There’s nothing wrong with you!

confused Joey“Everyone keeps telling me Xero is awesome but every time I try to use it I just get confused and can’t figure out what I need to do. What’s wrong with me?”

There is NOTHING wrong with YOU!

The problem isn’t you. The problem is the fact that most accounting products – including Xero – were designed by accountants and if you don’t happen to know anything about accounting, then you are naturally going to be a little bit confused when you’re using something that is meant for your accountant.

FOR DUMMIESCan I just use a self-help book?

Sure – there’s one of those “for dummies” books which, if you’ll pardon the insult to your intelligence – once again, assuming there’s something wrong with YOU – is only going to cost you an additional $30 on top of what you’re paying to use Xero, in the first place.

Rod Dury asks nicely

Xero was having a usability problem

The creator of Xero actually asked the author to write it! I guess there were a lot of other people out there, like you, who couldn’t figure out how to use his product…

Why does all this cost so much?

Well… it depends what you need.

You might be able to get away with Xero’s basic entry-level product, BUT you are extremely limited by that product and you might not be able to get everything you need done with it. This is no small coincidence! Xero hasn’t yet made a profit since they began in 2006 – they get their money from shareholders and rounds of investor funding. They need to maximise the amount of money they can squeeze from their customers, so they can turn around those losses and start making those shareholders happy.

Make no mistake:

they want you to upgrade to the $50 a month version – and then pay extra for other things you need, maybe even a self-help book they helped to write!

Here’s a quick comparison with eLEDGER:

comparison chartNotice the lack of green arrows on that $25 a month plan? Even if you upgrade to the $50 a month version, you still need add-ons to access some features – features which come standard on the “Executive” plan with eLEDGER, at less than their limited, basic package – features which will cost you extra and complicate your accounts because they come from third party providers that charge you separately!

What if my needs are simple?

Good news – you can get away with the most basic package from Xero! You might want to take a moment to consider what you are paying, for that. If you don’t need all those fancy “Premium” features, do you really need to pay what you might call a “Premium” price?

If your needs are simple, there’s no reason your accounts need to be complicated.

If Xero is not really helping you to cut down the confusion and save time with this stuff, try a “Leanaccount with eLEDGER – it’s going to cost you less than half the price and you can try it FREE for 30 days to see if it works for you.

 

The best part is there’s no such thing as “eLEDGER for Dummies”!

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

 

 

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Is your BAS due and you haven’t even STARTED?

tax nightmareDealing with the Tax Office can be painful and, as with any kind of pain, your first instinct is to delay that pain as much as possible…

But you can’t delay it any further – that BAS is due today and you haven’t even started to work out all the details you need to fill in all those boxes!

It’s OK – you can get it sorted in a matter of minutes, by using just 3 simple steps:

STEP 1: THE BIG GREEN BUTTON

Big Green ButtonSign In to your eLEDGER account an click on the big green button to enter your SALES – remember this is for the previous quarter, so we’re entering in money that you’ve received in the last three months – not including this month.

incomings

Go back to your Home Screen and use the same button as many times as you need to, in order to get them entered. If there are a lot of them, you can import your transactions from PayPal or your internet banking and get them in that way instead.

STEP 2: THE BIG RED BUTTON

Big Red ButtonNow use the big red button in your Home Screen to enter your PURCHASES – again, this is for the previous quarter so we’re entering in expenses that you’ve paid in the last three months – not including this month.

outgoings

If you imported your transactions in STEP 1, this is really just the same process but the records will go against your PURCHASES instead of SALES.

STEP 3: THE BIG BLUE BUTTON

Big Blue ButtonNow use the big blue button in your Home Screen to see a GST SUMMARY – again, this is for the previous quarter so remember to change it to the last quarter and not this one, which it automatically defaults to.

GST Summary

 That’s it! You’re done – now that you have all the information you need, go ahead and lodge that BAS statement…

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

What changes on 1st July will affect your business?

The only constant with our tax system is that it is ALWAYS CHANGING. With the new Federal Budget comes a bunch of changes, which may or may not affect your small business. Let’s take a look…

Superannuation Going Up

Contributions are going up, again

The “Superannuation Guarantee” (compulsory super contributions) was always meant to change from 9.25% to 9.5% on the 1st July and this is still happening – this change will not be changing. Apparently we are also still aiming for 12%, but the “schedule” has changed so that the (new) rate of 9.5% will remain fixed until 30th June 2018. It is supposed to then resume increasing by 0.5% every year after that. So far, we’ve only had the rate increase once (twice, if you include the change that’s about to happen) and the politicians have already fiddled with it, so let’s not be too surprised if this changes again NEXT year…

Will you need to update your accounting system or is it something like eLEDGER, which will automatically update this sort of thing for you, behind the scenes?

Deficit Levy Coming In

Starting on the 1st July will be yet another new tax – the (apparently three year) “Deficit Levy” will be imposed on anyone earning over $180,000 (per annum) at a rate of 2% (of each dollar you earn over $180k). So for example:2% tax on high income earners

  • You make $200,000 – you pay an extra $400 (2% of $20,000)
  • You make $300,000 – you pay an extra $2,400 (2% of $120,000)

This could affect small businesses operating as Sole Traders and Partnerships, like husbands and wives or a couple of mates who have started a business together and reinvest their profits into their business – if you haven’t already done so, you may need to review your salary packaging arrangements to keep those salaries under the $180,000 threshold.

Be careful with those salary packages – the government is also increasing the Fringe Benefits Tax rate to 49% on 1st April, 2015 (it already increased to 47% on April Fools Day, this year) so you may well be better off paying the 2% instead of creating a salary package which triggers the FBT!

Fuel Excise Going Up

petrol pump

Will you be hit at the pump?

In 2001 the government had cut the Fuel Excise Levy by 1.5c and frozen it “in perpetuity” at a rate of 38c per litre. The unfreezing of this federal excise will increase petrol prices twice a year in line with inflation, from 1st August 2014. It is expected to add around 2c per litre to the cost of fuel and keep going up from there. The Prime Minister recently admitted this is essentially the new government’s version of a “Carbon Tax”.

If your business is heavily reliant on company vehicles (which use petrol) then this could hit quite hard – it will certainly add to the already high cost of fuel you are paying, now.

Some Fiddling Around the Edges

The Medicare Levy will also be going up, from 1.5% to 2%,
on 1st July. As with changes to Super, you may need to update your accounting system if you aren’t using something like eLEDGER, which automatically makes these changes for you.

R&D

Less money for developing your product

R&D Tax Concessions will be going down by 1.5% – that’s less money to help you develop your product.

  • refundable offset will be 43.5%
  • non-refundable offset will be 38.5%

mature age worker

The Dependent Spouse Offset will be gone, as will the Mature Age Worker Offset – which will be replaced by a new incentive scheme called “Restart”. Details of this new scheme are a little thin on the ground at the moment, beyond that it will be “up to $10,000 to employers who hire a job seeker aged 50 or more who has been on income support for at least six months.” The Dependent Carer Offset will increase to a maximum of $2,535 per dependent.

Strictly speaking not a budget/tax decision, but the Fair Work Commission also recently announced its Wage Review, which will also come into effect 1st July. Notably the Minimum Wage will be increased from $16.37 per hour ($622.20 per week) to $16.87 per hour ($640.90 per week) – basically an extra 50c per hour. Leave loading will also be reduced from 75% to 50% on Sundays for (casual) bar, café and restaurant workers, starting in July. Other casual staff will be unaffected.

So… Are you going to have to madly scramble to rethink how you run your business – and possibly do that whole “Please Wait While New Updates Are Downloaded” thing with your accounting system – or are you going to be able to carry on, “business as usual” when this Financial Year ends and another one begins? To be fair, this year’s changes are relatively minor compared to some from past years – although there’s still the spectre of messing about with the GST looming in the shadows…

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

Is Keeping Track of Bank Records Actually Worth It?

No doubt you’ve heard about this wonderful new feature accounting packages like MYOB are now offering – Direct Bank Feeds into your accounts. It sounds like a good idea, right? You authorise them to talk directly to your bank and grab all your transactions on a regular basis and plug them directly into your accounting software, which of course means you don’t have to bother manually importing those records, yourself.

It sounds like it is saving you time – bank reconciliations can become a breeze and it can even match up your bank records against payment records in your ledger, usually requiring no more than a tick of approval that they found the right record. That’s obviously a lot easier than going through those records and matching them up yourself – it’s a no-brainer!

Here’s the thing…

When was the last time you actually did a bank reconciliation? Could you explain to a child why it is actually useful to do them? If you have an accounting background, I’m sure you have been taught the theory behind them and can rattle off a few ideas about “overdrafts” and bouncing cheques and so on… Maybe even the idea that your bank might make a mistake or someone could be stealing from you!

A good business manager understands that those kinds of risks are basically in the same category as being present during a bank robbery or locking your keys in the car. Sure, they’re not entirely impossible but they are far less likely to happen, in the modern age.

The problem is that those accounting principles you learned were developed in a far more industrial age where the word “computer” was used to describe someone you employed to do sums, using logarithms and a slide-rule.

 

Do you run your business like this?

Do you run your business like this?

Traditional accounting reports were developed to present an accurate view of a company to outsiders

The traditional accounting methods you are probably employing were developed in the early 1900’s to support companies with large batch production and high labour costs and inventory levels, not the plethora of small businesses which are so prevalent today. Worse still, traditional accounting reports were developed to present an accurate view of a company to outsiders – their purpose was to give someone an idea of how much your company was “worth”, rather than help you actually manage the business…

Skip to present day and even the most “cutting-edge” accounting products for small business, using the latest cloud-based technologies and modern design trends are still being created by unimaginative accountants using those same outdated Depression-Era methods and principles.

Remember where failure to adapt and “accounting irregularities” can lead!

If you can accept that running your business does not have to involve regularly trawling through detailed bank records then suddenly the idea of filling up your accounts with them, thanks to a drip feed that you’ve set up directly into the main artery of your bank account, starts to not look like such a clever idea, after all…

Illustration by Claudio Munoz

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?