctly, keep you up to date with any changes you need to know, and make your record keeping truly stress free!

That’s exactly what eclat was designed to do for you. With eclat…

* Gone is the need for specialised training
* Gone is the need for your accountant to reprocess your work
* Gone is your exposure to extra tax and penalties
* Gone is the stress from a task you may not fully understand

Indeed, Eclat is a specialist in the art of ’stress free’. Even your purchase is stress and risk free! Because I’m offering you a no obligation, 3-month free trial of eclat. Gone is the fear of buying a product that may not work for you, and gone is the fear that a retailer won’t refund your money.

Eclat doesn’t even need a money-back guarantee, because you don’t pay for the software unless you are totally satisfied after you have used your exclusive copy of Eclat to process three months of transactions!

Eclat services are provided online so you can access them at times convenient to you. Eclat is there for you from the set up of your chart of accounts right through to the transfer of data to your accountant!

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.

The evolution of civilisation has been identified by significant eras of advancement. These eras are the Stone Age, Bronze Age, Iron Age, through to modern times with the Industrial Age and now the Information Age. A characteristic common to all ages is the search for efficiency.

There is a drive within humankind to seek out and adopt efficient practices - and this is one of the reasons why civilisations advance!

By efficiency I mean that less effort and fewer or different resources are needed in order to achieve the same outcome or a greater benefit.

When it comes to accounting software for small business, it is important to seek out efficient processes too. Inefficiency is expensive and frustrating. Micro business and small business owners should not be forced to understand accounting principles or GST Laws in order to process financial information to report to the government. That simply isn’t efficient!

Efficiency would be software that knows all of the accounting principles and legislation, is simple to use and saves you, the client, time and dollars. Before you choose accounting software for your business you really must check out eclat. It is designed specifically for you, is easy to use and gets your accounts right… the first time!

Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.