In those good old days of accounting, keying in manual bank statements, reconciling cashbooks, printed workpapers all filed in a manilla folder; nice and neat, real old school.
This generally meant that no matter how hard the Larkin Partner team worked, we were behind and struggled to get our client files done. It was a scramble to get the end of year work done by the ATO deadlines and we were telling our clients how well they did months ago…and then telling them the news about how much tax they had to pay.
Client catch ups were frustrating for both us, as your accountants, and clients. Simply because if we had got you to take certain actions earlier, opportunities to deliver clients solid tax savings would have occurred and those actions needed to happen, happen.
With the introduction of GST in the 2000’s, came the requirement for most businesses to update their accounting activities and report to the ATO every quarter, sometimes monthly. For many businesses this also created a new and, of course, beneficial opportunity for their Larkin Partner Accountant to review, forecast and tax plan for their business.
Tax Planning and Income & Expense Forecasting should be done by every business, every year, if not more frequently. Having the information to hand to just know where your business is at, and where your business is going, helps you, as the owners, to plan and make more informed decisions.
Larkin Partners also made a bold business decision to start putting all clients onto cloud- based accounting software, such as MYOB’s suite of products and Xero. This move to cloud-based software combined with our greater focus on tax planning as one of our key services, has enabled our team of Larkin Partners Accountants to get on the front foot with clients and forecast both business performance and potential tax implications around the outcomes.
Planning or Forecasting offers you, and your business, so many benefits. The key is that it is proactive rather than reactive, forward thinking rather than playing catch up in the understanding of your business finances. As a minimum it provides your business with an estimate of profit for the year and therefore how much tax is going to need to be paid. At its absolute best, planning can provide you with various options to help minimise tax by making changes in the business before the end of the financial year – before its actually too late.
What’s the difference?
Planning and Forecasting are essentially the same thing, however there are some notable differences – Tax forecasting involves us working with you to predict how much tax is going to be paid at the end of the financial year. Generally, this is once all the options to help minimise tax have already been exhausted.
Tax Planning involves firstly forecasting and then reviewing the various options available including, but not limited to deferring income, prepaying expenses, ensuring lower tax thresholds are utilised, acquiring deductible assets, restructuring and maximising your deductible super contributions.
Not all scenarios result in tax savings. In some case, it simply allows for greater flexibility and improved decision making. For our clients where we have been doing tax planning and forecasting for many years, this process is all about just knowing where they are at and that everything that can be done is getting done at the right time. It rally is just simply good, strategic business practice that you should consider doing, if you are not already.