As a tax agent, one of the key pieces of advice I offer to business owners in Australia is the importance of not just complying with the requirements of the Business Activity Statement (BAS) but using it as a tool to gain insights into their business operations. The BAS is not merely a tax obligation; it’s a valuable resource for understanding the financial health of your business.
Here’s how you can leverage your BAS to better understand and improve your business.
What is a Business Activity Statement (BAS)?
The BAS is a form submitted to the Australian Taxation Office (ATO) by all businesses registered for Goods and Services Tax (GST). It reports your business’s GST obligations, as well as other tax obligations like Pay As You Go (PAYG) withholdings, PAYG installments, fringe benefits tax (FBT), and luxury car tax (LCT) if they apply to your business.
Gaining Insights from Your BAS
1. Tracking GST Collected and Paid
Your BAS shows the amount of GST you’ve collected from your sales and paid on your purchases. This information is critical for managing your cash flow effectively. By analysing these figures, you can identify trends in your sales and expenses, adjust your pricing strategy, or find ways to reduce costs.
2. Understanding Cash Flow
The PAYG installments and withholdings reported on your BAS can also give you insights into your cash flow. These figures reflect your income and the tax you’re setting aside for employee salaries. Regularly reviewing these amounts can help you anticipate cash flow shortages or surpluses and make informed financial decisions.
3. Analysing Business Performance
Comparing BAS submissions over different periods can reveal growth trends, seasonal fluctuations, and areas of your business that may require attention. For instance, if your GST obligations from sales are increasing, it could indicate business growth. Conversely, if your GST on purchases is rising faster than your GST on sales, you may need to assess your expenses.
4. Budgeting and Forecasting
Use the data from your BAS to improve your budgeting and forecasting. By understanding your tax obligations and how they relate to your sales and expenses, you can create more accurate financial projections and set realistic budgets for your business.
5. Compliance and Record Keeping
Staying on top of your BAS obligations ensures that you maintain accurate and timely records of your business transactions. This discipline in record-keeping can be invaluable for other aspects of your business management, including securing loans, attracting investors, or selling your business.
Tips for Managing Your BAS
– Stay Organised: Keep good records of all transactions, including invoices, receipts, and bank statements, to make completing your BAS easier and more accurate.
– Use Accounting Software: Modern accounting software can automate much of the work involved in preparing your BAS and offer insights through financial reports and dashboards.
– Seek Professional Advice: A tax agent or accountant can help you understand the nuances of your BAS, ensure compliance, and offer advice on using this information to your advantage.
– Plan for Tax Obligations: Set aside funds for your tax obligations as you earn income, so you’re not caught short when your BAS payments are due.
Your Business Activity Statement is a potent tool for understanding the financial dynamics of your business. Beyond mere compliance, it offers valuable insights into your sales, expenses, cash flow, and overall business performance. By effectively analysing the information your BAS provides, you can make informed decisions that drive business growth and improve financial management.
The Team at The Accountants and The Finance Brokers are here to help you navigate your cash flow requirements in your business. We offer complimentary cash flow reviews and assist you in understanding your finance needs.
